When a taxpayer fails to satisfy his or her tax liabilities, the IRS has an array of administrative tools that it can call upon to obtain the taxpayer’s compliance. One method is levying the taxpayer’s wages at the source under Internal Revenue Code provisions that require employers to help the
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Tax
Different Tax Results for Two Horse Breeders
The Tax Court recently allowed claimed losses from horse-breeding activities in one case but denied them in another. In the first case, the court held that the taxpayers could deduct all of the expenses of their horse-breeding activity, since they had a profit motive when they started and conducted the
Tax-Exempt Hospitals and New Reporting Requirements
The Patient Protection and Affordable Care Act of 2010 (PPACA) imposes reporting requirements under new IRC § 501(r) for charitable hospitals regarding the fulfillment of their charitable purpose as tax-exempt organizations. Specifically, if they have not already done so, these hospitals must complete a community health needs assessment and draft
Charitable Contributions of Conservation Easements
Charitable contributions of conservation easements allow taxpayers to obtain a federal tax benefit while helping to conserve land for public use or enjoyment or to preserve a historic structure. Through the use of these easements, ownership of land or a historic building is kept in private hands but with restrictions
Noncompete Agreement Is a Section 197 Intangible
The First Circuit Court of Appeals, affirming the Tax Court, held that a covenant not to compete must be amortized over 15 years rather than its one-year term. Recovery Group Inc. was an S corporation that provided services to insolvent companies. To buy out the interest of one of its
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
TIGTA: Resolution of Math Error Disputes Often Late, Sometimes Wrong
In taxpayer disputes over its correction of math errors on returns, the IRS was wrong 17% of the time and late in resolving disputes 40% of the time, the Treasury Inspector General for Tax Administration (TIGTA) found. IRC § 6213(b)(1) allows the IRS to adjust items on tax returns without
Short-Term Rentals Preclude Use of Losses
CPA tax practitioners who have clients involved in a real estate rental trade or business are no doubt aware of the rule allowing $25,000 of passive losses from rental real estate to be deducted against nonpassive income and the 750-hour material participation rule for qualifying as a real estate professional
Two Estate Tax Rulings Uphold IRS Regulatory Interpretations
In two recent estate tax cases, executors were denied timeliness-related claims, and although in both cases the executors said administrative failures by the IRS caused or contributed to the error, the courts said those lapses did not rise to the level of misconduct that would justify special treatment. In the
Final Regs Implement Form 990 Changes
The IRS issued final regulations on Sept. 7, 2011, (TD 9549) implementing extensive revisions made in 2008 to Form 990, Return of Organization Exempt From Income Tax. The final regulations provide new threshold amounts for reporting compensation, require that compensation be reported on a calendar-year basis and modify the rules
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
Regs Extend Religious and Family Member FICA, FUTA Exceptions to Disregarded Entities
The IRS on Monday issued temporary and proposed regulations that extend the religious and family member FICA and FUTA tax exceptions to disregarded entities (T.D. 9554; REG-136565-09). The regulations also clarify the rule that owners of disregarded entities—except for qualified subchapter S subsidiaries (QSubs)—are responsible for backup withholding and information
IRS Gives Penalty Relief, Delays Backup Withholding for Payment Card Reporting
The IRS postponed for a year the effective date of the backup withholding requirement for payments in settlement of payment card and third-party network transactions. The Service also created an FAQ page explaining the new requirements. The postponement, in Notice 2011-88, applies to transactions subject to reporting under Sec. 6050W
House Passes Repeal of 3% Withholding on Government Contracts
The House of Representatives passed a bill Wednesday to repeal a law that beginning in 2013 requires tax withholding of 3% of payments to vendors and contractors providing services to federal, state and local governments and their agencies. The bill, HR 674, passed by a vote of 405-16 and now
Final Regs Clarify Excise, Employment Tax Treatment of Disregarded Entities
The IRS issued final regulations (T.D. 9553) Tuesday clarifying the treatment of disregarded entities with respect to employment and certain excise taxes. The rules adopt proposed regulations issued in 2009 (REG-116614-08). Under Regs. Sec. 301.7701-2(a), business entities with a single owner may be disregarded as an entity separate from their
IRS Proposes Eliminating De Minimis Partner Rule
The IRS issued proposed regulations on Monday that, if finalized, would remove the de minimis partner rule in Regs. Sec. 1.704-1(b)(2)(iii)(e) (REG-109564-10). Sec. 704(b) allows a partnership to make special allocations as long as they have substantial economic effect. In 2008, the IRS issued final regulations under Sec. 704(b) that
President Signs Bill Increasing EITC Due Diligence Penalty
President Barack Obama signed into law Friday a trade agreement with South Korea (HR 3080) that increases from $100 to $500 the Sec. 6695(g) penalty for failure by preparers to exercise due diligence with respect to the earned income tax credit (EITC). Under another provision of the agreement, the IRS
PTIN System Opens for 2012 Renewals
The IRS on Thursday announced that it has opened its preparer tax identification number (PTIN) registration system to accept renewals for the 2012 filing season (IR-2011-105). Preparers are required to renew their PTINs annually and must do so before Jan. 1, 2012. Among the changes this year, CPAs will be
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
Final Regulations Eliminate “Hot Stock” Rule for Certain Reorganizations
On Wednesday, the IRS issued final regulations that generally hold that the so-called “hot stock” rule is inapplicable in reorganizations where a subsidiary is a member of the distributing corporation’s separate affiliated group (DSAG) (T.D. 9548). The regulations finalize without change rules that were issued as temporary and proposed regulations
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