Tax News Roundup - January 27

January 27, 2020

This is a roundup of tax news and opinion. Opinions found at the link are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall.

IRS Clarifies that Rev. Proc. 84-35 Still Applies to Small Partnerships - Kristine A. Tidgren, Ag Docket: 

First, remember that Rev. Proc. 84-35 does not exempt small partnerships from the requirement of filing a Form 1065, U.S. Return of Partnership Income. Rather, it provides a method to establish “reasonable cause” to get out from under the onerous failure to file penalty if certain conditions are met. The most recent inflation adjustment set the penalty at $210/month/per partner for failure to file a partnership return in 2021 (for the 2020 tax year)

Despite some commentary to the contrary, the 2015 changes to the rules governing partnership audits did not change the rules that gave rise to the Rev. Proc. 84-35 exception.

Preparers Cautiously Optimistic for Normal 2020 Filing Season - William Hoffman, Tax Notes ($). 

Tax professionals were pleased that the IRS appears to finally have sorted out its Form 1040 and accompanying schedules, but they said the solution may have created its own problems.

The newest Form 1040 comes with three schedules, down from six last year, noted Joel Grandon, an enrolled agent and president of the National Society of Accountants. Still, he said that “as long as the forms are in a state of flux, we will have confusion among taxpayers.”

Cautiously is about right.

IRS watchdog report indicates continued tax refund delays - Don't Mess with Taxes. "Given the IRS' continued focus on false filings and refund fraud, delayed refunds are likely again in 2020…The biggest problem, according to the 380 page report, is that the IRS' anti-fraud filters are too tough.” 

Lesson From The Tax Court: §6672 Trust Fund Recovery Penalty Is Really A Penalty ... Sort Of  - Bryan Camp, TaxProf Blog. "'Trust Fund Taxes' are those taxes that are paid by the taxpayer to an intermediary who, after collecting the tax, is then supposed to forward it to the government.  These are known as ‘trust fund’ taxes because  §7501(a) says that the money so collected is held in trust for the United States until it is paid over.”

Analysis of Sen. Warren and Sen. Sanders’ Wealth Tax Plans - Juaqun Li and Karl Smith, Tax Policy Blog. "Seemingly low 2 percent and 3 percent wealth tax rates imply much higher income tax rates; in this example, 40 percent and 60 percent, respectively."

States Adopt Some Federal Tax Expenditures And Add Others - Aravind Boddupalli, Frank Sammartino and Eric Toder, TaxVox. "State tax codes are connected to federal law because many start their tax calculations with the same measure of income as reported on federal tax returns." 

Filing season officially starts today - IRS press release: 

WASHINGTON ― The Internal Revenue Service confirmed that the nation's tax season will start for individual tax return filers on Monday, January 27, 2020, when the tax agency will begin accepting and processing 2019 tax year returns.

The deadline to file 2019 tax returns and pay any tax owed is Wednesday, April 15, 2020. More than 150 million individual tax returns for the 2019 tax year are expected to be filed, with the vast majority of those coming before the traditional April tax deadline.

You should wait until you are sure you have all of your 1099, W-2, K-1, 1095 and 1098 forms before you file. Also, keep in mind that brokerage houses often amend 1099s, and these usually come out after the usual January 31 1099 deadline.

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