Federal Tax Posts

The IRS continues its crackdown on abusive “micro-captive transactions.” The tax agency is establishing 12 new examination teams that are expected to open audits related to large numbers of taxpayers in coming months. A micro-captive transaction is one in which a related group of taxpayers attempt to reduce their aggregate taxable income using insurance contracts. Each insured entity under the contracts claims deductions for premiums [...]

The Congressional Budget Office (CBO) has published a report titled “Projected Changes in the Distribution of Household Income, 2016 to 2021.” The report presents the CBO’s projections of the distribution of household income, means-tested transfers and federal taxes in 2021 and compares them with the actual distributions in 2016. (2016 is the most recent year for which data was available when this analysis was conducted.) [...]

The IRS issued its 2019 annual report, which gives an overview of the tax agency’s progress in taxpayer service, compliance and support. For example, the report focuses on results from its Criminal Investigation department and efforts involving civil enforcement. Ongoing compliance areas, including micro-captives, syndicated conservation easements and virtual currency, are also detailed in the publication. In addition, it covers IRS implementation of new tax [...]

A reminder for nonprofits: The Taxpayer First Act requires most tax-exempt organizations to electronically file information returns and related forms. The new law affects these organizations in tax years starting after July 1, 2019. According to the IRS, the following forms are included in the mandate: Form 990, Return of Organization Exempt from Income Tax; Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Trust [...]

If you’re age 70 ½ or older, be aware that a new law has changed the rules for IRAs. Before 2020, traditional IRA contributions weren’t allowed once you attained age 70 ½. Starting in 2020, new rules allow individuals of any age to make contributions to traditional IRAs, as long as you have compensation (generally, earned income from wages or self-employment). The required minimum distribution [...]

Ready, set, file. The IRS has announced that it will begin accepting 2019 e-filed business returns on Jan. 7 and will begin accepting individual returns on Jan. 27. The tax agency noted that while individual taxpayers may get their returns prepared using a tax professional before the start date (or use software programs), the processing of those returns will begin after IRS systems open on [...]

The IRS has issued 2020 covered compensation tables for the 2020 plan year. For purposes of determining covered compensation for the 2020 year, the taxable wage base is $137,700. In Revenue Ruling 2020-2, the 2020 covered compensation tables show an employee’s calendar year of birth, ranging from 1907 to 1987 and later. Each calendar year of birth is coordinated both with the calendar year when [...]

If you haven’t yet thought about your 2019 taxes, as well as planning ahead for 2020, don’t delay the conversation with us. There may be actions you can still take before the end of the year to make a favorable impact on your tax bill. If you’re an owner of a pass-through entity and pay tax on your share of business profits on your personal [...]

In addition to a year-end funding bill, lawmakers finalized the Setting Every Community Up for Retirement Enhancement (SECURE) Act. The retirement bill includes expansion of the automatic contribution to savings plans to 15% of employee pay, allows some part-time employees to participate in 401(k) plans and raises the age limit for IRA contributions from age 70½ to 72. Also included in the retirement package are [...]

The U.S. Tax Court has ruled that amounts received by a Russian scientist from a U.S. company to do research for the U.S. Department of Energy were similar to a grant or allowance as described in the U.S.-Russia Tax Treaty. Therefore, they were exempt from U.S. tax. The scientist testified that his wages were much like those for a grant because the funding was earmarked [...]

Final regulations have been released that cover corporate predecessors, successors and taxable spin-offs. When certain requirements are met, a corporation may make a tax-free distribution of stock, or stock and securities, of a controlled corporation to the corporation’s shareholders, or to its shareholders and security holders. The IRS’s final regs provide guidance for determining whether a corporation is a predecessor or successor of a distributing [...]

Divorcing or separating taxpayers need to be aware of how the breakup of a marriage may affect their 2019 tax returns. The tax treatment of alimony and separation payments changed for divorce and separation agreements that occurred (or, in some cases, were modified) after 2018. Prior to the Tax Cuts and Jobs Act, alimony was deductible from the gross income of the payer and had [...]

The IRS has concluded that an S corporation’s employee stock compensation plan didn’t create a second class of stock. In a Private Letter Ruling (PLR), the tax agency determined that, in this case, the transfer and repurchase restrictions on the plan’s shares were disregarded when determining whether the shares awarded under the plan had identical rights to other stock issued by the S corporation. Under [...]

In an Action on Decision (AOD), the IRS has acquiesced in a U.S. Tax Court decision involving deductibility of pregame meals at away city hotels by the Boston Bruins hockey team. This means the IRS will follow the court’s decision in cases when “facts are substantially identical.” In a 2017 case, the court ruled the team owner could deduct 100% of the meal costs as [...]