TaxConnections

 
 

Access Leading Tax Experts And Technology
In Our Global Digital Marketplace

Please enter your input in search

Email Contact Us

IRS Forms VS. Statues – Net Capital Loss Deduction

JASON FREEMAN, JD - IRS Forms VS. Statues - Net Capital Loss Deduction

Powell and Iakovenko v. Comm’r, T.C. Summary Opinion, 2022-19 | Copeland, J. | Docket No. 20268-19S

(Freeman Law Tax Court In Brief)

Short Summary

Petitioners claimed a $123,822 long-term capital loss deduction on their 2017 return, far in excess of the $3,000.00 per year limit on the net capital loss deduction. Due to this miscalculation, the Petitioners reported $1,001 in AGI for the year. They also received an advance premium tax credit (APTC) in monthly installments during their 2017 tax year under the Patient Protection and Affordable Care. In response, the IRS issued a math error notice limiting the net capital loss deduction to $3,000. The IRS then examined the petitioners return, concluding that household income disqualified the petitioners for the Premium Tax Credit (PTC). Thus, the IRS determined that: petitioners were not entitled to a PTC of $636 previously credited to them; they had an excess APTC of $17,652; and after allowing $4,000 of newly claimed tuition and fee deductions, they had a resulting deficiency of $17,288 for the 2017 tax year.

Key Issue

Read More

TIGTA Finds IRS Is Not Always Following Procedures For Tax Liens

TIGTA Finds IRS Is Not Always Following Procedures For Tax Liens

In 2021, the Internal Revenue Service filed 212,251 Notices of Federal Tax Lien (“NFTLs”). To provide perspective, in 2019 (i.e., pre-COVID-19 pandemic), the IRS filed 543,604 NFTLs. The IRS is working on ramping up its enforcement efforts; however, the IRS must follow certain procedures with respect to filing NFTLs against taxpayers. The Treasury Inspector General for Tax Administration (“TIGTA”) recently performed its annual audit to review the Internal Revenue Service’s legal compliance with respect to NFTLs. While TIGTA found general compliance by the IRS, it also noted several areas of improvement.

NFTLs and Section 6320(a)

Section 6320(a) of the Internal Revenue Code explicitly provides that the IRS must file a notice of lien, assuming it complies with certain restrictions on timing, service methods, and notice information. Specifically, Section 6320(a) provides as follows:

Read More

Guide To U.S. Inheritance And Estate Tax For US Expats

Guide To U.S. Inheritance And Estate Tax For US Expats

Are you worried about paying inheritance tax in the United States and your country of residence? In this guide, we’ll discuss what the inheritance tax is when it’s taxable and what tax obligation you might have in relation to inheriting an estate.

Losing a loved one is often an emotionally charged and complicated process. Things can get even more complicated by different laws and regulations if you’re inheriting property from someone who lives overseas or you reside abroad. It’s important to understand how US inheritance tax laws might impact you.

What Is Inheritance Tax?

The term “inheritance” refers to the transfer of wealth from a deceased person to his or her heirs. This includes real estate, stocks, bonds, cash, bank accounts, retirement plans, life insurance policies, etc. Inheritance tax is a state tax that you pay when you receive money or property from the estate of a deceased person.

What Is an Estate?

Read More

What Is A Per Diem Allowance? What Is The Rate?

Per Diem Allowance

Per diem or daily allowance is a specific amount of money that an organization gives an individual, typically an employee, per day to cover living expenses when travelling on the employer’s business. A per diem payment can cover part or all of the expenses incurred.

Per diem is an allowance paid to your employees for lodging, meals, and incidental expenses incurred when travelling. This allowance is in lieu of paying their actual travel expenses.

How do I find the per diem rate for (city/county, state)?

Please visit www.gsa.gov/perdiem to find the rates. Click on the state you need to view that state’s rates or enter the location in the search box. Even though some cities are listed for your lookup convenience, not all cities can or will be listed, so look for the county where you will be working. To look up the county, visit explorer.naco.org. If the city or county you are looking for is not listed on the GSA per diem rate page, then the standard CONUS rate applies.

Per Diem Rates are set each calendar year to start October 1st.

Read More

Treasury Issues Proposed Regulations On IRS Appeals Procedures

Treasury Issues Proposed Regulations On IRS Appeals Procedures

Taxpayers routinely resolve their tax controversy matters without resort to litigation.  Indeed, good tax professionals will often seek to avoid costly and time-consuming litigation, if possible, by utilizing various administrative avenues within the IRS including the IRS Independent Office of Appeals (“IRS Appeals”).  Formed originally in 1927, IRS Appeals serves as a quasi-independent government agency staffed with the purpose of, among other things, resolving certain tax controversy matters in a manner fair to both the United States and the taxpayer.

However, IRS Appeals does not hear all tax controversy matters.  Rather, it has excepted from its jurisdiction certain tax matters which it feels are not within its scope of review.  Generally, this has been accomplished through a hodgepodge of administrative guidance, including publication in revenue procedures and the Internal Revenue Manual (“IRM”).

On July 1, 2019, Congress codified the objectives and purposes of IRS Appeals in the Taxpayer First Act of 2019, Pub. L. No. 116-25 (“2019 TFA”).  Thus, by statute, Congress provided that the IRS Appeals process “should be generally available to all taxpayers.”  See I.R.C. § 7803(e)(4).  Because the term “generally” denotes at least some type of exclusion, many taxpayers and tax professionals were left wondering how far the new statutory right extended.

Read More

International Tax Withholding: Chapter 3 Of The Internal Revenue Code

TL FAHRING - International Tax Withholding: Chapter 3 Of The Internal Revenue Code

One of the more confusing areas of international tax law is determining when withholding is required. Getting it wrong can have dire consequences.

Currently, U.S. international withholding provisions can be found in Chapters 3 and 4 of the Internal Revenue Code.  Chapter 3 contains the withholding provisions that are intended to approximate a foreign person’s U.S. federal income tax liability. Chapter 4, on the other hand, deals with withholding provisions put in place by the Foreign Accounts Tax Compliance Act of 2010 and is primarily aimed at obtaining information regarding account holders of foreign financial institutions and owners of certain foreign entities.

In this post, we’ll focus on Chapter 3 withholding, setting aside Chapter 4 for another time.

But first . . .

Why International Tax Withholding?

Read More

Cost Segregation Accelerates Depreciation Deductions

Bruce Johnson - The Importance Of A Cost Segregation Study

What is Cost Segregation?

Cost segregation is a tax planning strategy that can help real estate owners and tenants to accelerate depreciation deductions. Although standard depreciation occurs over a lengthy 39-year period, many assets within a structure–from plumbing and electrical fixtures to flooring–are not designed to last that long.

The ability to break out such assets for a five-year, seven-year, or 15-year recovery period helps accelerate depreciation, defer taxes, and improve cash flow.

Invest In An Engineering-Driven Cost Segregation Study

An engineering-driven cost segregation study can be useful at any point in the real estate cycle. Whether a property has been newly constructed, recently acquired, or undergone renovations or tenant improvements, a cost segregation study is likely to be a valuable depreciation tool. In certain cases, a look-back study can be appropriate.

Bottom line: If you own your building or if you’ve made improvements (as an owner OR a tenant), you may benefit from a cost segregation study.

Benefits Of Leveraging Cost Segregation

Read More

The IRS Extends The Transition Period For Enhanced R&D Tax Credit Reporting Requirements

The IRS Extends The Transition Period For Enhanced R&D Tax Credit Reporting Requirements

On Friday, September 30th the Internal Revenue Service (the “Service”) set forth administrative guidance indicating that it is extending the transition period during which taxpayers are required to adhere to the much more arduous and onerous R&D Tax Credit reporting requirements in connection to amending tax returns within open statute years for R&D Tax Credit claims for refund. This new transition period has now been extended through January 10th of 2024 in which taxpayers are afforded a full 45 days to perfect a R&D Tax Credit claim for refund with reporting deficiencies prior to the Service’s final determination on the claim.

It should be duly recalled under previous administrative authority issued by the Service in 2021 that went into effect earlier this year on January 10th of 2022 taxpayers filing a valid R&D Tax Credit claim for refund under I.R.C. § 41 must provide, at a minimum, five essential pieces of contemporaneous documentation including:

Read More

Schedule A And Schedule C Itemized Deductions And Documentation Requirements

Schedule A And Schedule C Itemized Deductions And Documentation Requirements

Opinion

Short Summary: This case involves taxpayers’ entitlement to Schedule A itemized deductions and Schedule C deductions and the taxpayers’ obligation to substantiate those expenses to which the deductions were related were paid or incurred for the 2015 and 2016 tax years. Petitioners were husband and wife that jointly filed their tax return for the years at issue. Mrs. Patitz was an account executive with a copying company and she also operated her own insurance business selling supplemental insurance policies. Mrs. Patitz’s job responsibilities for the copying company required her to travel to client sites in Central Florida. Her employer reimbursed her for travel expenses incurred outside of her home base in Jacksonville, FL. Her weekly mileage expenses only accounted for her local trips in Jacksonville. In 2015 and for part of 2016 Mr. Moody was employed as an area manager for a courier service. His service area spanned from Vero Beach, FL to Key West, FL and his job duties required him to deliver “on demand” packages to clients in the service area. He had to travel to the employer’s warehouses weekly and occasionally had to stay overnight in hotels. For the second half of 2016, Mr. Moody began a new career as a teacher in Jacksonville, FL.

Read More

Learn Sales Tax Exemptions In 50 States (Part 2 of 2 Part Blog Post)

Learn Sales Tax Exemptions In 50 States (Part 2 of 2 Part Blog Post)

Montana Sales And Use Tax Exemptions

The state of Montana has no sales tax at the state or local levels. It is one of five states in the U.S. that does not charge a state sales tax.

Nebraska Sales And Use Tax Exemptions

The state of Nebraska levies a 5.5% state sales tax on the retail sale, lease or rental of most goods and some services. Local jurisdictions impose additional sales taxes up to 2%. The range of total sales tax rates within the state of Nebraska is between 5.5% and 7.5%.

Use tax is also collected on the consumption, use or storage of goods in Nebraska if sales tax was not paid on the purchase of the goods. The use tax rate is the same as the sales tax rate. Returns are to be filed on or before the 25th day of the month following the month in which the purchases were made. For example, purchases made in the month of January should be reported to the state of Nebraska on or before February 25th.

Visit https://revenue.nebraska.gov/

Nevada Sales And Use Tax Exemptions

Read More

Colorado Now Accepts Crypto For Tax Payments

Colorado Now Accepts Crypto For Tax Payments

On 9/1/22, Colorado became the first state to accept cryptocurrency for all tax payments. There are many ways this could have been structured and I think the state picked an interesting one which I assume makes it easier for the state.

Payments have to come from PayPal Cryptocurrencies Hub. The PayPal account has to be a personal one rather than a business one. Per the DOR website on this:

“A sufficient amount of cryptocurrency to cover the tax, obligation and fees is converted to dollars and remitted to DOR to complete the online transaction. Service fees include an additional $1.00 plus 1.83% of the payment amount. You must have the entire value of your invoice in a single cryptocurrency in your PayPal Cryptocurrencies Hub. Effective on the date initiated, USDs will transfer in 3-5 business days.” [also see https://www.colorado.gov/revenueonline/_/#1]

Per the PayPal crypto website, you can buy, transfer or sell Bitcoin, Bitcoin Cash, Ethereum, and Litecoin.

Read More

United States Income Tax Treaty Network Interactive Map: You Are Invited To Complimentary International Tax Symposium

United States Income Tax Treaty Network Interactive Map: You Are Invited To Complimentary International Tax Symposium

The United States is a signatory to more than 60 income tax treaties with countries throughout the world.  Each treaty offers unique planning opportunities.  From permanent-establishment planning, subsidiary or branch formation, transfer-pricing considerations, anti-hybrid planning, and everything in between, our tax attorneys, CPAs, and experts provide insight and guidance that is custom-tailored to our clients and their unique circumstances.

International Tax Treaties

In addition to the U.S. and foreign statutory rules for the taxation of foreign income of U.S. persons and U.S. income of foreign persons, bilateral income tax treaties limit the amount of income tax that may be imposed by one treaty partner on residents of the other treaty partner. Treaties also contain provisions governing the creditability of taxes imposed by the treaty country in which income was earned in computing the amount of tax owed to the other country by its residents with respect to such income. Treaties further provide procedures under which inconsistent positions taken by the treaty countries with respect to a single item of income or deduction may be mutually resolved by the two countries.

Read More