November 10, 2020
Some Business Owners Can Avoid Cap on Deductions for State and Local Taxes, Treasury Says - Richard Rubin, Wall Street Journal.
Until Monday, the Treasury Department hadn’t issued official guidance on these entity-level taxes and whether that approach would be respected for federal tax purposes. Now, states can implement them with little worry that their business owners will still face the cap.
States that have recently passed such laws also include Rhode Island, Wisconsin, Maryland, Oklahoma and Louisiana. Business owners facing entity-level taxes in California, Illinois, Washington, D.C. and New York City may also be affected.
Related: IRS Blesses Entity-level Tax Deduction used as SALT Cap Workaround: "The Treasury today blessed pass-through entity taxes enacted in response to the $10,000 cap on itemized deductions for state and local taxes."
Partnership, S Corp SALT Payments Not Subject to Deduction Cap - Emily Foster, Tax Notes ($). "The rules described in the notice are effective immediately, and taxpayers may elect to apply them to specified income taxes paid in a passthrough entity’s tax years ending after December 31, 2017, and before the date the proposed regulations are published in the Federal Register."
Passthrough Taxes Created by States as SALT Workarounds Will Be Allowed as Deduction Without Regard to any SALT Limitations - Ed Zollars, Current Federal Tax Developments. "The IRS has now released guidance that proposed regulations will be released that will allow partnerships and S corporations to deduct state and local income taxes imposed on the entity. This development resolves an issue that has been around since Connecticut enacted the first passthrough tax following the passage of the Tax Cuts and Jobs Act."
Could a Divided Congress Approve Biden’s Ambitious Tax Agenda? Maybe More Than You Think - Howard Gleckman, TaxVox.
Biden’s biggest revenue-raisers are an increase in the corporate tax rate from 21 percent to 28 percent and a provision to impose the Social Security payroll tax on wages above $400,000. Are those two in play? Probably not, especially if the economy remains weak.
But public opinion surveys show strong support for raising taxes on the rich, even among Republicans. Combining modest tax cuts for low- and middle-income households with tax increases on high-income households or, say, corporations with lots of foreign income, may be hard for even some Senate Republicans to resist. Especially if the Hill GOP beats the drum for deficit reduction with a Democrat in the White House.
Related: Post-Election Legislative Update webinar. Presented November 11 by Mel Schwarz, Eide Bailly Director of Legislative Affairs.
General Bonus Depreciation Guidance Has Welcome Retail Relief - Nathan Richman, Tax Notes ($). "The revenue procedure providing taxpayers with options for implementing subsequent waves of bonus depreciation regulations includes 2020 tax return options for taxpayers who didn’t address their qualified improvement property (QIP) for 2019."
Related: What is Qualified Improvement Property and Why it Matters.
Colleges Could Benefit From Credits in COVID-19 Relief - Fred Stokeld, Tax Notes:
Nonprofit colleges and universities could benefit from tax credits likely to appear in any COVID-19 relief legislation Congress might consider, according to a former congressional tax committee staff member.
A COVID-19 relief bill would almost certainly include expansion of the employee retention tax credit, said Rick Grafmeyer, a former deputy chief of staff for the Joint Committee on Taxation who is now with Capitol Tax Partners.
U.S. Supreme Court Denies Challenge to Massachusetts Estate Tax - Tax Notes ($). "The Court on November 9 denied a certiorari petition in Shaffer v. Snyder, letting stand a July 10 Massachusetts Supreme Judicial Court ruling that imposing the state estate tax on intangible assets of a qualified terminable interest property trust created by the decedent’s spouse does not violate the federal due process clause."
IRS updates life expectancy tables that determine RMDs - Kay Bell, Don't Mess With Taxes. "Pushing the RMD age from 70½ to 72 means that the money in our traditional IRAs and/or workplace plans like basic 401(k)s have more time to grow untouched. As a corollary to that law change, the IRS has just updated the tables that help us compute just how much of our tax-deferred retirement money we must take out — and finally pay tax on — when we now hit 72."
Lesson From The Tax Court: How To Beat The Bureaucracy - Bryan Camp, TaxProf Blog. "The best way to think of the IRS---both in theory and practice---is that it is a collection of different offices (or functions) each of which has certain defined authorities. Folks, it’s a bureaucracy, not a beast."
Sixth Circuit to (Maybe) Decide Whether Taxpayers Who Don’t Receive a Notice of Deficiency Can Contest an Underlying Liability in a CDP Hearing - Chaim Gordon. "In a case currently pending before the Sixth Circuit, the taxpayer makes the novel argument that a taxpayer can contest an underlying liability in a CDP hearing even if the taxpayer had a prior opportunity to contest the liability before the IRS Appeals Office."
The IRS Says Audit Rates Increase as Income Rises and Offers Data and Explanations - Jack Townsend, Federal Tax Procedure. Quoting an IRS web page: "Despite common misperceptions about IRS examination rates, the reality is that the likelihood of an audit significantly increases as income grows."
U.K. Pension Lump-Sum Distributions For U.S. Residents - International Tax Blog. "Individuals that have lived in the U.K. but then move to the U.S. may have U.K. pensions. One question that arises at times is whether a lump-sum distribution from the U.K. pension is tax-free in the U.S. under the U.K.-U.S. Income Tax Treaty..."
Deducting Business Attire, Real Estate Agents & Small Business Owners - Brett Hersh, Overnight Accountant. "That’s the general rule - attire one can wear outside the workplace is not deductible. But, there are two exceptions: Safety Gear and Uniforms."
Accessory after the fact. The New York State Department of Taxation and Finance says little kid mittens aren't taxable, but not losing them is:
Tax Law §1115(a)(30) exempts clothing and footwear costing less than $110 from the imposition of sales tax and the compensating use tax. Items used to make or repair such clothing that become a physical component part of such clothing are also exempt from sales and use tax.
Mitten clips themselves are not clothing...Mitten clips used in the manner outlined by the Petitioner are essentially accessories and not physical components or constituent parts of the clothing to which they are attached. Unlike zippers or snaps, for example, mitten clips do not become a physical component part of the clothing. Furthermore, they are readily removable rather than being sewn into a garment.
Some consolation for parents of little mitten wearers: you are doing more than trying to not lose mittens; you're accessorizing the outfit.
Today in History:
November 10, 1975: The ore carrier SS Edmund Fitzgerald is lost in a storm in Lake Superior with all hands. "When launched on June 7, 1958, she was the largest ship on North America's Great Lakes, and she remains the largest to have sunk there."
November 10, 1983: Bill Gates Introduces Windows 1.0. "When it was presented at a swanky New York event, the first version of Windows required two floppy disk drives and 192KB of RAM."
This is a roundup of tax news and opinion. Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.