IRS’s Proposed 2021 Crypto Question Seen as Improvement - Kristen Parillo, Tax Notes ($).
In the new draft Form 1040, the IRS has deleted the word “send” and replaced “otherwise acquire” with “otherwise dispose of,” so that it reads: “At any time during 2021, did you receive, sell, exchange, or otherwise dispose of any financial interest in any virtual currency?”
If you answer this question "no" and the IRS later learns it should have been "yes," that won't be a good thing.
Related: New Tax Guidance Issued on Cryptocurrency Transactions.
IRS releases drafts of 2021 Form 1040 and schedules - Kay Bell, Don't Mess With Taxes. "The schedule's current version on line 8 simply says "Other income. List type and amount" on the dotted line before the dollar amount column. For 2021, Schedule 1 line 8 has 17 sublines, shown in the excerpt below, detailing the various other income types and sources."
Infrastructure negotiators’ new deadline: ‘ASAP’ - Jessica Wehrman, Roll Call. "The happy talk came in sharp contrast to the mood earlier in the day, when Republicans and Democrats exchanged barbs over the negotiations and former President Donald Trump weighed in to urge Republicans not to make a deal."
Looking ahead on Child Tax Credit - Bernie Becker, Politico
It’s a big question hanging out there: Why aren’t Democrats making a bigger push to make this year’s expansion of the Child Tax Credit permanent?
At its core, the answer is pretty simple — the money isn’t there. Democrats are essentially trying to fit as much of the $6 trillion agenda envisioned by Senate Budget Chair Bernie Sanders (I-Vt.) into the $3.5 trillion cap for a budget reconciliation measure allowed by their centrists.
Oregon Governor Signs Small Business Tax Break Reform, SALT Workaround - Paul Jones, Tax Notes ($):
S.B. 139 amends the reduced income tax rate schedule allowed for passthrough income received by owners of partnerships, S corporations, and sole proprietorships that meet eligibility requirements. The bill establishes new restrictions on the program for S corporations and partnerships, including that passthrough owners can use the special rate schedule only if their business has no more than $5 million in ordinary business income.
The bill also requires partnerships and S corporations using the schedule to meet an employee-to-employer ratio of a certain number of employees per entity owner, member, or limited partner.
It doesn't appear that tax simplification was a big part of the plan. Also:
Entities treated as partnerships or S corporations, including limited liability companies, can elect to pay an entity-level state tax if they meet requirements, including that all their members are individuals subject to Oregon’s personal income tax or are passthrough entities owned entirely by individuals subject to Oregon’s personal income tax.
That's a puzzling limitation.
North Carolina Considers Corporate Income Tax Repeal and Individual Income Tax Relief - Katherine Loughead, Tax Policy Blog.
Under HB 334, the state’s 2.5 percent corporate income tax rate would be reduced by 0.5 percentage points per year, starting in 2024 and fully phasing out by 2028. In FY 2019, North Carolina’s corporate income tax generated $836 million, or less than 3 percent of the state’s general fund tax collections. Compared to most alternative revenue sources, the corporate income tax is not only more economically harmful, but it is also notoriously volatile, presenting challenges for state forecasters in anticipating how much revenue it will generate in any given year. Reducing and ultimately eliminating reliance on such a volatile revenue source would make state tax revenue more stable over time.
In addition to phasing out the corporate income tax, HB 334 would reduce the state’s individual income tax rate from 5.25 to 4.99 percent, effective January 1, 2022.
Compare and contrast with Oregon.
Entrepreneur Can Deduct Full Amount of MBA Education Expenses - Kelley Taylor, Tax Notes ($). "A technology entrepreneur is entitled to fully deduct education expenses for a master’s in business administration he pursued to refine skills involving his established trade, the Tax Court held in a bench opinion."
From the opinion:
We are satisfied that petitioner was qualified in the trade or business of being an entrepreneur before enrolling in the MBA program at MIT on the basis of the time and money he had previously spent founding, organizing, and assuming the financial risks of his two entrepreneurial ventures, Wikispective and 36Names. Further, petitioner had likely developed significant business acumen that was useful in pursuing these ventures while obtaining an undergraduate degree in business administration and working as an investment analyst at Goldman Sachs and Solstein Capital. Petitioner continued to develop his entrepreneurial skillset when he helped found and served as the CEO of DeepBench starting in 2016.
Although petitioner's business courses at the MIT MBA program may have honed his leadership, communication, organization, and other skills necessary to run a successful business, they did not "qualify" him for a new trade or business as an entrepreneur. Rather, they maintained and refined skills he was already using in his current business.
Don't count on using this for yoru 2021 return. The taxpayer claimed the expenses as a "miscellaneous itemized deduction." The 2017 tax law changes have made such costs non-deductible through 2025.
In Taxpayer's Situation, Cost of an MBA Program Found to Be a Deductible Business Education Expense - Ed Zollars, Current Federal Tax Developments. "The IRS argued that the skills provided by the program were not required to be successful in his employment with Solstein Capital, apparently viewing the training as being aimed at allowing the taxpayer to pursue a new trade or business as an entrepreneur."
IRS Whiff on Timeliness of Refund Claim Prevents Payment of Refund If Taxpayer Fails to File Suit Within Two Years - Leslie Book, Procedurally Taxing. "What happens if a taxpayer timely files a refund claim, IRS denies the claim because it mistakenly believes that the claim is untimely and the taxpayer fails to files a refund suit within two years? To top it off, IRS, outside the two-year window for filing suit, realizes that it made an initial mistake in rejecting the claim on SOL grounds?... The situation highlights the at times unfairness of the SOL rules."
"SOL" means "statute of limitations," in case you were thinking of something else.
Changes to partnership capital reporting requirements - National Association of Tax Professionals. "For even the most skilled of professionals, the preparation of the partnership return is a source of frustration partly due to the complexities of Subchapter K of the IRC (Subchapter K governs partnership taxation)."
Big Pharma Quietly Pushes Back on Global Tax Deal, Citing Covid-19 Role - Jenny Strasburg and Laura Cooper, Wall Street Journal ($). "Pharma executives and lawyers say they want certainty and simplicity and warn higher taxes could crimp the sort of risky research and development that led to the quick deployment of Covid-19 vaccines and pandemic therapies."
Should Overseas Americans Be Required to Buy Their Freedom? Laura Snyder, Karen Alpert, and John Richardson, Tax Notes ($):
The U.S. extraterritorial tax system creates extraordinary hardships for Americans living overseas. The problem has little to do with the amount of taxes Americans living overseas actually pay to the United States. Instead, the more consequential and far-reaching problem is that Americans living overseas are expected to carry out their financial lives as if they are living in the United States. For persons living outside the United States on a long-term basis, this is impossible.10 It results in their economic and social exclusion from both their families and communities.
New York Launches NYC Theatrical Production Tax Credit - Carolina Vargas, Tax Notes. "Eligible companies can receive a tax credit equal to 25 percent of qualified production expenditures, including costumes, wardrobes, and makeup, according to the release. Applicants to the program will be eligible for up to $3 million per production in the first year."
#TaxTok Answers the Request for Easy-to-Understand Tax Info - Caitlin Mullaney, Tax Notes ($):
Joe Kristan of Eide Bailly LLP said he had only seen #TaxTok previously mentioned on #TaxTwitter conversations, adding, “I only knew of a couple videos that were heavily dunked on for giving terrible tax advice.” But after researching #TaxTok, he said he came away finding some pretty good and funny posts.
“There’s so much out there, though, that I’m sure that there is bad stuff — like everywhere else on the internet,” said Kristan, a principal contributor to the Eide Bailly Tax News and Views blog. “There’s been bad (and good) tax stuff on the internet since the heyday of the misc.taxes Usenet board,” he added.
Taxes are hard to understand, and people need help, so it is natural for them to go to platforms they are comfortable with to learn more, Kristan said. However, he advises that when real money is involved, the viewer should take what they learn on #TaxTok to a real paid professional, perhaps one they have seen on the platform.
“Like everywhere else, you get what you pay for,” Kristan said.
Here's an example of some good stuff from Duke, a prominent #TaxTok guy.
Get out that kitchen torch, today is National Crème Brûlée Day! "Crème brûlée is also known as burnt cream, crema Catalana, and Trinity crème. The dessert consists of a rich custard base. The custard is then topped with a contrasting layer of caramelized sugar. Chefs achieve this final layer by using a small propane torch."
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.