March 17, 2021
Over 100 House Members Join Call for Filing Season Extension - Jad Chamseddine, Tax Notes ($):
The lawmakers join a growing chorus of voices calling on the IRS to postpone the deadline.
The American Institute of CPAs has also called on the IRS to postpone the deadline after its members have been hounded by clients about the difficulties of filing their returns on time. “Denying a postponement of this filing and payment deadline disregards and further exacerbates the continued difficulties being faced by these families and businesses,” the AICPA said in a March 16 statement.
The IRS was 25% behind its processing pace as of March 5. It still hasn't processed millions of items submitted last year.
IRS tax-free unemployment guidance: don't amend returns if you've already filed; use new worksheet if you haven't - Kay Bell, Don't Mess With Taxes. "Hopefully, the IRS will get back to us soon about next moves in these unemployment income tax return cases."
IRS Tax Returns Are Due April 15, But Extensions May Reduce Audit Risk - Robert Wood, Forbes ($). "Opinions vary, and there are many old wives tales about what triggers an audit. However, it is unlikely that going on extension increases IRS audit risk."
The article makes the excellent point that filing in haste is likely to increase your audit risk because of the increased risk of errors. The returns most likely to be examined are those that are wrong.
AICPA asks for guidance on S corp. and partnership PPP loan forgiveness - Sally Schreiber, Journal of Accountancy:
The AICPA is recommending that Treasury and the IRS issue guidance stating that the proper period for the inclusion of the tax-exempt income due to Section 276 is when the PPP borrower pays or incurs qualifying expenses during the covered forgiveness period. The AICPA is also asking that the guidance state that the IRS does not intend to challenge treating the loan forgiveness as a ministerial act.
The second issue the letter seeks guidance on is the proper treatment of “related expenses” for S corporations. The AICPA recommends that for S corporation purposes, related expenses (qualified PPP expenses) that are deducted and attributed to the PPP loan not be taken into account for the accumulated adjustment account pursuant to Sec. 1368(e)(1)(A). Instead, the other adjustment account should include those related expenses because they directly relate to the tax-exempt income by operation of Section 276 due to PPP loan forgiveness. The AICPA asks Treasury and the IRS to issue guidance reflecting this proper treatment and disregard Regs. Sec. 1.1368-2(a)(3)(i) for this limited purpose.
The AICPA approach is correct. It would sure have been nice of the IRS to have had issued such guidance for the calendar year S corporation returns that were due Monday.
House Approves 2-Month PPP Extension - Jad Chamseddine, Tax Notes. "The program is scheduled to close on March 31. The proposal has the support of organizations including the American Institute of CPAs, following complaints that loan reviews by the SBA have hampered the speed of the process."
Related: What the American Rescue Plan Means for Nonprofits.
Stimulus Questions Hold Up California PPP Loan Conformity Bill - Paul Jones, Tax Notes ($):
As drafted, the bill would establish modified conformity with the federal Consolidated Appropriations Act, 2021 (P.L. 116-260), approved late last year. Businesses would be allowed to deduct from their state taxable income expenses paid for using forgiven PPP loans or forgiven loans issued via the Economic Injury Disaster Loans program, but total expenses would be capped at $150,000.
A spokesperson with the California Department of Finance said March 16 that state leaders are concerned about whether A.B. 80 might be seen as conflicting with a provision in the $1.9 trillion American Rescue Plan Act of 2021 (P.L. 117-2) that prohibits states that receive the federal aid from using it to directly or indirectly offset state tax cuts.
Maybe Congress didn't really think that "no tax cut" provision through very well.
Senate Tax-Writing Committee Examines Tax Incentives to Spur Domestic Manufacturing - Jay Heflin, Eide Bailly. "The issue of extending the 20% deduction for pass-thru entities was raised a few times during the hearing and witnesses stressed that it should be extended before it expires in 2026."
Yellen Says Biden Administration Undecided on Wealth Tax - Paul Kiernan and Catherine Lucey, Wall Street Journal ($):
“That’s something that we haven’t decided yet and can look at,” Ms. Yellen said. She noted that Mr. Biden proposed higher taxes on corporations, on some individuals and on capital gains or dividend payments during his 2020 presidential campaign. “Those are alternatives that address—that are similar in their impact to a wealth tax.”
$1.9 Trillion America Rescue Plan Contains Wide-Reaching Tax Changes - Kristine Tidgren, Ag Docket. "This massive new stimulus package raises more questions about future tax increases. On March 15, 2021, Bloomberg reported that President Biden plans to increase taxes on corporations and 'wealthy' individuals in the next spending package."
A Look at Tax Provisions for Low-Income Americans in the American Rescue Plan Act - Omeed Firouzi, Procedurally Taxing. "All told, these dramatic changes will be enormously impactful in the lives of clients of low-income taxpayer clinic practitioners."
Selling Farm Business Assets – Special Tax Treatment (Part Three) - Roger McEowen, Agricultural Law and Taxation Blog. "Section 1231 assets are accorded special tax treatment under the Code. For farmers and ranchers that treatment can come up in many common transactions."
Can a hotel be a tax home? - National Association of Tax Professionals. "In determining if a travel deduction is allowed for tax purposes, the location of the taxpayer’s tax home is important. Generally, a taxpayer’s tax home for travel deduction purposes 'means the vicinity of the taxpayer’s principal place of employment [or business] and not where his or her personal residence is located.'"
How GILTI Are U.S. Industries? - Daniel Bunn, Tax Policy Blog. "As policymakers consider potential changes to GILTI it is important to keep in mind that the intent behind the policy was to tax foreign profits from intangible assets that faced low levels of tax. In reality, the policy applies much more broadly."
Related: Five Reasons International Businesses Should Consider GILTI.
Biden’s Pandemic Relief Bill Is One Of The Biggest One Year Tax Cuts In Modern US History - Howard Gleckman, TaxVox. "As a share of the economy, the Biden tax cuts are 70 percent larger than the tax reductions in any single year of the 2017 Tax Cuts and Jobs Act (TCJA), a tax cut that President Trump falsely and repeatedly touted as the biggest ever."
Korean Superstars Endorse Lipstick, Pizza, and Tax Compliance - Martin Sullivan, Tax Notes Opinions:
One of the biggest stars in the Korean entertainment industry, Park has 8.1 million Instagram followers and is known as the "queen of K-drama rom-coms." Her popularity has won her a slew of endorsements, mostly for clothing and cosmetics. This year, one day before her 35th birthday, she was awarded yet another honorific and scheduled to begin endorsing another product. On March 3, Korea’s 55th annual Taxpayers’ Day, Park was selected to be an honorary ambassador to promote payment of taxes for South Korea’s National Tax Service (NTS).
I wonder what U.S. star would be tapped for an IRS publicity drive. Probably not Wesley Snipes.
Happy St. Patrick's Day! Appropriately, today is also National Corned Beef and Cabbage Day.
It is also National Small Business Development Centers day. "SBDC Day unites the nearly 1,000 SBDC centers across the country and the hundreds of thousands of clients they serve by sharing, in real time, the success stories and notable impacts SBDCs collectively have on the small business community at large. This special day will be celebrated with social media campaigns, public relations initiatives and other online events." Find your Local SBDC here.
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.