August 12, 2020
Today's post is late due to local internet issues arising out of Monday's big storm. Our apologies.
An optional payroll tax holiday? Tax Notes reports ($) that the big payroll tax holiday announced over the weekend may be optional:
“We can’t force people to participate, but I think many small businesses will [participate] and pass on the benefits,” Mnuchin said August 12 on Fox Business.
As reported below, some employers are concerned about potential exposure if they don't withhold the taxes. Payroll providers say that not withholding employee taxes will be a software challenge.
Employers Cast Wary Eye on Trump Payroll-Tax Deferral - Richard Rubin, Wall Street Journal ($). "Employers’ biggest worry: If they stop withholding taxes without any guarantee that Congress will actually forgive any deferred payments, they could find themselves on the hook. That is a particular risk in cases where employees change jobs and employers can’t withhold more taxes from later paychecks to catch up on missed payments."
Executive order delays workers’ payroll tax payments - Alistair M. Nevius, The Tax Adviser. "The deferral applies to any employee whose pretax wages or compensation during any biweekly pay period generally is less than $4,000. The tax payments are deferred without any penalties, interest, additional amount, or addition to the tax."
GOP Finance chairman raises concerns about Trump push to make payroll-tax deferral permanent- Alexander Bolton, The Hill. "Senate Finance Committee Chairman Chuck Grassley (R-Iowa) said Tuesday that he would only support making President Trump's payroll-tax holiday permanent if it was coupled with a larger reform to ensure the long-term solvency of Social Security."
Losing Money Is a Winning Pandemic Tax Strategy for Some Companies - Richard Rubin and Theo Francis, Wall Street Journal ($). "That’s because companies can now use losses incurred before and during the pandemic to offset up to five years of past profits. What makes this moment particularly attractive: Congress is letting companies get refunds of taxes they paid at the 35% corporate rate that existed before 2018 rather than at today’s 21% rate."
These opportunities are enhanced by retroactive changes allowing 100% bonus depreciation for building improvements placed in service after 2017 and enhanced deductions for energy-efficient commercial building expenditures. These carryback benefits also increase the value of cost segregation studies, which identify shorter-lived property in buildings and construction projects.
Biden Shares Common Tax Ground With VP Pick Harris - Jonathan Curry, Tax Notes ($). "Like Biden, Harris had proposed rolling back the parts of the Tax Cuts and Jobs Act that benefited corporations and wealthy individuals. They also shared a desire to end stepped-up basis at death, and to ease the cost of housing for low-income individuals through a new refundable tax credit for renters that would effectively cap the cost of rent and utilities at a portion of income."
Guidance Issued in the Form of FAQs on Interaction of EIDL Advances and PPP Loan Forgiveness - Ed Zollars, Current Federal Tax Developments. "The SBA added a new “Economic Injury Disaster Loan (EIDL) FAQs” section to the PPP Loan Forgiveness FAQ on August 11, 2020. The FAQs are the first significant guidance issued on the interaction of EIDL advances and PPP loans."
The Ultimate Forbes Guide to Working From Home - Kelly Phillips Erb, Forbes. "Millions of employees could be in for a rude surprise next April when they find out their home office isn’t deductible and the states can’t agree on who gets their money. Time to put a tax pro on speed dial?"
Demolishing Farm Buildings and Structures – Any Tax Benefit? - Roger McEowen, Agricultural Law and Taxation Blog. "The inland hurricane of August 10 wreaked havoc on a great deal of agricultural assets that were in its path. The tax rules surrounding the disposition of disaffected assets is important to understand."
Uber & Lyft Ordered To Treat Drivers As Employees, Are Any Contractors Independent Now? - Robert W. Wood, Forbes. "A judge granted a preliminary injunction and ordered Uber and Lyft to start treating their California drivers as employees. It is a sweeping court order for both companies to consider all their drivers as employees. The companies will appeal, of course, but it’s a big victory for California’s tough new law, Assembly Bill 5."
Interest Rules’ 11-Step Process for Partnerships Still Raises Ire - Eric Yauch, Tax Notes ($):
When the so-called 11-step process was first introduced by Treasury and the IRS in proposed regulations in 2018, practitioners were somewhat divided on how helpful it would be. Some noted that it was easily programmable into Excel, which made the section 163(j) allocation process workable from a practical standpoint.
Others disagreed, with Eric B. Sloan of Gibson Dunn & Crutcher LLP referring to it as the “Eleven Steps From Hell” in his presentation slides at a D.C. Bar conference in January.
Whether it's an elaborate spreadsheet or a walk through hell, it won't make partnership returns any cheaper.
Where Should the Money Come From? - Daniel Bunn, Tax Policy Blog:
The fiscal responses to the COVID-19 pandemic will require policymakers to consider what revenue resources should be used to fill budget gaps.
Tax policy experts have proposed wealth taxes, (global) corporate minimum taxes, excess profits taxes, and digital taxes as opportunities for governments to raise new revenues.
Instead of designing novel taxes, however, governments should focus on neutral and competitive reforms to existing taxes for sustainable financing and to support economic growth.
IRS updating taxpayer addresses using Post Office's yellow label info - Kay Bell, Don't Mess With Taxes. "An agency-wide memo went out on July 28 with guidance for IRS employees who process undeliverable mail. It details, pending final formal regs, how they should research and update a taxpayer's mailing address when correspondence is returned by the Postal Service as undeliverable."
Are They Turning Up the Heat on Tax Return Preparers? - Jim Maule, Mauled Again. "I will simply repeat what I have written several times in the past: 'The lesson at the moment? Choose a tax return preparer as carefully as choosing a surgeon or child care provider. In other words, do research, talk to friends and neighbors, look at online reviews, and interview the preparer.'"
I would add - don't always take the lowest price, and don't trust promises of the biggest refunds.
IRS Veteran Insists That IRS Is Missing Billions In Real Estate Gains - Peter Reilly, Forbes:
Working with a computer expert, Jerry designed an algorithm. The algorithm would look for partnerships with large deficit capital accounts. He was in the big time in Washington so it was a big cutoff. He put out $50 million as the threshold.
And then he traced them into the next year. What he found was that some of them disappeared. There was no final return recognizing gain to bring the deficit up to zero, which is what most practical accountants think is supposed to happen.
Things like this may have something to do with recent IRS efforts to require annual updates of tax basis capital accounts on partner K-1s.
Happy Birthday, DOS 1.0. The first IBM Personal Computer was released on this date in 1981. The base prace was $1,585, for 16K ram and no disk drives.
This is a roundup of tax news and opinion. Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.