Partnership interests (including interests in limited liability entities treated as a partnership) represent a potentially valuable gift to charities and private foundations, but with greater potential complications than gifts of stock. CPAs can alert principals to the following issues. —By Dennis Walsh, CPA, (nonprofitcpa365@gmail.com) a Jamestown, N.C.-based consultant to
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NEW FORM 1099 REQUIREMENT FOR RENTAL INCOME Taxpayers receiving income from renting real estate should be aware of their new information-reporting responsibilities under IRC § 6041(h)(1), as amended by the Small Business Jobs Act of 2010 (PL 111-240). The law requires them to report payments they make totaling $600 or
Multistate Tax Considerations for S Corporations
Many S corporations do business in multiple states and must file income or other tax returns in them. Many states have been more aggressive in going after out-of-state companies doing business in their states. Many of these businesses do not realize they have an exposure to a state’s taxes until
Fifth Circuit: IRS Lacked Diligence in Notifying Taxpayer
The Fifth Circuit reversed and remanded a Tax Court decision in a case the Tax Court had dismissed for lack of jurisdiction due to the taxpayer’s late filing of her petition contesting the IRS’ denial of innocent spouse relief. The appellate court held that the original notice of determination sent
How the IRS Examines Repair and Maintenance Costs
Taxpayers are generally allowed to deduct the cost of making incidental repairs to their property used in carrying on any trade or business under IRC § 162 and Treas. Reg. § 1.162-4. However, to be deductible currently, a repair cost must not be subject to capitalization under IRC § 263(a).
Some Forbearance Payments Deductible, Some Not
The Tax Court held that a corporation could deduct forbearance payments made to its shareholders in return for their promise not to exercise their stock redemption rights under the first two of several agreements. However, the court also held that payments under a subsequent agreement had to be capitalized, since
Ponzi-Scheme Losses: Indirect Investor and State Tax Issues
Ponzi schemes continue to come to light regularly. After 2008, when Bernard Madoff’s $65 billion Ponzi scheme was exposed, the SEC made comprehensive reforms to better detect fraud within the 11,000 regulated investment advisers and 8,000 mutual funds that it oversees, according to the SEC’s description of those reforms (tinyurl.com/2fu6eog).
Save Time and Trouble With General Asset Accounts
Small and medium-size entrepreneurial businesses are sometimes blessed with a good idea but many similar or identical capital assets and not much time or accounting prowess to keep track of them all individually. Larger businesses may seek more efficient tax treatment for standard capital assets, such as laptop computers issued
New 1099 Rules: President’s Speech Offers Hope for Some Relief; Exceptions for Rental Income Reporting Remain Vague
For small businesses that were dreading the thought of having to produce a Form 1099 for every payee to which they paid at least $600, President Barack Obama offered the prospect of relief in his State of the Union speech Jan. 25 when he said, “We can start right now
Audit Guide Covers Capitalization Rules
Practitioners have been making use of a resource arising from the IRS’ ongoing audit initiative concerning capitalization rules. The IRS issued Capitalization v. Repairs Audit Technique Guide (LB&I-4-0910-023) as a framework for examining agents to follow when determining whether a business’s expenses should be capitalized or an immediate deduction allowed,
Bill Introduced to Address Tax Strategy Patents
On Tuesday, Sens. Max Baucus, D-Mont., and Chuck Grassley, R-Iowa, introduced legislation intended to stop the granting of patents for tax strategies. The Equal Access to Tax Planning Act of 2011 (S 139) would provide that “any strategy for reducing, avoiding, or deferring tax liability” is deemed to be “prior
IRS Targets 1040 Schedules, Procedures in Preparer Compliance Visits
In its current round of office visits involving tax preparer compliance, the IRS is targeting practitioners who prepare a high percentage of returns with certain Form 1040 schedules and is checking preparers’ procedures and recordkeeping. For a second tax season, the IRS has sent reminders to tax preparers of their
IRS Launches Smartphone App
The IRS on Monday announced the launch of a new application for smartphones: IRS2Go. The application will let taxpayers check on the status of their refunds and get tax tips. In a press release, IRS Commissioner Doug Shulman described the application as showing the IRS’ “commitment to modernizing the agency
IRS Gives Relief to Return Preparers With Pending PTIN Applications
Because some return preparers are having trouble with the IRS’ new online preparer tax identification number (PTIN) application, the IRS on Jan. 24 announced that it is providing relief for preparers who make a good-faith effort to comply with the new PTIN requirement (Notice 2011-11). The IRS will permit preparers
IRS Announces Date to Start Processing Delayed Returns
The IRS announced that it plans to be able to start processing tax returns delayed by the late enactment of the 2010 Tax Relief Act on Feb. 14. On Dec. 23, the IRS warned that because of the late enactment of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation
Lack of Economic Substance Guidance May Chill Legitimate Planning, Organizations Warn
The AICPA and the American Bar Association (ABA) Tax Section jointly issued a comprehensive set of recommendations to the IRS to encourage the Service to quickly establish guidance for applying the economic substance doctrine. In the absence of specific guidance, the organizations warn in a 65-page report released Jan. 18
AICPA Offers Congress 13 Suggested Cleanups for the Tax Code
Noncontroversial and straightforward tweaks to a tax code that contains more than 3.5 million words are not easy to find, but the AICPA has several such proposals that, if enacted, could eliminate a few headaches for taxpayers and CPAs alike. The AICPA’s second annual compendium of legislative proposals, distributed to
IRS Will Not Meet 80% E-File Goal, Oversight Board Says
The IRS Oversight Board released its Electronic Filing 2010 Annual Report to Congress on Wednesday, including the news that its goal that 80% of all major tax return types be electronically filed will likely not be met by 2012. The 80% e-file goal was originally implemented by the IRS Restructuring
IRS Allows More Small Exempt Organizations to File E-Postcard
The IRS has raised the gross receipts threshold for Form 990, Return of Organization Exempt From Income Tax, from $25,000 to $50,000, allowing more tax-exempt organizations to avoid filing a full Form 990 or 990-EZ (Revenue Procedure 2011-15). Tax-exempt organizations are generally required to file either a Form 990 or
The 20 Most Popular Stories of 2010
2010 was a busy year for regulatory reform and changes to standards that affect the practices and responsibilities of CPAs. It’s no surprise that the JofA’s readers were interested in regulatory reform over the past year, particularly the health care and Wall Street Reform bills passed in March and July,
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