Tax News & Views Montana Rounds 'em Up Roundup

February 17, 2021

Montana DOR: Remote Workers Subject to State Income Tax - Montana Department of Revenue via Tax Notes. "The Montana Department of Revenue reminded taxpayers that income received from remote work performed in the state at any time in 2020 is subject to state income tax; this applies to employees who temporarily relocated because of COVID-19, even if their work is normally performed in another state."

Not all states are taxing workers dislocated by COVID. The American Institute of Certified Public Accountants has a state-by-state summary of state approaches to COVID refugees.

Related: Telecommuting Workers in Refuge States Complicate State Taxes.


Be sure to claim applicable household utility costs in your home office deduction - Kay Bell, Don't Mess With Taxes:

Before you get too excited about writing off, like me, the Polar Blast's triple digit heating bill, note the phrase from the previous paragraph: count a portion of home-related expenses.

You can deduct only the amount of your residence's expenses that applies to your home office.

That's the space, either a separate room or a portion of a room that meets the Internal Revenue Service qualifications. Notably, you use the area/room exclusively and regularly to conduct your business.

And even that doesn't work for home offices of employees.


The IRS Cashed Her Check. Then the Late Notices Started Coming. - Lydia DePillis, ProPublica:

“If you got a penalty or notice, and you’re trying to resolve the issue, it’s literally mission impossible to do that over the phone, even as a practitioner,” said Mishkin Santa, a principal with the Wolf Group, which often works on U.S. tax issues with foreign nationals. “The processing systems of the IRS are failing our taxpayers.”

If you get a scary IRS notice, don't panic, and don't send them more money without talking to your tax pro. You may have already sent them the money, and it's in the bottom of a bin of unopened mail.

Related: How to Address COVID-19-Related Tax Collection Issues. 


IRS Issues Applicable Federal Rates (AFR) for March 2021 - Eide Bailly. "IRS updates Applicable Federal Rates (AFR): minimum interest rates required by IRS for gifts, loans & sales. Includes long-term tax-exempt rate for applying Section 382 to Net Operating Losses (NOLs) for ownership changes occurring in the month" The annual short-term AFR is 0.11% for March 2021.

IRS Taxes Legal Settlements, But Some Are Capital Gain - Robert W. Wood, Forbes ($). "The Tax Court relied heavily on the express allocation in the settlement agreement, and was inclined to agree with the taxpayer that these were sale proceeds and capital gain."

Low Income Housing Tax Credit - Aggregators Fight Sponsors In Year 15 - Peter Reilly, Forbes ($). "Deals were structured so that investor partners would get all their return from tax benefits with a view that they would not be getting anything on the back end."

Controlling Interest Transfer Tax - George W. Rendziperis, Freeman Law. "Taxpayers utilized loopholes to avoid paying the Real Estate Transfer Tax, by selling the entity that owns the real estate instead of selling the real estate itself.  Approximately 17 states have closed such loopholes."

What Nonprofits Need to Know About Sales Tax - Jennifer Dunn, TaxJar. "Nonprofit organizations are sometimes exempt from paying sales tax, but only in limited cases." 

Related: Sales Tax Considerations for Nonprofits.

Avoiding the SALT cap might actually spark a larger tax bill - Lynnley Browning, Accounting Today. "Where it gets complicated, experts say, is when owners or investors in a business or fund are spread out across America."

Tariffs on Wine, Food From Europe to Stay for Now, U.S. Says - Yuka Hayashi, Wall Street Journal ($). "The Office of the U.S. Trade Representative said Friday it was unnecessary for now to suspend the levies, which were imposed by the Trump administration as part of a longstanding dispute with the European Union over commercial aircraft subsidies."


Biden Wants to Reform the Capital Gains Preference — It Will Be Hard - Joseph Thorndike, Tax Notes Opinions:

Biden’s proposal to narrow the preference stops well short of full repeal. As a candidate, he promised to increase the rate for individual long-term gains from 20 percent to his proposed top rate on ordinary income of 39.6 percent. That new rate for capital gains would apply only to taxpayers earning more than $1 million a year.


But the history should be encouraging, at least if you’re a fan of the preference. It should also be sobering if you’re eager to see the preference disappear. Because one thing is clear: It’s not just the preference that’s old — so are the arguments used to defend and attack it.


Business Incomes at the Top - Wojciech Kopczuk and Eric Zwick, Journal of Economic Perspectives. "In 2014, 69 percent of the top 1 percent of income earners and 84 percent of the top 0.1 percent of income earners accrued some pass-through business income. In absolute terms, that amounts to more than 1.1 million pass-through owners with annual incomes above $390,000 and 140,000 pass-through owners with annual incomes of more than $1.6 million. In both number and aggregate income, these groups far surpass the top executives at public companies, who have been the focus of much inequality commentary... In short, the typical top 1 percent earner is not a public company executive or tech billionaire; instead, a top earner is typically a doctor, lawyer, or the owner-operator of a middle-sized business."


Today is both "National Cabbage Day" and "National Random Act of Kindness" day. So surprise a stranger with a nice big head of cabbage. It will be an act that will be long remembered.

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