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
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Tax
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
Qui tam award held taxable
The Eleventh Circuit Court of Appeals affirmed a Tax Court determination that a qui tam whistleblower award to a taxpayer under the federal False Claims Act (FCA) was taxable. Under the FCA, a person may bring a civil action, in which the U.S. government may intervene, against a party that
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
Top-hat retirement plans
Tax-exempt entities may establish as many as three types of tax-favored retirement plans. They may, of course, establish qualified retirement plans. They may also establish Sec. 403(b) plans, generally known as tax-sheltered annuities. The tax law treats distributions from qualified plans and tax-sheltered annuities similarly, a treatment generally familiar to
IRS provides planning opportunity for accrued bonuses
A recently issued revenue ruling (Rev. Rul. 2011-29) provides accrual-method employers with a potential planning opportunity to secure a current deduction for accrued bonuses paid within 2½ months of their tax year-end. This opportunity can apply even though the bonus plan includes a contingency, that is, a requirement that the
Estate tax protective claim procedures detailed
The IRS issued guidance on filing a protective claim for refund of estate tax and notifying the IRS that the claim is ready for consideration. The guidance, in Rev. Proc. 2011-48, provides details on who may file a protective claim, methods by which the claim must be prepared and submitted,
New law, proposed regs heighten EITC preparer due diligence
The Sec. 6695(g) penalty for failure by preparers to exercise due diligence with respect to the earned income tax credit (EITC) increased from $100 to $500 effective for returns required to be filed after Dec. 31, 2011. The measure was enacted in late October as part of the U.S.-Korea Free
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
IRS PTIN Application System to Go Down for Maintenance
The IRS announced on its website that it will not be accepting new applications for preparer tax identification numbers (PTINs) from 5 p.m. EST Friday, Dec. 23, until approximately 6 a.m. EST on Monday, Jan. 9. The IRS PTIN system will be available for renewals during that time. The IRS
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
Some Form 990 Filers Have Extension to March 30
In Notice 2012-4, the IRS extended the filing deadline for Form 990 until March 30, 2012, for many tax-exempt organizations with a filing due date during the first two months of the new year. Organizations affected by the extension normally would have a filing deadline of Jan. 17 or Feb.
Regulations Issued on Continuity of Interest Rule for Corporate Reorganizations
The IRS issued final and proposed regulations (T.D. 9565 and REG-124627-11) on the continuity of interest (COI) requirement in Sec. 368 corporate reorganizations. To qualify for nonrecognition treatment in a corporate reorganization, one of the requirements that must be met is COI, specifically how that requirement is met in the
Regulations Issued for Specified Foreign Financial Assets Reporting
The IRS issued temporary and proposed regulations (T.D. 9567; REG-130302-10) on the requirement that certain foreign financial assets be reported to the IRS for tax years beginning after March 18, 2010. Sec. 6038D requires individuals to report interests in “specified foreign financial assets” (SFFAs) when filing their federal income tax
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
IRS Clarifies Recurring-Item Exception
The IRS issued a revenue ruling on Tuesday to clarify the application of the all-events test’s recurring-item exception under Sec. 461(h)(3) to certain fact patterns (Rev. Rul. 2012-1). The ruling addresses four questions: Is the amount of a taxpayer’s liability material for purposes of the recurring-item exception if the liability
Transit Pass and Vanpool Benefits to Shrink in 2012
Millions of people across the United States will experience a significant increase in the cost of their daily commute to work, and many employers will suffer a corresponding increase in payroll taxes for 2012 and beyond, unless Congress acts. The monthly tax exclusion for employer provided transit pass and vanpool
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