Federal Tax News

The IRS is offering some “summertime tax tips” for a sunnier tax season. For example, summer brides should report any name changes to the Social Security Administration before filing tax returns next year. Report address changes to the U.S. Postal Service, employers and the IRS to ensure receipt of tax-related items. And taxpayers who send their children to summer day camps (not overnight camps) may be able to count the cost for the child and dependent care credit.
The IRS continues to remind taxpayers to check their withholding, to make sure they’re paying the right amount of taxes through withholding or estimated payments. Do you work multiple jobs or are you adding a summer job this year? Conduct a “paycheck checkup.” The Tax Cuts and Jobs Act made changes that might affect the taxes you owe. Changes include increasing the standard deduction, eliminating personal exemptions, discontinuing certain deductions, increasing the child credit, changing the tax rates and brackets and more. The easiest way to do a checkup is to use the IRS withholding calculator: http://bit.ly/2W5pqSY. Have your 2018 tax return and a recent pay stub handy to make the process easier. To see all the summertime tips: https//bit.ly/2LRCrc8
An author’s brand is subject to self-employment tax. Generally, income generated by a self-employed taxpayer’s trade or business is subject to self-employment tax. One successful author received substantial royalty income from publishing contracts for her writing, her name and her likeness. She claimed that amounts received for her name and likeness (her “brand”) were investment income, and not subject to self-employment tax. Her brand, she said, is who she is and that she’s “not in the trade or business of being herself.” The IRS maintained that the payments were derived from her business, and therefore subject to self-employment tax. The U.S. Tax Court agreed, finding her brand was part of her business because it had commercial value. (Slaughter, TC Memo 2019-65)
Is your business buying new or used vehicles this year? The IRS has issued depreciation limits for business passenger autos (including trucks and vans) placed in service in 2019. IRS Revenue Procedure 2019-26 provides that, for vehicles acquired before September 28, 2017, and placed in service in 2019, the depreciation limits are $10,100 for the first year ($14,900 with bonus depreciation), $16,100 for the second year, $9,700 for the third year, and $5,760 each year thereafter. For vehicles acquired after September 27, 2017, and placed in service in 2019, the limits are $10,100 for the first year ($18,100 with bonus depreciation), $16,100 for the second year, $9,700 for the third year, and $5,760 each year thereafter. Contact us with questions.
A CFO is liable for the trust fund recovery penalty (TFRP). Employers may face a harsh penalty if they withhold taxes from employee paychecks but fail to remit the taxes. The IRS may impose a penalty on any person who: 1) is responsible for collecting, accounting for, and paying over payroll taxes; and 2) willfully fails to perform this responsibility. The TFRP equals 100% of the unpaid tax and can be assessed against responsible parties.
In one case, the Chief Financial Officer of two companies (both licensed by the Small Business Administration) was hit with the TFRP for unpaid taxes. In court, he argued that SBA agents had advised him to prioritize paying vendors over paying the taxes. He lost in a U.S. District Court. He filed an appeal, but the U.S. Appeals Court said “my-boss-told-me-not-to-pay” isn’t a defense, even when the “boss” is a government agency. (Myers, CA11, 5/6/19)
Congress has passed a wide-ranging IRS reform bill, and the President is expected to sign it. The “Taxpayer First Act” includes provisions to improve customer service and enhance taxpayers’ rights. In addition, it contains provisions to protect personal data in an effort to help prevent tax-related identity theft. Other reforms include changes to the IRS whistleblower and private debt collection programs.
Establishing an IRS Independent Office of Appeals is part of the Taxpayer First Act. Currently, IRS correspondence to taxpayers explains proposed adjustments to the amount of income tax they owe and possible collection action. Although the U.S. Tax Code refers to appealing the tax amount due, no rules are in place for an appeal. Under the new law, the taxpayer’s case file will be referred to the new office. Appeals will be available to 1) individuals with adjusted gross incomes not exceeding $400,000 and 2) small-business entities with tax-year gross receipts not exceeding $5 million.
FBAR deadline is extended until October, if you missed it. U.S. taxpayers with an interest in or signing authority over certain foreign financial accounts must report those accounts on their tax returns. This applies to foreign financial accounts with aggregate value exceeding $10,000 at any time during 2018. Form 114, “Report of Foreign Bank and Financial Accounts” (FBAR), must be electronically filed with the U.S. Treasury Department. Financial Crimes Enforcement Network (FinCEN). The deadline to file FBARs was the same as for federal income tax returns: April 15, 2019. But FinCEN is granting filers missing the original deadline an automatic extension until October 15, 2019, to file. No request for an extension is required. Contact us with questions.
Planning your wedding? The IRS reminds you that it’s not all about cake and gifts. You’ll also be filing your first tax return as a married couple. To help you take the plunge, there are some steps you should take. For example, check your withholding. You may need to have more (or less) tax taken out of your paychecks, so you may need to submit a new Form W-4 to your employer. If the marriage results in a name change, you’ll need to inform the Social Security Administration. For address changes, let the IRS and the U.S. Postal Service know. You’ll also need to decide whether to file joint or separate tax returns. For more details on these important issues, contact us or click here: http://bit.ly/2JUNNvP
The IRS has issued inflation-adjusted Health Savings Account (HSA) figures for 2020. The new annual HSA contribution limit for an individual with self-only coverage will be $3,550 (up from $3,500 for 2019). For family coverage, the contribution limit will be $7,100 (up from $7,000 for 2019). HSA contributions can be made only by taxpayers with a high deductible health plan (HDHP). For a health plan to qualify as an HDHP in 2020, its annual deductible must not be less than $1,400 (up from $1,350 for 2019) for self-only coverage or $2,800 (up from $2,700 for 2019) for family coverage. (IRS Revenue Procedure 2019-25)

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