September 1, 2021
The tax relief postpones various tax filing and payment deadlines that occurred starting on August 26, 2021. As a result, affected individuals and businesses will have until January 3, 2022, to file returns and pay any taxes that were originally due during this period. This means individuals who had a valid extension to file their 2020 return due to run out on October 15, 2021, will now have until January 3, 2022, to file. The IRS noted, however, that because tax payments related to these 2020 returns were due on May 17, 2021, those payments are not eligible for this relief.
The January 3, 2022 deadline also applies to quarterly estimated income tax payments due on September 15, 2021, and the quarterly payroll and excise tax returns normally due on November 1, 2021. It also applies to tax-exempt organizations, operating on a calendar-year basis, that had a valid extension due to run out on November 15, 2021. Businesses with extensions also have the additional time including, among others, calendar-year corporations whose 2020 extensions run out on October 15, 2021.
In addition, penalties on payroll and excise tax deposits due on or after August 26 and before September 10, will be abated as long as the deposits are made by September 10, 2021.
The extension applies to the entire state of Louisiana.
IRS gives all Louisiana taxpayers Hurricane Ida tax relief - Kay Bell, Don't Mess With Taxes. "For individual taxpayers who had filed for an extension to complete their 2020 returns, this means that instead of getting their Form 1040s etc. to the IRS by Oct. 15, they have until the new January due date."
Disaster postponements also apply to parts of California and Tennessee. The Calfornia relief is a result of wildfires and applies to individuals residing or having businesses in Lassen, Nevada, Placer, and Pumas counties. Returns due starting July 14 are now due no sooner than November 15.
The Tennessee relief is for storm victims in Dickson, Hickman, Houston, and Humphries counties; their returns due after August 21, 2021 are now due no sooner than January 3, 2022.
Democratic lawmaker urges Congress to extend R&D expensing - Jay Heflin, Eide Bailly. "Without Larson’s change, research and development expenses will be amortized over five years beginning in 2022, instead of being immediately deducted each year, which is currently allowed."
Capital-Gains Tax Hike Exposes Divisions Among House Democrats - Kaustuv Basu, Bloomberg:
Most House Ways and Means Democrats support Biden’s plan to raise the capital gains rate on those earning above $1 million to 39.6% from 20%, to make it equal with president’s proposal for the top rate on income, according to a lawmaker and a House aide familiar with the talks. About a third of Democrats on the panel, however, are advocating for a lower rate on investments, potentially around 28%, according to the people, who requested anonymity because the discussions are private.
Some Democrats on the panel are also balking at Biden’s plan to end a tax preference, known as “step-up-in-basis,” that allows appreciated assets to be passed to heirs tax-free, the people said. Various lawmakers have expressed concern that requiring taxes to be paid when the owner dies would hurt family farms and small businesses.
Given the narrowness of the Democratic majority and the unified Republican opposition, taxation of gains at death may be beyond the reach of its advocates.
Keeping Up With Congress: Fall 2021 Preview - David Stewart, Doug Sword, and Frederic Lee, Tax Notes Opinions. "A lot of people say that spending number will be determined by the most conservative member in the Senate because all 50 Senate Democrats will have to vote for this."
Proposed Capital Gains Rate Increase Impact on the Sale of a Family Business - Sherri Sorbello, Tax Warrior Chronicle. "Given the significant reduction to net cash flow from a sale with the increased capital gains tax rate, there are planning strategies to consider when selling a family business."
Dispute Over Deduction for Online Software Goes to Tax Court - Kristan Parillo, Tax Notes ($). "A technology business is challenging the IRS’s position that the domestic production activities deduction isn’t available for revenue derived from online software."
The case involves the now-repealed Sec. 199 deduction, which allowed a 9% reduction in taxable income from "production activities" for years beginning before 2018. The last statutes of limitation for extended 2017 returns will be expiring in September and October, so any taxpayers who want to retain refund rights for online software will have to move quickly.
IRS announces underpayment, overpayment rates for 2021 Fourth Quarter. - Bailey Finney, Eide Bailly:
The IRS has announced (Rev. Rul. 2021-17) the interest rates for taxpayer underpayments and overpayments for the fourth quarter of 2021:
• 3% for overpayments [2% in the case of a corporation];
• an additional 0.5% for the portion of a corporate overpayment exceeding $10,000;
• 3% for underpayments; and
• 5% for large corporate underpayments.
Iowa Again Updates Tax Guidance for Small Business Relief Grants - Iowa Department of Revenue, via Tax Notes. "The Iowa Department of Revenue has updated previously released guidance on the income and franchise tax exclusion available for qualifying COVID-19 grants to clarify that business expense deductions attributable to these grants are allowed for state tax purposes."
Iowa payroll tax rate to remain steady in 2022 as unemployment trust fund recovers from pandemic - Tyler Jett, Des Moines Register. "Iowa Workforce Development announced Tuesday afternoon that the rates will remain the same in 2022. The payroll tax revenues bolster Iowa's unemployment insurance trust fund, the source of state-provided compensation."
The Biggest Tax Mistakes Business Owners Make - Eric Reiner, Financial Advisor:
Tax gaffes occur for varied reasons. Some folks rush headlong into creating a business without seeking advice. On their own, they may not choose the most tax-friendly entity for their company.
Other owners outgrow their first accountant and fail to move on. “The client may have started with an accounting firm when their business was small. Then the business got large, the accounting firm is no longer a fit, and opportunities are missed. There is a spectrum of expertise,” says tax attorney Adam Sweet, a principal in the national tax office of Eide Bailly LLP in Spokane, Wash.
Tax Court Announces Return to In-Person Trials - Keith Fogg, Procedurally Taxing. "Whether to grant the motion for a remote proceeding is at the judge’s discretion."
Reviewing New Healthcare Options for 2021 and 2022 - Kristine Tidgren, Ag Docket. "The American Rescue Plan Act of 2021 (ARPA), Pub L. No. 117-2, significantly enhanced the availability of the Affordable Care Act’s (ACA) premium tax credit (PTC) to make healthcare acquired on the ACA’s Health Insurance Marketplace more affordable for 2020, 2021, and 2022. These changes could mean significant savings to taxpayers purchasing healthcare coverage on the Marketplace. Because many farmers and ranchers are self-employed or owners of small partnerships or corporations for which insurance plans may be costly, they may benefit from purchasing insurance on the Marketplace."
Taxing College Athlete Name Image Likeness Deals - Robert Wood, Forbes. "In most cases, athlete income is likely to be considered self-employment income. Apart from the taxes mentioned, there is compliance, and not just annual tax returns. There are quarterly estimates to make, so you pay into the IRS four times a year. Planning ahead is a must so you don’t end up unable to pay your taxes."
Lawmakers’ Tax Rate to Help Pay for Reconciliation is 1,900 Percent - Erica York, Tax Policy Blog. "While the excise tax penalty is referred to as a 95 percent tax rate, it actually amounts to a 1,900 percent tax rate because of how the proposal defines the tax base. In other words, under the H.R. 3 tax penalty, a drug that sells for $100 would incur a $1,900 tax."
What’s Easier: Killing Aliens, Or Levying A Vehicle-Mileage Tax? - Renu Zaretsky, TaxVox. "Hybrid and electric vehicles will be more expensive than fossil-fueled cars for at least five more years. If other consumers have to pay a VMT, they might decide against buying a hybrid or electric vehicle, despite those tax incentives to buy them that would more than cover the cost of the VMT, and reduce the overall cost of those vehicles."
Put it in writing. Today is World Letter Writing Day, a day those of us who are penmanship-challenged perhaps should just ignore.
This is a roundup of tax news and opinion. Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.