September 15, 2020
Passthrough Deadline Day. Today is the extended due date for calendar-year 2019 returns for "passthrough" entities - partnerships and S corporations. Taxpayers that miss the deadline face penalties that begin at $205 per K-1 on the late return. For example, a return with 10 K-1s that is filed one day late incurs penalties of $2050. For each additional month the return is late, the penalty repeats.
Electronic filing is the best way to ensure timely filing. For taxpayers filing on paper, certified mail, return receipt requested, can avoid penalties if the return is postmarked today.
Taxpayers trying to file on paper after the post office closes can use a "designated" private delivery service if the item ships today. Make sure you choose a "designated" option and save your shipping documents. For example, while "UPS Next Day Air" qualifies, "UPS Ground" does not. Be sure to address private delivery filings to the proper IRS service center street address.
Today is also the deadline for third quarter 2020 estimated tax payments for calendar-year taxpayers. Individuals can use paper vouchers, or they may use one of the IRS's electronic payment options. Corporations generally must use EFTPS, the Electronic Federal Tax Payment System.
Due date mulligans. Taxpayers living in some designated disaster areas get extra time to file returns otherwise due today. For example, taxpayers in 11 Iowa counties affected by the August 10 windstorms have until December 15 to file. California taxpayers in Butte, Lake, Monterey, Napa, San Mateo, Santa Cruz, Solano, Sonoma and Yolo counties also are automatically extended to December 15. A complete list of recent IRS disaster relief may be found here; scroll down and click where it says "2020."
Kansas Governor Further Extends Tax Filing Deadlines - Tax Analysts. "Kansas Gov. Laura Kelly (D) issued an executive order extending several COVID-19 relief efforts, including a previous order that extended the deadline for filing individual income tax, fiduciary income tax, corporate income tax, and privilege tax returns without penalty or interest; the new deadline is January 26, 2021, when the state of disaster emergency is lifted, or until the order is rescinded, whichever occurs first."
FBAR Reporting For Indirectly Owned Foreign Bank Accounts - International Tax Blog:
Today, I had some questions about how to report certain other situations on the FBAR, so I called the FBAR helpline. I described the situation where a US citizen individual owns 100% of a foreign corporation and the foreign corporation has a foreign bank account. The IRS representative confirmed that the individual was treated as having a financial interest in the foreign corporation’s foreign bank account and that the individual was required to file an FBAR. Without hesitation, the IRS representative indicated that the account should be reported by the individual on Part II (separately owned accounts).
FBAR reporting is required for foreign financial accounts, not just foreign bank accounts. These are due October 15 if combined balances in all foreign accounts exceed $10,000 during the year. Penalties for non-filing are severe.
Lesson From The Tax Court: Rejected e-Filed Return Starts The SOL On Assessment - Bryan Camp, TaxProf Blog. "It may be consequential because of its ripple effects. For example, will taxpayers whose e-filed returns are rejected now escape a late filing penalty if they either fail to resubmit or resubmit much later? Further, both the IRS and taxpayers will now need to figure out whether the Court’s opinion applies to all e-file rejections or just certain ones and, if so, which ones. Hello litigation."
Opportunity Zone Investing Can Cut Your Tax Bill - Robert W. Wood, Forbes. "So say you just sold a piece of real estate and you are worried about the big tax bill. Or maybe you sold your business and have a big tax bill there. As long as you invest in a QOZ within 180 days of your sale, you can delay the tax until as long as December 31, 2026."
10 tax considerations and tips for newlyweds - Kay Bell, Don't Mess With Taxes.
The Tax Moves Day Traders Need to Make Now - Laura Saunders and Mischa Frankl-Duval, Wall Street Journal ($):
•Know the basics. The tax rules for investment income are very different from those for earned income such as wages. No Social Security or Medicare taxes are due on it, and there is no automatic withholding to set aside cash for income taxes. Estimated quarterly tax payments may be due.
IRS Releases Version of Form 941-X Needed for Employers Looking to Revise Second Quarter Forms 941 - Ed Zollars, Current Federal Tax Developments. "You are now cleared to start filing revisions to the second quarter Form 941 if you have some to fix. The IRS has released the revised Form 941-X that will allow revising Forms 941 that are impacted by provisions found in the Families First Coronavirus Relief Act and/or the CARES Act that impacted second quarter payroll."
Death of Taxpayer Extinguishes Claims for Wrongful Collection and Failure to Release Lien - Leslie Book, Procedurally Taxing. "While the government may pursue the estate for any tax liability, and even for possible civil penalties, this case shows that the government enjoys special status and is free from any consequences from alleged misconduct in collecting those taxes when the taxpayer was alive."
NYSE Signals It Will Exit New Jersey if State Taxes Stock Trades - Alexander Sopovich and Joseph De Avila, Wall Street Journal ($). "Like many other exchange operators, the NYSE runs its electronic trading systems out of data centers in northern New Jersey. Such market operators have been concerned about a bill in the New Jersey legislature that would impose a tax on firms that process large quantities of trades in the state."
New York Stock Exchange Signals Willingness to Relocate Servers to Avoid Proposed New Jersey Financial Transaction Tax - Jared Walczak, Tax Policy Blog. "If implemented, New Jersey’s financial transaction tax would be a flat-rate tax imposed per instrument, not per trade, meaning that a purchase of 1,000 shares would generate $2.50 in taxes. As we have noted previously, this rate may seem small, but it would quickly pyramid as the same instrument is traded—and therefore taxed—multiple times."
Two conflicting goals of Joe Biden's tax plan - Scott Greenberg, No Withholding:
Here’s the issue: The Biden campaign has given no indication that corporations will be allowed to use any business tax credits against the 15% minimum tax (except for the foreign tax credit). If so, corporations subject to the Biden minimum tax would be unable to claim all of the new business tax credits that the Biden campaign has proposed. And if there are fewer companies eligible to claim these tax credits, then the credits could be less effective at achieving their policy goals.
That's the political magic of minimum taxes: offer popular tax breaks, but impose a minimum tax to neuter them.. The unlimited deduction for state and local taxes was a good example. Goodies left on the front porch, quietly removed out the back door.
IRS Aims to Help Marijuana Industry Understand Tax Obligations - Wesley Elmore, Tax Notes ($). "The IRS has launched a webpage designed to help marijuana businesses make sense of their tax compliance obligations, complete with FAQs addressing filing requirements and resources for unbanked taxpayers looking to pay their taxes in cash."
From the IRS Marijuana Industry webpage:
Businesses that traffic marijuana in contravention of federal or state law are subject to the limitations of Internal Revenue Code (IRC) Section 280E. The Marijuana Industry FAQs, linked below, address federal tax filing and information report requirements specific to taxpayers in this industry.
Section 280E prevents cannabis businesses from deducting ordinary business expenses, other than cost of goods sold.
IRS Sweetens The Pot With New Marijuana Industry Web Page - Kelly Phillips Erb, Forbes. Today's Headline Award winner.
What Do People Think About Taxes? They Are Partisan, Dazed, And Confused - Howard Gleckman, TaxVox.
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.