September 30, 2020
It's a sneaky tax deadline day! Extended Trust and Estate income tax returns on extended Forms 1041 are due today. This is the only annual income tax filing that doesn't come due mid-month that I can think of. E-filing is best. If you have to use paper, pop for the Certified Mail, Return Receipt Requested fee so you can demonstrate timely filing. If you get to the post office after closing, you might try an authorized private delivery service, but remember to use one of the listed options and use the proper IRS street address.
U.S. to Start Forgiving PPP Loans After Borrowers Complained - Yuka Hayashi, Wall Street Journal ($). "The government expects to approve and pay forgiveness requests by late this week or early next, a Treasury spokesperson said. The applications are generally expected to be approved quickly, with the exception of loans above $2 million that will get added scrutiny."
Biden Releases Tax Returns Ahead of Debate With Trump - Richard Rubin and Ken Thomas, Wall Street Journal ($). "Mr. Biden and his wife, Jill, reported receiving $985,233 in adjusted gross income in 2019, a year in which he was mostly running for president. Their tax rate was 29.5%, and their income means they would likely be subject to several of the tax increases Mr. Biden is proposing."
Links to the returns:
Tax Notes has a free archive of available returns for prior presidents and 2020 candidates.
President Trump’s Tax Deductions—And Yours - Laura Saunders, Wall Street Journal ($). "Tax professionals say that several of Mr. Trump’s reported deductions—especially paying family members and making personal use of business assets, and sometimes grooming expenses—raise issues they see in preparing returns for clients with far less wealth than the president’s. The consequences of getting them wrong range from a slap on the wrist and an interest payment, to huge penalties or prison."
President Trump Used Rental Losses To Reduce His Taxable Income: But Can You? - Tony Nitti, Forbes. "This, of course, begs the all-important question: what constitutes a passive activity?"
Treasury Clarifies Intent of 163(j) Real Estate Election Guidance - Eric Yauch, Tax Notes:
Bryan Rimmke, attorney-adviser, Treasury Office of Tax Legislative Counsel, said September 29 on an American Bar Association Section of Taxation virtual meeting that the government’s intent was to allow taxpayers to qualify to make retroactive real property trade or business elections in the revenue procedure based on the language in the final regulations.
The new rules limit annual business interest deductions for taxpayers with gross receipts over $25 million. They also apply to smaller businesses that are considered "tax shelters" under a definition that embraces many normal businesses with passive ownership. Real estate operations and farmers can opt out of the limits at the price of some reduced depreciation allowances.
Related: What Dealerships Need to Know About Tax Reform 2018/2
Tax Court Mail Backlog Difficulties May Persist - Nathan Richman, Tax Notes:
Taxpayers may feel the effect of the Tax Court’s 10,000-piece mail backlog not only in their interactions with the court, but also the IRS, Judge Mark V. Holmes told the audience of a September 29 digital forum hosted by the National Association of Enrolled Agents. Because the IRS didn’t receive notice of the petitions filed while the court was closed, the agency’s assessment and collection processes, especially the automated ones, likely continued, he said.
Any tax assessment or collection notices that should have been prevented by the filing of a Tax Court petition — one the IRS wasn’t notified about — will probably lead to litigation in that court, according to Holmes. Some taxpayers “will end up with assessed taxes that they had thought, quite legitimately, that they had challenged,” he said.
Should be fun.
Did you know? Eide Bailly has a Tax Controversy and Collections team that can help with IRS tax disputes.
New Jersey Governor Signs Budget With Tax Hike on Millionaires - Lauren Loricchio, Tax Notes. "A. 10 will expand the existing 10.75 percent gross income tax rate on income over $5 million to income earned over $1 million. The tax increase is expected to generate $390 million in fiscal 2021."
Recent Tax Cases of Interest - Roger McEowen, Agricultural Law and Taxation Blog. "No Loss Deduction on Sale of Vacation Property."
All About Tax Audits: What To Know Whether It’s Your House Or The White House - Kelly Phillips Erb, Forbes. Great rundown of how IRS exams work.
Voters in Four States to Vote on Recreational Marijuana - Ulrik Boesen, Tax Policy Blog. "This Election Day, voters in Arizona, Montana, New Jersey, and South Dakota will consider legalization and taxation of recreational marijuana."
That doesn't solve the daunting tax problems facing legal cannabis businesses.
COVID-19 Has Turned Much of What We Thought We Knew About City Finances Upside Down - Richard Auxier, Aravind Boddupalli, TaxVox. "The city funding model may be broken"
How ordinary & necessary expenses become tax deductions - Kay Bell, Don't Mess With Taxes:
Robert Lee Henry, an accountant, deducted his yacht expenses, contending that because the boat flew a pennant with the numbers "1040," it brought him professional recognition and clients. The matter ended up before the Tax Court.
The court ruled that the yacht wasn't a normal business expense for a tax professional, and so it wasn't ordinary or necessary." In short, the yacht expense was personal and thus nondeductible. (Henry v. Internal Revenue Commissioner, 36 TC 879 (1961))
I may need to revisit my plan to get "BIG RFND" vanity plates for my car.
This is a roundup of tax news and opinion. Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.