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TOPICS / TAX

Individual income taxation

Tax relief and health care acts shape 2011 returns

As CPAs gear up for tax season, they’ll find the Form 1040 series for 2011 looking much the same as that of the previous year, but only because of Congress’ 11th-hour compromise late in 2010 to keep it so. Nonetheless, a number of new features affecting individuals and businesses, such

Home office deduction

With unemployment still near the highest rate in decades, it is not surprising to find many people working out of their homes. Now may be a good time to review the criteria for claiming a deduction for the business use of part of a person’s residence. You do not have

Mortgage interest deduction allowed for home never built

The Tax Court held that a couple could deduct interest paid on a loan incurred to purchase property on which they intended to construct a new home but never did. According to the court, a qualified residence was deemed to be under construction when an existing home was demolished and

Regulations Issued on Repair Expenditures

On Friday, the IRS issued long-awaited temporary and identical proposed regulations (T.D. 9564; REG-168745-03) regarding the treatment of expenditures incurred in selling, acquiring, producing, or improving tangible assets, including rules on determining whether costs related to tangible property are deductible repairs or capital improvements. The temporary regulations affect all taxpayers

Congress Passes Temporary Payroll Tax Cut Extension

The reduced 4.2% Social Security tax rate will remain in effect at least through February. The Senate and the House of Representatives on Friday both agreed by unanimous consent to extend the reduced rate, and President Barack Obama signed the bill—the Temporary Payroll Tax Cut Continuation Act of 2011 (H.R.

Many Tax Provisions Set to Expire at Year-End

Congress has reportedly broken its impasse and agreed to extend the payroll tax cut for two months, so the reduced Social Security tax rate will not expire as scheduled at midnight on Dec. 31. While Congress’ negotiations over extending the reduced payroll tax rate have garnered a lot of media

Final Regs on EITC Due Diligence Issued

The IRS issued final regulations (T.D. 9570) Monday governing the due-diligence requirements imposed on tax return preparers who prepare tax returns on which taxpayers claim the earned income tax credit (EITC). Former rules required preparers to complete Form 8867, Paid Preparer’s Earned Income Credit Checklist, or to otherwise record the

Foreign Financial Asset Reporting Form Finalized

The IRS on Saturday released the final version of Form 8938, Statement of Specified Foreign Financial Assets, and released its instructions on Monday. Affected taxpayers must use the form to report certain financial assets to the IRS. Last week, the IRS released temporary and proposed regulations on the new reporting

Tax Issues and the 2010 S Corporation Shareholder Decedent

Editor’s note: This article originally appeared on thetaxadviser.com.   A tax practitioner working with the estate of an S corporation shareholder who died in 2010 must contend with numerous issues. This article points out some of the issues and discusses some of the choices that a practitioner can consider. The

Standard Mileage Rates for 2012 Released

The IRS on Friday released standard mileage rates for use in 2012 (Notice 2012-1). Taxpayers can use the optional standard mileage rates to calculate the deductible costs of operating an automobile. For business use of an automobile remains at 55½ cents per mile. For medical or moving expenses, it is

Line Items

HIGH COURT TO HEAR BASIS ISSUE SPLITTING CIRCUITS The U.S. Supreme Court granted certiorari Sept. 27 in U.S. v. Home Concrete & Supply LLC, one of several cases in which the IRS has claimed that a six-year extended statute of limitation applies when an understatement of gross income arises from

Offers in Compromise and Dissipated Assets

Under IRC Sec. 7122(a), taxpayers may request an offer in compromise (OIC) with the IRS to settle outstanding tax liabilities for less than the full amount owed. To qualify, taxpayers must prove that their outstanding tax liabilities exceed the amount of income and assets available to satisfy those liabilities during

Advising Clients in Same-Sex Relationships

Even as the debate over legally recognizing same-sex relationships continues, many such unions are being created in which income, expenses, assets and liabilities are shared, but generally without legal recognition of property and other rights accorded heterosexual marriages, federally and in most states. These unions create unique challenges and opportunities

Health Care Premium Credit Rules Proposed

The IRS released proposed regulations in August (REG-131491-10) implementing the health insurance premium tax credit, which was enacted last year by the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act and is effective starting in 2014. The proposed regulations were part of a “next

Fifth Circuit Upholds Qualified Disclaimer

In an unpublished opinion, the Fifth Circuit Court of Appeals held that a disclaimer by a legatee did not result in a lapsed bequest under Mississippi state law that would have resulted in taxable gifts of property passing to the legatee’s heirs. The circuit court thus reversed and remanded a

Inflation Adjustments Made to Many Tax Items for 2012

The IRS released on Thursday its annual revenue procedure making inflation adjustments to the income tax tables and many tax credits and other items for tax years beginning in 2012 (Rev. Proc. 2011-52). Separately on Thursday, the IRS announced the 2012 contribution limits and other figures for pension plans and

Trade Bills Pass Congress With Tax Provisions

A tax preparer penalty relating to the earned income tax credit (EITC) will increase to $500, and the IRS will receive detailed information about federal and state prison inmates, both measures in a trio of foreign trade agreements Congress passed Wednesday. The trade deals with South Korea, Colombia and Panama

IRS Proposes Stiffer Preparer Requirements for EITCs

The IRS issued proposed regulations Thursday (REG-140280-09) that would impose new requirements for tax return preparers and their firms for returns claiming the earned income tax credit (EITC), including submission of information regarding taxpayers’ eligibility to the IRS. The EITC provides a refundable credit to eligible taxpayers, and it has

FROM THIS MONTH'S ISSUE

How to craft the CPA career you want

Want to pursue a work life that brings you purpose and joy? Learn how in this article from the Journal of Accountancy’s November issue.

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