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Internal Revenue Service Issues Final Regulations On Qualified Business Income Deduction

IRS- Qualified Business Income Deduction

Safe Harbor Enables Many Rental Real Estate Owners To Claim  Deduction

The Treasury Department and the Internal Revenue Service issued final regulations and three related pieces of guidance, implementing the new qualified business income (QBI) deduction (section 199A deduction).

The new QBI deduction, created by the 2017 Tax Cuts and Jobs Act (TCJA) allows many owners of sole proprietorships, partnerships, S corporations, trusts, or estates to deduct up to 20 percent of their qualified business income.  Eligible taxpayers can also deduct up to 20 percent of their qualified real estate investment trust (REIT) dividends and publicly traded partnership income.

The QBI deduction is available in tax years beginning after Dec. 31, 2017, meaning eligible taxpayers will be able to claim it for the first time on their 2018 Form 1040.

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IRS Withholding Calculator To Perform Paycheck Checkup

IRS Withholding Calculator

The IRS encourages everyone to use the Withholding Calculator to perform a quick “paycheck checkup.”  This is even more important following the recent changes to the tax law for 2018 and beyond.

The Calculator helps you identify your tax withholding to make sure you have the right amount of tax withheld from your paycheck at work.

There are several reasons to check your withholding:

  • Checking your withholding can help protect against having too little tax withheld and facing an unexpected tax bill or penalty at tax time next year.
  • At the same time, with the average refund topping $2,800, you may prefer to have less tax withheld up front and receive more in your paychecks.
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Budget Act of 2018 (BBA) Extended Credits – Residential Energy Credits – Form 5695

IRS - Residential Energy Tax Credits

Budget Act of 2018 (BBA) Extended Credits 

The BBA reinstated the nonbusiness energy property credit for 2017, and it reinstated the residential energy efficient property credit for qualified small wind energy property costs, qualified geothermal heat pump property costs, and qualified fuel cell property costs to the end of 2021.

You may claim these credits on your 2017 tax return if you otherwise meet the criteria. If you have already filed your return, you will need to file an amended return (Form 1040X) to claim these credits.

Purpose of Form

Use Form 5695 to figure and take your residential energy credits. The residential energy credits are:

  • The residential energy efficient property credit, and
  • The nonbusiness energy property credit.

Also use Form 5695 to take any residential energy efficient property credit carryforward from 2016 or to carry the unused portion of the credit to 2018.

Who Can Take The Credits

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IRS Issues Proposed Regulations On The Base Erosion And Anti-Abuse Tax

IRS Base Erosion

The Internal Revenue Service issued proposed regulations on the section 59A base erosion and anti-abuse tax.

The Tax Cuts and Jobs Act (TCJA), legislation passed in December 2017, made major changes to the tax law for 2018 and future years, including revamping the U.S. international tax system. Among other changes made by the TCJA, new section 59A imposes a tax equal to the base erosion minimum tax amount for certain taxpayers beginning in tax year 2018. When applicable, this tax is in addition to the taxpayer’s regular tax liability. This new provision will primarily affect corporate taxpayers with gross receipts averaging more than $500 million over a three-year period who make deductible payments to foreign related parties.

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IRS Confirms Tax Filing Season To Begin January 28, 2019

IRS- Resumes January 28 2019

Despite the government shutdown, the Internal Revenue Service confirmed that it will process tax returns beginning January 28, 2019 and provide refunds to taxpayers as scheduled.

“We are committed to ensuring that taxpayers receive their refunds notwithstanding the government shutdown. I appreciate the hard work of the employees and their commitment to the taxpayers during this period,” said IRS Commissioner Chuck Rettig.

Congress directed the payment of all tax refunds through a permanent, indefinite appropriation (31 U.S.C. 1324), and the IRS has consistently been of the view that it has authority to pay refunds despite a lapse in annual appropriations. Although in 2011 the Office of Management and Budget (OMB) directed the IRS not to pay refunds during a lapse, OMB has reviewed the relevant law at Treasury’s request and concluded that IRS may pay tax refunds during a lapse.

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Tax Professionals Now Able To Obtain Wage And Income Transcripts Needed For Tax Preparation

IRS - Request Wage Statements From IRS

The Internal Revenue Service, in partnership with the tax preparation community, has devised a new process that will allow tax practitioners to access employer information needed for return preparation and electronic filing while also protecting taxpayer data.

The new process is part of a series of steps planned by the IRS to enhance safeguards around the tax transcript format and distribution to better protect taxpayers from identity theft. A transcript is a summary of tax return entries on the Form 1040 series.

In September 2018, the IRS began partially masking the personally identifiable information for all individuals and entities listed on an individual tax return. The redesigned transcript will fully display all financial entries. See New Tax Transcript and Customer File Number for details.

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IRS Issues Guidance On Section 179 Expenses And Section 168(g) Depreciation Under Tax Cuts And Jobs Act

IRS - Section 179 Expenses

The Internal Revenue Service issued Revenue Procedure 2019-08 to provide guidance on deducting expenses under Section 179(a) and on deducting depreciation under Section 168(g).  These rules, as amended by the Tax Cuts and Jobs Act (TCJA) in December 2017, generally apply to tax years beginning after 2017.

Section 179 allows taxpayers to deduct the cost of certain property as an expense when the property is placed in service.  For tax years beginning after 2017, the TCJA increased the maximum Section 179 expense deduction from $500,000 to $1 million. The phase-out limit increased from $2 million to $2.5 million. These amounts are indexed for inflation for tax years beginning after 2018.

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IRS Issues Proposed Regulations On Key New International Provision, The Base Erosion And Anti-Abuse Tax

IRS LOGO - DEC 14th

The Internal Revenue Service issued proposed regulations  on the section 59A base erosion and anti-abuse tax.

The Tax Cuts and Jobs Act (TCJA), legislation passed in December 2017, made major changes to the tax law for 2018 and future years, including revamping the U.S. international tax system. Among other changes made by the TCJA, new section 59A imposes a tax equal to the base erosion minimum tax amount for certain taxpayers beginning in tax year 2018. When applicable, this tax is in addition to the taxpayer’s regular tax liability. This new provision will primarily affect corporate taxpayers with gross receipts averaging more than $500 million over a three-year period who make deductible payments to foreign related parties.

The proposed regulations provide detailed guidance regarding which taxpayers will be subject to section 59A, the determination of what is a base erosion payment, the method for calculating the base erosion minimum tax amount, and the required base erosion and anti-abuse tax resulting from that calculation.

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Tax Cuts And Jobs Act, Section 199A – Qualified Business Income Deduction (Q&As)

IRS - SEC 199A
Q1. What is the Qualified Business Income Deduction?

A1. Section 199A of the Internal Revenue Code provides many taxpayers a deduction for qualified business income from a qualified trade or business operated directly or through a pass-through entity. The deduction has two components.

  1. Eligible taxpayers may be entitled to a deduction of up to 20 percent of qualified business income (QBI) from a domestic business operated as a sole proprietorship or through a partnership, S corporation, trust or estate. For taxpayers with taxable income that exceeds $315,000 for a married couple filing a joint return, or $157,500 for all other taxpayers, the deduction is subject to limitations such as the type of trade or business, the taxpayer’s taxable income, the amount of W-2 wages paid by the qualified trade or business and the unadjusted basis immediately after acquisition (UBIA) of qualified property held by the trade or business. Income earned through a C corporation or by providing services as an employee is not eligible for the deduction.
  2. Eligible taxpayers may also be entitled to a deduction of up to 20 percent of their combined qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership (PTP) income. This component of the section 199A deduction is not limited by W-2 wages or the UBIA of qualified property.

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Guidance Related To The Foreign Tax Credit, Including Guidance Implementing Changes Made By The Tax Cuts And Jobs Act

IRS - Foreign Tax Credit Guidance

Background

The Act made several significant changes to the Internal Revenue Code with respect to the foreign tax credit rules and related rules for allocating and apportioning expenses for purposes of determining the foreign tax credit limitation. In particular, the Act repealed the fair market value method of asset valuation for purposes of allocating and apportioning interest expense under section 864(e)(2), added section 904(b)(4), added two foreign tax credit limitation categories in section 904(d), amended section 960(a) through (c), added section 960(d) through (f), and repealed section 902 along with making other conforming changes. The Act also added section 951A, which requires a United States shareholder of a controlled foreign corporation (“CFC”) to include certain amounts in income (a “global intangible low-taxed income inclusion” or “GILTI inclusion”).

This document contains proposed regulations (the “proposed regulations”) addressing (1) the allocation and apportionment of deductions under sections 861 through 865 and adjustments to the foreign tax credit limitation under section 904(b)(4); (2) transition rules for overall foreign loss, separate limitation loss, and overall domestic loss accounts under section 904(f) and (g), and for the carryover and carryback of unused foreign taxes under section 904(c); (3) the addition of separate categories under section 904(d) and other necessary updates to the regulations under section 904 including revisions to the look-through rules and other updates to reflect pre-Act statutory amendments; (4) the calculation of the exception from subpart F income for high-taxed income under section 954(b)(4); (5) the determination of deemed paid credits under section 960 and the gross up under section 78; and (6) the application of the election under section 965(n).

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New Tax Credit Benefits Employers Who Provide Paid Family And Medical Leave

IRS Tax Credits For Employers Who Give Family Leave

Tax reform legislation enacted in December 2017 offers a new tax credit for employers who provide paid family and medical leave. Here are several facts about how this credit works and which employers are eligible to claim it:

  • The credit is available for wages paid in taxable years beginning after December 31, 2017, and before January 1, 2020.
  • Some employers can claim the credit retroactively to the beginning of their first taxable year beginning after December 31, 2017, if they meet the terms of a transition rule on or before December 31, 2018.
  • To be eligible for the credit, an employer must have a written policy in place that includes:
    • At least two weeks of paid family and medical leave annually to full-time employees, prorated for part-time employees.
    • Pay for family and medical leave that’s at least 50 percent of the wages normally paid to the employee.
  • Generally, for tax year 2018, the employee’s 2017 compensation from the employer must be $72,000 or less.

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IRS Issues Proposed Regulations On New Business Interest Expense Deduction Limit

TaxConnections- IRS Interest Expense Deduction

The Internal Revenue Service issued proposed regulations for a provision of the Tax Cuts and Jobs Act, which limits the business interest expense deduction for certain taxpayers. Certain small businesses whose gross receipts are $25 million or less and certain trades or businesses are not subject to the limits under this provision.

For tax years beginning after Dec. 31, 2017, the deduction for business interest expense is generally limited to the sum of a taxpayer’s business interest income, 30 percent of adjusted taxable income and floor plan financing interest. Taxpayers will use new Form 8990, Limitation on Business Interest Expense Under Section 163(j), to calculate and report their deduction and the amount of disallowed business interest expense to carry forward to the next tax year.

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