Small Business Taxes & Management

News and Tip of the Day


Small Business Taxes & ManagementTM--Copyright 2016, A/N Group, Inc.

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  Health Care Tax Tips

 

April 29, 2016

News

The IRS has issued final regulations (T.D. 9764) relating to the penalty under Section 6708 of the Code for failing to make available lists of advisees with respect to reportable transactions. Section 6708 imposes a penalty upon material advisors for failing to make available to the Secretary, upon written request, the list required to be maintained by Section 6112 within 20 business days after the date of such request. The final regulations primarily affect individuals and entities who are material advisors, as defined in Section 6111 of the Code.

Revenue Procedure 2016-28 (IRB 2016-20) provides the 2017 inflation adjusted deduction limitations for annual contributions made to a health savings account (HSA) under section 223. These deduction limitations are updated annually pursuant to Section 223(g) to reflect the cost-of-living adjustments. For 2017 a high deductible plan is one with an annual deductible of not less than $1,300 ($2,600 for family coverage) but where the annual out-of-pocket expenses do not exceed $6,550 ($13,100 for family coverage).

As a result of severe winter storms and snowstorm occurring on January 22-23, 2016, the president has determined that certain areas in Virginia are eligible for relief. Taxpayers in the counties of Greene, Henrico and Shenandoah and the independent cities of Fairfax and Fredericksburg who sustained losses attributable to the disaster may deduct the losses on their 2016 or 2015 federal income tax returns.

In Angelinea Alhadi (T.C. Memo. 2016-74) the Court found that the money the taxpayer obtained through undue influence from the decedent for whom she was a caregiver was income to her and not a loan or a gift. In addition, the income was subject to the self-employment tax. Finally, the Court found the taxpayer was responsible for the fraud penalty.

What happens if you're tax preparer has your data and you have trouble retrieving the information? The IRS may be sympathetic, but it only goes so far. In Allen B. Miller (T.C. Memo. 2016-73) the taxpayer waited almost 18 months to hire an attorney to assist in securing his data. The Court found the 18-month delay in taking substantive action to be unreasonable. The Court also dismissed a claim of reliance on a tax preparer. The Court allowed the IRS penalty for failure to timely pay.

Tip of the Day

Who's responsible for any gift taxes? . . . The donor is primarily responsible for the tax. But if he or she doesn't pay, the donee becomes liable up to the value of the gift. The IRS can put a lien on the gift and try to collect from the donee, just as it could from the donor. And the lien remains in effect for 10 years.

 

April 28, 2016

News

It is possible to win a "hobby loss" case, even if it's a side business. In Amy Ndiaye Delia (T.C. Memo. 2016-71) the taxpayer opened a hair-braiding salon which ultimately failed after generating only nominal revenue. The Court noted the taxpayer was unfortunate in entering the business during the economic downturn of 2008-2010 and was in competition with a number of similar businesses in the area. The Court looked at the nine factors normally examined in not-for-profit activity cases and found most of the factors neutral. The factor that weighed against her was the persistent history of losses. Despite that fact, the Court was convinced she conducted the business with an actual and honest (if unduly optimistic) objective of making a profit and allowed the losses.

Tip of the Day

Charitable contribution of property . . . It's not unusual for a taxpayer to make a charitable contribution of his or her time in their profession. For example, Fred's a licensed plumber with his own business. He volunteers to rework some of the old plumbing at his church. The church has purchased the fixtures and the necessary piping. During the course of the work Fred supplies small hardware such as clamps, hangers, copper couplings and elbows, etc. directly from his truck. Fred's labor doesn't generate a chartiable contribution deduction, but the small hardware he provides does. The value of those parts shouldn't be deducted as cost of goods sold.

 

April 27, 2016

News

Victims of the severe storms and flooding that took place beginning on April 17, 2016 in parts of Texas ma
y qualify for tax relief
from the IRS. The President has declared that a major disaster exists in the State of Texas. Following the recent disaster declaration for individual assistance issued by the Federal Emergency Management Agency, the IRS announced today that affected taxpayers in Texas will receive tax relief. Individuals who reside or have a business in Fayette, Grimes, Harris and Parker Counties may qualify for tax relief. The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after April 17, and on or before September 1, 2016 have been postponed to September 1, 2016. This includes 2015 income tax returns normally due on April 18. It also includes the April 18 and June 15 deadlines for making quarterly estimated tax payments. A variety of business tax deadlines are also affected including the May 2 and August 1 deadlines for quarterly payroll and excise tax returns. In addition, the IRS is waiving the failure-to-deposit penalties for employment and excise tax deposits due on or after April 17 as long as the deposits were made by May 2, 2016. If an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date that falls within the postponement period, the taxpayer should call the telephone number on the notice to have the IRS abate the penalty. The IRS automatically identifies taxpayers located in the covered disaster area and applies automatic filing and payment relief. But affected taxpayers who reside or have a business located outside the covered disaster area must call the IRS disaster hotline at 866-562-5227 to request this tax relief. For additional information go to Tax Relief for Victims of Severe Storms and Flooding in Texas-Houston Area.

You may be able to settle your tax debt for less than the full amount using an offer in compromise (OIC), but you've got to show why the IRS should accept the offer. In David W. Strong (T.C. Memo. 2014-70) the taxpayers proposed an offer of $11,500 based upon doubt as to collectibility. The OIC sought to compromise: (1) an Individual Master File (IMF) balance owing totaling $67,462, which included the TFRPs (trust fund recovery penalties), and (2) a Business Master File (BMF) balance owing totaling $105,952. The IRS reviewed P&L statements of the business, certain bank statements, and accounts receivable and payable reports. The IRS rejected the offer. The Tax Court found that the Settlement Officer (SO) reviewed the documents and did not include the bank balances in the taxpayer's reasonable collection potential because the funds were need to run the business. She did include a portion of the taxpayer's accounts receivable and computed the reasonable collection potential at $38,839. The Court noted that the SO took into account all relevant documents submitted. The Court noted that many of the documents the taxpayer submitted were inconsistent with one another. In addition, most of the accounts payable were apparently owed to the taxpayer's relatives as oposed to third-party vendors. The taxpayer did not provide the SO with adequate evidence to show tht the liquidation of the company's accounts receivable would be detrimental to its survival. The Court sustained the SO's determination.

Tip of the Day

Title car in business name . . . If your company is paying for the car, make sure you title it in the company's name. If the company writes the check yet you put the title in your own name, the IRS is almost surely going to deny the business a depreciation deduction. (This doesn't apply to sole proprietors; you're not separate from your business.) You may also lose deductions for insurance, gas, maintenance, etc. Of course, even if the car is in the company's name, you still have to keep records of the business usage. But if you don't take the first step, you'll have an uphill battle. By the way, the same is true for other business assets. Take the time to do it right. Any money you save on sales tax, insurance expense, etc. is likely to be more than offset by higher income taxes.

 

April 26, 2016

News

The Treasury Inspector General for Tax Administration (TIGTA) has received information that callers impersonating IRS employees or the Treasury Department are demanding payments on iTunes Gift Cards as well as other cards reported earlier including Green Dot Prepaid Cards, MoneyPak Prepaid Cards, Reloadit Prepaid Debit Cards, and other prepaid credit cards. These are fraudulent calls . Any call requesting that taxpayers place funds on an iTunes Gift Card or other prepaid cards to pay taxes and fees is an indicator of fraudulent activity! No legitimate United States Treasury or IRS official will demand that payments via Western Union, MoneyGram, bank wire transfers or bank deposits be made into another person's account for any debt to the IRS or Treasury. Hang up on these fraudulent callers and go to the TIGTA scam reporting page to report the call.

Leasing real estate you own personally to your business often makes sense. But things get a lot trickier when you lease tangible personal property to your business. In David H. Hoffman et ux. (T.C. Memo. 2016-69) the taxpayer purchased interests in jet aircraft in anticipation of leasing them profitably to E, a corporation organized to combine his business with similar businesses. In 2001, after E failed, the taxplayer's majority- owned corporation reacquired the business he had sold to E. Thereafter, the taxpayer could no longer earn a profit from leasing his aircraft to controlled corporations. The taxpayers claimed that the continuing, and increasing, losses incurred in the husband's jet service activity through 2004 did not evidence the absence of a profit motive because the losses were attributable to E's failure and the taxpayer's inability to terminate his relationship with the provider of his aircraft. The Court held that because the taxpayer's contracts with the provider of his aircraft allowed him to cause it to reacquire his interests in the aircraft no later than October 20, 2002, the taxpayers did not establish that the losses incurred in the jet service activity in 2003 and 2004 were unavoidable or that the taxpayer engaged in his jet service activity for profit during those years; consequently, The taxpayers can deduct expenses of that activity paid in each of those years only to the extent allowed by Sec. 183(b). The Court also held the taxpayer's deficiency and Sec. 6662(a) accuracy-related penalty for 2003 sustained; the taxpayer's deficiency and Sec. 6662(a) accuracy-related penalty for 2004 depend on computation of deductions allowable for that year related to the taxpayer's jet service activity taking into account agreed amount of unreported income for that year.

In Tracia Callender (T.C. Memo. 2016-68) the taxpayer failed to carry her burden of substantiating the expenses underlying the miscellaneous itemized deductions she claimed in excess of the amounts the IRS allowed. At trial, she described the amounts in issue only in general terms but did not provide supporting documentation for each item or establish how it was related to her employment. Moreover, she admitted that she had incurred some of the claimed expenses in connection with a case that was unrelated to her employment and for which she received no compensation. Thus, in regard to the amount remaining in issue for each year, the taxpayer failed to establish to the Court both the fact of the expenditures themselves and that any such expenditures were ordinary and necessary business expenses.

Tip of the Day

Scouting locations . . . One frachise suggests you pick a location for your business (not food related) near a famous hamburger chain. Makes sense. Generally so does locating a retail business in a mall or near a major department store. But make sure you pick the right mall or store. More than a few department stores are, or may be, closing locations. Because of the internet, foot traffic has fallen and the space has become too expensive to keep. You can often tell which stores or malls are in trouble. Maintenance has been deferred, a walk through the store or mall reveals few customers, there are more than a few empty spaces, shelves are poorly stocked, etc. Make sure you know the area before committing. You may still want to get space in the mall, but you should negotiate hard on price. Renting retail space shouldn't be taken lightly. You're committing to a lease, often 5 years or longer, and moving can be expensive.

 

April 25, 2016

News

The IRS has issued proposed regulations (REG-108060-15) under Sec. 385 that would authorize the Commissioner to treat certain related-party interests in a corporation as indebtedness in part and stock in part for federal tax purposes, and establish threshold documentation requirements that must be satisfied in order for certain related-party interests in a corporation to be treated as indebtedness for federal tax purposes. the proposed regulations also would treat as stock certain related-party interest that otherwise would be treated as indebtedness for federal tax purposes.

The Treasury Inspector General for Tax Administration (TIGTA) has released its annual interim report of the performance of the IRS during the current tax filing season, defined as the period from January 1 through mid-April. The IRS was challenged by the late passage of legislation that extended a number of expired tax provisions. To reduce the impact on the filing season, the IRS monitored the status of the legislation and took steps to implement the extension of these provisions prior to their enactment. These efforts enabled the IRS to begin accepting and processing individual tax returns on January 19, 2016, as scheduled. As of March 4, 2016, the IRS received approximately 67 million tax returns - 62.6 million (93.9 percent) were filed electronically (e-filed) and four million (6.1 percent) were filed on paper. The IRS has issued 53.5 million refunds totaling more than $160 billion. In addition, as of February 25, 2016, the IRS processed 1.4 million tax returns that reported $4.4 billion in Premium Tax Credits that were either received in advance or claimed at the time of filing. More than 2.7 million taxpayers reported shared responsibility payments totaling $1 billion for not maintaining required health insurance coverage. The IRS continues to expand its efforts to detect tax refund fraud. As of March 5, 2016, the IRS reports that it identified 42,148 tax returns with $227 million claimed in fraudulent refunds and prevented the issuance of $180.6 million (79.6 percent) in fraudulent refunds. In addition, the IRS reports that expanded use of controls to identify fraudulent refund claims before they are accepted into the processing system has allowed the IRS to identify approximately 35,000 fraudulent e-filed tax returns and 741 paper tax returns as of February 29, 2016. The IRS also identified and confirmed 31,578 fraudulent tax returns involving identity theft as of February 29, 2016, and identified 20,224 prisoner tax returns for screening as of March 5, 2016. As of March 5, 2016, approximately 46.1 million taxpayers contacted the IRS by calling the various Customer Account Services function’s toll- free telephone assistance lines. IRS assistors have answered 7.3 million calls and provided a 72.8 percent Level of Service with a 9.6 minute Average Speed of Answer. Finally, during Fiscal Year 2016, the IRS plans to assist 4.7 million taxpayers through face-to-face contact at the Taxpayer Assistance Centers, which is a 16 percent decrease from Fiscal Year 2015. To see the complete report, go to www.treasury.gov/tigta/au ditreports/2016reports/201640034fr.pdf.

What happens if a alternative minimum tax credit is generated to a taxpayer during a prior marriage? In Nadine L. Vichich (146 T.C. No. 12) before his marriage to the taxpayer, the husband was married to another woman. In 1998 the husband exercised employer-granted incentive stock options that resulted in alternative minimum tax (AMT) liability, which the husband reported on a 1998 tax return filed jointly with his then spouse. Payment of the AMT liability in 1998 generated an AMT credit carryforward. The taxpayer was married to the husband from 2002 until his death in 2004. On her 2009 tax return the taxpayer reported an AMT credit derived from her deceased husband's 1998 AMT credit carryforward that she used to offset her individual income tax liability. In a notice of deficiency to the taxpayer, the IRS disallowed the claimed AMT credit and determined a deficiency in P's income tax for tax year 2009. The Court held the taxpayer is not entitled to use the AMT credit to offset her individual income tax liability for 2009.

Tip of the Day

Stay lean . . . Most businesses go through a phase when they make out-sized profits, often either soon after startup or some time down the road. The high profits can be from acceptance of the product, achieving economies of scale, favorable publicity, etc., or in some cases, just good luck. But those times often don't last long. There's a change in fashion, competitors move in, etc. There's a tendency to loosen the purse strings. Avoid the impulse. Stay lean. That doesn't mean you shouldn't reward employees. But they may not feel a $2,000 chair for everyone is a reward. Better to keep the funds in the company so you don't have to lay off valuable people or cut their pay when times are tougher. And cutting costs can be much more difficult than staying lean. It can also have a greater impact on the morale of employees.

 

April 22, 2016

News

The list of parishes in Louisiana that qualify for relief as a result of severe storms and flooding that took place beginning March 8, 2016 has been updated once again to include Avoyelles parish. In addition, the parts of Mississippi that qualify for tax relief from the IRS as a result of severe storms and flooding that took place beginning on March 9, 2016 now includes Tallahatchie county. For more details, go to www.irs.gov.

You might be able to avoid joint liability on your return with your spouse or ex-spouse if you can show that the income was not yours, you did not know the other party wouldn't pay their share, you would suffer an economic hardship, etc. In Larry O. Arobo and Sletta Hughes Arobo (T.C. Memo. 2016- 66) the Court refused to grant innocent spouse relief; The taxpayers had filed returns many years late (the 2004 return was filed January 19, 2010). Mrs. Arobo did not review the returns but just signed them. The agent suspected the taxpayer's income was underreported. The IRS reconstructed the taxpayers' income. The parties agreed to a lesser amount of unreported income and the IRS disallowed all their Schedule C expenses because they were not substantiated. The Court denied innocent spouse relief finding the wife satisfied three of the five tests and all five must be satisfied. The Court noted the taxpayer knew, or had reason to know there was an understatement in income tax.

Tip of the Day

Partnership/shareholder protection . . . If you're a shareholder in a corporation or partner in a partnership there should be an agreement that restricts the transfer of an interest without first allowing another partner or shareholder to purchase the interest at fair market value. You should also consider a provision that requires a selling partner or shareholder to provide advance notice of an intention to place an interest up for sale. There might be an exception for death, sickness, etc. You don't want to unreasonably restrict a sale, but you do want to protect your ownership interests and taking on a new partner or shareholder in a closely owned business has significant implications. Talk to your attorney about the details.

 

April 21, 2016

News

It's more difficult than it sounds to win against the IRS in a "hobby loss" issue. The IRS is usually able to show the venture was not engaged in with a profit motive. In Merrill C. Roberts (U.S. Court of Appeals, Seventh Circuit) the taxpayer sought to overturn his loss in an earlier Tax Court case (Roberts; T.C. Memo. 2014-74). The Court of Appeals revisited the Tax Court decision and noted some inconsistencies in the Tax Court's reasoning. The Court of Appeals reversed the Tax Court and found for the two years at issue, the taxpayer's activities had a profit objective.

If you don't provide the IRS with requested information it can issue a summons, but it must first satisfy the four Powellfactors, specifically that the IRS is investigating your tax liability, that the information sought is relevant to that investigation, that the records Government seeks are not already in the IRS's possession, and that all administrative steps required by the Internal Revenue Code for issuance of a Summons have been taken. Once the IRS has shown that, the taxpayer must either disprove one of the four elements or show that enforcement of the summons will result in an abuse of the court's process. In Anthony J. Samango, Jr. (U.S. District Court, E.D. Pennsylvania) the taxpayer's only argument was that he owed no tax. The Court found the taxpayer offered no justification for why the IRS summons should not be enforced.

Tip of the Day

Understand your investments . . . Investment vehicles are far more complicated than 20 years ago. And, if you don't understand them, maybe you should think twice before putting your money in them. There's nothing wrong with taking a risk, if you can afford it. More than a few investors put a high percentage of their assets in relatively safe vehicles and save 5%-15% of their funds for more risky ventures. But read the fine print. For one security the price was dependent on a commodity--but there was a cap of 35% on the upside and no floor on the downside. That meant you could 35% within a 2-year period--or lose close to your entire investment if the price of the commodity fell far enough. In this case the deck is stacked against you. Worse yet, there was no ready market for the security so you couldn't get out, without taking a substantial cut.

 

April 20, 2016

News

The IRS is advising taxpayers who are affected by severe weather in the Houston area and other parts of Texas that they may qualify for relief from penalties if they were unable to meet the April 18th deadline for filing 2015 tax returns. There is no penalty for filing a late return qualifying for a refund. Taxpayers who owe tax, however, should file when they are reasonably able, and expect a notice regarding late filing and late payment penalties. The IRS will continue to closely monitor the situation. Disaster declarations with individual assistance for areas are made by FEMA, which allows the IRS to provide additional relief for taxpayers. If taxpayers receive a notice regarding a penalty, they can request a penalty abatement based on reasonable cause criteria. The IRS will review requests on a case-by-case basis. Affected taxpayers may request abatement of penalties assessed on their 2015 federal income tax return by:

In Nik Lamas-Richie et ux. (T.C. Memo. 2016-63) the taxpayers failed to report their distributive share of income of a partnership. The Court noted the Court noted the income has to be reported regardless of whether or not the partner receives a distribution. Furthermore, the lack of a K-1 was no excuse for not reporting the income. The Court noted a partner must report his share of partnership income even if he was not aware that such income existed at the time it was earned. The Court noted the taxpayer, although not in control, had a 41% interest and the partnership filed its return by the extended due date. The taxpayers, who filed before that date, could have requested an extension of time to file. The Court did find the taxpayers testified credibly and acted in good faith when they failed to report the partnership income, believing their was no income to report. The Court denied the imposition of the accuracy-related penalty.

Tip of the Day

Breaking up a business . . . It's not unusual to want to split up a going concern. There can be many reasons. In small businesses, it's often because the shareholders can't agree on how to manage diverse operations. For example, Madison Inc. manufactures electronic test equipment and does computer consulting. The operations don't fit together and the two shareholders can't agree. Were it not for a special code section (Sec. 355), splitting the business would be a taxable transaction. (There can be a number of other reasons for splitting a corporation.) However, the IRS realizes that the section can provide a big loophole. To plug it the regulations contain some strict requirements. In South Tulsa Pathology Laboratory, Inc. (118 TC--, No. 5) the corporation transferred a portion of its business to an new corporation and distributed the stock of that new corporation to its shareholders. On the same day the shareholders sold their stock in the new corporation to a third party in a prearranged sale. The Court sided with the IRS in holding that the distribution to the shareholders did not meet the requirements and was fully taxable. The immediate sale of the stock belied the evidence of a business purpose provided by the taxpayer.

 

April 19, 2016

News

In 2006 the decedent's revocable trust, T, entered into two split-dollar life insurance arrangements with three distinct trusts. T then contributed a total of $29.9 million to the trusts in order to fund the purchase of life insurance policies on each of the decedent's three sons. The split-dollar life insurance arrangements provided that T would receive the greater of the cash surrender value of the respective policy or the aggregate premium payments on that policy upon termination of the split-dollar life insurance arrangement or the death of the insured. The IRS determined that the $29.9 million contribution was a gift for tax year 2006. The Service determined a gift tax deficiency against the estate, the estate of the decedent, of $13,800,179 and a Sec. 6662 penalty of $2,760,036. The estate moved for partial summary judgment under Rule 121 on the narrow issue of whether the split-dollar life insurance arrangements are governed by the economic benefit regime under Reg. Sec. 1.61-22, The Tax Court held that because the only economic benefit conferred upon the trusts was current life insurance protection, the economic benefit regime applies. Estate of Clara M. Morrissette, Deceased, Kenneth Morrissette, Donald J. Morrissette, and Arthur E. Morrissette, Personal Representatives (146 T.C. No. 11)

In Michael Galloway, Defendants (U.S. District Court, E.D. California) the defendant was accused of fraud but sought dismissal of the charges on the basis that the six-year statute of limitations had run. The government opposed the motion to dismiss on the grounds that the last affirmative act of the defendant as alleged in the indictment with respect to all four counts of tax evasion was the making of false statements to IRS agents on February 23, 2010. Those false statements regarding his finances with respect to each of the tax years in question, the government points out, were made within six years of the return of the indictment in this case on May 29, 2014. According to the government, the statute of limitations for a tax evasion prosecution commences at the time of the defendant's last affirmative act of evasion and an act of evasion is any conduct which serves the purpose of evasion and the likely effect of which is to mislead or conceal. Thus, where a defendant makes false statements to IRS agents disclaiming involvement in a tax evasion scheme and the statement falls within the statute of limitations, conviction is not barred as long as the jury unanimously finds that at least one act of evasion took place within the six year statute of limitations. The Court sided with the IRS and denied the motion to dismiss.

Tip of the Day

Co-executors . . . It may sound like a good idea to have your two children act as co-executors of your will. But that may require two signatures for any action. Even if both executors agree, they may have to be physically present to sign documents and approve actions. It may be best to name one child as the executor and the second as a standby to take his or her place if they can't perform. Talk to your attorney on the best approach.

 

April 18, 2016

News

In Peter L. Ax et ux (146 T.C. No. 10) the taxpayer's LLC faced various risks. He formed SMS as a "captive insurance company", and in 2009 and 2010 LLC paid SMS premiums for coverage of the risks by SMS. LLC deducted the premiums, and the deductions were passed through to the taxpayers' tax returns. After audit, the IRS disallowed the deductions and stated in the notice of deficiency (NOD): "You did not establish that the amount shown was (a) insurance expense, and (b) paid". The taxpayers filed a petition in the Tax Court disputing the NOD, and the IRS filed an answer that did not make any affirmative allegations as to the disallowed insurance expense deductions. After the case was stricken from a trial calendar and continued generally, the IRS moved for leave to amend its answer to assert "that a) Petitioners' use, through solely controlled flow-through entities, of a micro-captive insurance arrangement in 2009 and 2010 lacked economic substance; and b) Amounts paid as premiums through the micro- captive arrangement were neither ordinary nor necessary" and to allege facts in support of those assertions. The taxpayers opposed the motion for leave. The Tax Court held that Chenery (the case cited by the taxpayers) may restrict a reviewing court from relying on reasons not considered by an agency in its determinations, but only as to matters that Congress has exclusively entrusted to the administrative agency, whereas Congress has expressly authorized the Tax Court to redetermine tax liabilities in a deficiency case. The enactment of the APA did not disturb the regime for deficiency litigation that Congress had previously enacted. Therefore, in a deficiency case, the IRS could plead grounds not in the NOD. The Court also held where no trial date has been set and ample time remains for discovery, no prejudice results to the taxpayer from the IRS's being allowed to add to his answer "new matter" (in this instance, lack of economic substance) and that the answer does not otherwise assert "new matter" under Rule 142(a)(1).

Tip of the Day

Returns for other states . . . If you've got interests in one or more partnerships, S corporations, rental properties, or tenant-in-common investments that have property or do business in another state, you may have to file a return in those states. The rules vary widely among states. In many states the partnership or S corporation can file a "composite return" paying the tax for out-of-state residents. Talk to your tax advisor about the requirements. Keep in mind that if you don't file a return when required to do so, the general rule is that the statute of limitations never begins to run.

 

April 15, 2016

News

The IRS has issued a warning (IR-2016-62) that scammers may try using the April 18 tax deadline to prey on hard-working taxpayers by impersonating the IRS and others with fake phone calls and emails. Even after the tax deadline passes, taxpayers should know the telltale signs of a scam and tips to protect themselves from a variety of phone scams and phishing emails. Some examples of the varied tactics seen this year are:

Announcement 2016-16 (IRB 2016-18) states that the Treasury Department and the IRS intend to withdraw certain provisions of proposed regulations published on January 29, 2016 relating to nondiscrimination requirements applicable to qualified retirement plans under Sec. 401(a)(4).

Congress and the administration continue to express interest in reforming the U.S. corporate income tax and the rate at which U.S. corporations' income is taxed. GAO's 2013 report on corporate effective tax rates (ETR) found that in tax year 2010, whether for all large corporate filers or only profitable ones, the average ETRs were significantly below the statutory rate. In each year from 2006 to 2012, at least two-thirds of all active corporations had no federal income tax liability. Larger corporations were more likely to owe tax. Among large corporations (generally those with at least $10 million in assets) less than half--42.3 percent--paid no federal income tax in 2012. Of those large corporations whose financial statements reported a profit, 19.5 percent paid no federal income tax that year. Reasons why even profitable corporations may have paid no federal tax in a given year include the use of tax deductions for losses carried forward from prior years and tax incentives, such as depreciation allowances that are more generous in the federal tax code than those allowed for financial accounting purposes. For the complete Most Large Profitable U.S. Corporations Paid Tax but Effective Tax Rates Differed Significantly from the Statutory Rate.

You can take losses passed through from a partnership up to your basis in the partnership (there are other requirements). In Michael D. Hastings et ux. (T.C. Memo. 2016-61) the Court found the taxpayers could not show they had a basis in the partnership. The Court noted that basis does not include the value of services performed unless and until the value of those services have been subject to taxation.

Tip of the Day

Down to the wire . . . While you still have the weekend (April 18 is the filing deadline this year; April 19th in Massachusetts and Maine), that doesn't allow much time if you've got a complicated return or are waiting for a K-1 or other documentation. And if you're trying to put together numbers for a Schedule C or rental properties, you may be better off filing an extension and taking your time to do it right. In over your head and need professional help? Most professionals are dealing with existing clients. Best to wait for things to calm down. You can file a paper extension or e-file using tax software or online with the IRS or your state. State availability varies and some states virtually require e-filing. The only trick is that you'll have to estimate your final liability and pay any amount due. But, at least for federal purposes, even if you're not fully paid, filing a return or extension will allow you to avoid one of the penalties.

 

April 14, 2016

News

The IRS has released proposed regulations (REG-133673-15) regarding deemed distributions of stock and rights to acquire stock. The proposed regulations would resolve ambiguities concerning the amount and timing of deemed distributions that are or result from adjustments to rights to acquire stock. The proposed regulations also would provide additional guidance to withholding agents regarding their current withholding and information reporting obligations under chapters 3 and 4 with respect to these deemed distributions. The proposed regulations would affect corporations issuing rights to acquire stock, their shareholders and holders of these rights, and withholding agents with respect to these deemed distributions.

There aren't many excuses for avoiding penalties on failure to deposit employment taxes, but in Nutrition Formulators, Inc. (T.C. Memo. 2016-60) the taxpayer argued that it's accountant embezzled the firm out of $1 million and the business encountered other financial problems including meeting FDA requirements for its manufacturing process. The IRS and the Court found that the accountant did, indeed, embezzle from the firm but the Court held that the theft only affected one quarter and that the taxpayer did not demonstrate the impact of the company's other financial problems on the failure to deposit employment taxes. Penalties for one period were abated based on the accountant's embezzlement.

Tip of the Day

Work-related education expenses . . . You may be able to deduct tuition, books, supplies, transportation, and related expenses for education to improve or maintain your job skills. But you can't deduct expenses that will qualify you for a new trade or business. If you're self-employed deduct the expenses on Schedule C; if you're an employee you deduct the expenses as a miscellaneous itemized deduction on Schedule A. What qualifies an individual for a new trade or business can be tricky. If the profession requires a license, such as a CPA, attorney, pilot, or even a licensed plumber, course work and tests would generally not be deductible. On the other hand, a pilot who has a commercial license to fly charters in a piston aircraft might be able to deduct the cost of training in jet aircraft. Reimbursed by your employer? You can only deduct costs in excess of the reimbursement. And you can't deduct education expenses as a business expense on Schedule A or C and get a benefit for the same expenses under one of the education benefits (e.g. education credit or tuition and fees deduction).

 

April 13, 2016

News

Rev. Proc. 2016-24 (IRB 2014-16) provides indexing adjustments for certain provisions under Sections 36B and 5000A of the Code. In particular, it updates the Applicable Percentage Table in Sec. 36B(b)(3)(A)(i) to provide the Applicable Percentage Table for 2017. This table is used to calculate an individual's premium tax credit. This revenue procedure also updates the required contribution percentage in Sec. 36B(c)(2)(C)(i)(II) for plan years beginning after calendar year 2016. The percentage is used to determine whether an individual is eligible for affordable employer-sponsored minimum essential coverage under Sec. 36B.

In a recent report the Government Accountability Office has found that processing of individual income tax returns in 2016 has gone relatively smoothly through mid-February and IRS anticipates improved taxpayer service due, in part, to additional funding. Specifically, IRS projects that the percentage of callers seeking live assistance who receive it (level of service) will increase from about 38 percent for fiscal year 2015 to 47 percent for fiscal year 2016--including 65 percent for the filing season. IRS also projects that average telephone wait time will improve from about 31 minutes in fiscal year 2015 to about 26 minutes in fiscal year 2016. However, this will still be about twice as long as the wait times in fiscal year 2011. Nevertheless, IRS has provided improved telephone service through mid-February compared to the same time last year--level of service was 76 percent (a 33 percentage point increase) while the average wait time dropped to 9 minutes (an improvement of about 70 percent). Importantly, improved customer service, including for telephones, can increase voluntary tax compliance. IRS took steps in 2016--including detailing staff from enforcement to customer service and providing overtime--to help improve service. Finally, the GAO noted that the IRS is leveraging industry partners to combat identity theft refund fraud and improve cybersecurity efforts to protect taxpayer information.

Tip of the Day

IRS can take your passport . . . Well, not exactly but a new law passed in December requires the IRS to advise the U.S. State Department if a taxpayer is "seriously delinquent" in his or her taxes. The State Department can then deny a passport application or revoke an existing one. While the definition of seriously deliquent is complex, the starting point is owing more than $50,000 in taxes, interest and penalties. Yet another reason to be current on your taxes. There are safeguards and you won't be caught by surprise, they'll be plenty of warning. Nonetheless, $50,000 is a low number. Two to three years' penalty and interest on a relatively modest sum can put you over the top.

 

April 12, 2016

News

Notice 2016-30 (IRB 2016-18) provides that the Service has designated eight new delivery services as designated Private Delivery Services that qualify for the timely mailing treated as timely filing/paying rule of Section 7502(a).

If you find an error in a deficiency notice you may be able to challenge the validity of the notice. But don't get excited because you found a minor error. In John C. Hom (U.S. Court of Appeals, Ninth Circuit) the appeals court sided with the Tax Court in finding that the notice of deficiency was valid despite errors. The Court found that the taxpayer did not demonstrate that he suffered any prejudice due to an error in the notice.

Tip of the Day

Done with your taxes? . . . Now's the time to file your receipts, statements, etc. in order, put them in an envelope or some other place where they won't go missing. If you have documentation that should be in a permanent file--purchase of a residence, vacation home, rental property, equipment for a rental, etc.--make sure you keep it and label it. Scanning documentation also makes sense, especially material that should be kept a long time. Did your own return? Make sure you print a hard copy for your file and a PDF version. If you can create a version that has all the supporting schedules and notes, do that.

 

April 11, 2016

News

Senate Judiciary Committee Chairman Chuck Grassley has introduced legislation to combat tax return theft by identity theft. The Tax Return Identity Theft Protection Act of 2016 strengthens penalties for identity thieves, establishes enhanced sentences for crimes against vulnerable and frequently targeted groups, and clarifies the state of mind proof requirement that has created an obstacle to holding some identity thieves accountable. Identity thieves successfully stole $5.75 billion in fraudulent tax refunds in the 2013 tax year, according to IRS estimates, with another $24 billion in theft that was prevented. Taxpayers whose returns were compromised wait 278 days on average for the account to be corrected and their return reissued. Identity theft victims spend on average six months and $1,300 to correct their records. The bill seeks to deter tax return identity theft and other related fraud by increasing the maximum punishment for such crimes to a term of 20 years imprisonment. In addition to tax return identity theft, these offenses include stealing a victim's identity to conspire to defraud the government, file a false claim against the government, or steal public money, property or records. The bill also enhances penalties for crimes against vulnerable groups that government watchdogs have identified as frequently targeted by identity thieves. These groups include the aging and low income populations as well as members of the military.

Tip of the Day

Child's investment income . . . If your child has unearned income of $2,100 or more and is claimed as your dependent he or she may have to file Form 8615, Child With Investment Income, to calculate his or her tax based on their parent's tax rate. The actual criteria are a bit more complex. The law is designed to prevent taxpayers from splitting income and having children pay tax at their reduced rate. Parents can make an election to report the income on their return (if it's less than $10,500). This approach simplifies the returns, but could cost some tax dollars. There's also an effect on the child's Alternative Minimum Tax (AMT). See IRS Publication 17 and the instructions to Form 8615 for more information.

 

April 8, 2016

News

Additional counties have been to those in Texas where victims of severe storms tornadoes and flooding that took place beginning on March 7, 2016 in parts may qualify for tax relief from the IRS. The additional counties include Henderson, Limestone, Shelby and Tyler. For more details, go to Tax Relief for Victims of Severe- Storms, Tornadoes and Flooding in Texas.

As reports of phone scams as well as email phishing schemes continue across the country, the IRS warned (IR-2016-55) taxpayers of a new phishing scam targeting Washington D.C., Maryland and Virginia residents. This time, the email scammers are citing tax fraud and trying to trick victims into verifying "the last four digits of their social security number" by clicking on a link provided. The criminals specifically state that this is for tax filers in the District of Columbia, Maryland and Virginia. As a further attempt to trick residents of the Capital region, the email scam even suggests that information from recent data breaches across the nation may be involved.

In Bohdan Senyszyn and Kelly L. Senyszyn (146 T.C. No. 9) the taxpayer husband misappropriated funds from a business associate, DH. As part of a criminal investigation, a revenue agent examined records of accounts belonging to the taxpayers, DH, or related entities and determined that, during 2003, the taxpayer husband received from DH's accounts $252,726 more than he paid back to DH during that year. The taxpayer later pleaded guilty to and was convicted of criminal charges, including tax evasion in violation of Sec. 7201. Under a plea agreement, The taxpayer husband agreed to a stipulation that he knowingly and willfully failed to report $252,726 of taxable income for 2003. The Court held that the evidence presented showed that, contrary to the revenue agent's analysis, the taxpayer repaid to DH during 2003 more than the amount the revenue agent determined the taxpayer to have misappropriated from DH in that year. The Court also held the purposes of the doctrine of collateral estoppel do not support its application to uphold whatever minimum deficiency would be consistent with the taxpayer husband's conviction for tax evasion. Finally the Court held that because the taxpayers are not liable for any deficiency in their Federal income tax for 2003, the fraud penalty the IRS asserted and the accuracy-related penalty asserted against the taxpayer wife were not sustained.

Valuations can be critical to the determination of estate taxes and to the value of a charitable contribution of property. For charitable contributions made in a will, the value of the property may be the same for both purposes. However, in Estate of Victoria E. Dieringer, Deceased, Eugene Dieringer, Executor (146 T.C. No. 8) the contribution wasn't effected until some months after the date of death and a number of events transpired in the meantime. The gift involved closely held stock and a redemption of some of the shares which changed the ownership, as well as a shift from a C to an S corporation. The valuation for redemption included discounts for lack of control and for lack of marketability that were not present in the date of death valuation. The IRS determined that the value of the charitable contribution was less than that reported on the estate tax return (Form 706) and that additional estate tax was due. The Tax Court agreed with the IRS's reduced valuation. In addition, the Court held that the IRS properly allocated the proportionate share of additional estate tax due to each of the specific bequests and reduced the charitable contribution deduction attributable to those bequests respectively and that the estate was liable for an accuracy-related penalty.

Tip of the Day

Rebates generally not taxable . . . Rebates on purchases are generally not taxable. For example, getting a $50 check for the purchase of a new TV. But you must reduce your basis in the property by the amount of the rebate. For example, you purchase a new car and get a $4,000 rebate in the form of a check from the manufacturer. You use the 40 percent for business and use the actual cost method. You've got to reduce the cost of the car by the amount of the rebate when arriving at your cost for depreciation purposes.

 

April 7, 2016

News

In what can only be described as ironic, U.S. Attorney Andrew M. Luger announced a federal indictment charging former U.S. Tax Court judge Diane L. Kroupa, 60, and her husband, Robert E. Fackler, 62, with conspiring with each other to evade assessment of taxes. Each defendant is charged with conspiracy, tax evasion, making and subscribing false tax returns and obstruction of an IRS audit. "The allegations in this indictment are deeply disturbing," said U.S. Attorney Andrew Luger. "The tax laws of this county apply to everyone, and those of us appointed to federal positions must hold ourselves to an even higher standard." According to the indictment and documents filed in court, between 2004 and 2012, Kroupa and Fackler conspired to evade their tax obligations. Kroupa was appointed to the U.S. Tax Court on June 13, 2003, for a term of 15 years, but she retired on June 16, 2014. During the same period, Fackler was a self-employed lobbyist and political consultant who owned and operated a business known as Grassroots Consulting. From 2004 to 2013, Kroupa and Fackler owned a home in Minnesota. From 2007 to 2013, they also leased a second residence in Maryland. According to the indictment and documents filed in court, as part of the conspiracy to defraud the United States, Kroupa and Fackler fraudulently claimed personal expenses as Grassroots Consulting business deductions. They fraudulently claimed the following personal expenses as deductible business expenses: rent and utilities for the Maryland home; utilities, upkeep and renovation expenses of the Minnesota home; pilates classes; spa and massage fees; jewelry and personal clothing; wine club fees; Chinese language tutoring; music lessons; personal computers; and expenses for vacations. According to the indictment and documents filed in court, Kroupa and Fackler made a series of other false claims on their tax returns, including failing to report approximately $44,520 that Kroupa received from a 2010 land sale in South Dakota. The defendants falsely claimed financial insolvency to avoid paying tax on $33,031 on cancellation of indebtedness income. According to the indictment and documents filed in court, in 2006, Kroupa and Fackler concealed documents from their tax preparer and an IRS Tax Compliance Officer during an audit. During a second audit in 2012, Kroupa and Fackler caused misleading documents to be delivered to an IRS employee in order to convince the IRS employee that certain personal expenses were actually business expenses of Grassroots Consulting. According to the indictment and documents filed in court, between 2004 and 2010, Kroupa and Fackler purposely understated their taxable income by approximately $1 million and purposely understated the amount of tax they owed by at least $400,000. For additional details go to www.justice.gov.

The IRS has twice updated the parts of Mississippi that qualify for tax relief from the IRS as a result of severe storms and flooding that took place beginning on March 9, 2016. The counties now include Bolivar, Clarke, Coahoma, Forrest, George, Greene, Jones, Marion, Panola, Pearly River, Perry, Quitman, Sunflower, Tunica and Washington. For additional information go to Tax Relief for Victims of Severe Storms and Flooding in Mississippi.

The Federal Trade Commission has reported a new twist on tech-support scams--you know, the one where crooks try to get access to your computer or sensitive information by offering to "fix" a computer problem that doesn't’t actually exist. Lately, we’ve heard reports that people are getting calls from someone claiming to be from the Global Privacy Enforcement Network. Their claim? That your email account has been hacked and is sending fraudulent messages. They say they’ll have to take legal action against you, unless you let them fix the problem right away.

Documentation is critical. In Carlos A. Arizaga (T.C. Memo. 2016-57) the IRS had denied the owner of a restaurant a deduction for "supplies" which he claimed were food and other items that should have been deducted as cost of goods sold. The IRS also denied a deduction for cash payments to workers for contract labor. The taxpayer claimed his ex-girlfriend absconded with most of the restaurant's records. The Court found he credibly testified that the supplies included food and other items. The Court allowed a deduction for cost of goods sold and labor based on the Cohan rule.

Tip of the Day

Split refunds . . . If you decide to use direct deposit for your refund, you may be able to split the refund and have it deposited among two or three accounts. If you want to split your refund, check the box on the line for the amount you want refunded to you. Then, complete Form 8888, Direct Deposit of Refund to More Than One Account, and attach it to your return. Here's another tip. Bank part of that refund instead of upgrading your room on a cruise ship. Another alternative? Pay down credit card debt.

 

April 6, 2016

News

The IRS has announced (AOD-2016-1) that it does not agree with the result in G.A. Cosentino, (T.C. Memo. 2014-186). In that case the taxpayers received a settlement from an accounting firm that advised them to invest in an abusive tax shelter. The proceeds of the settlement were for the additional income tax liability they incurred. The Tax Court had found the amount was excludible from their gross income as a restoration of lost capital.

The IRS has issued temporary (T.D. 9761) and proposed (REG-135734-14) regulations that address transactions that are structured to avoid the purposes of sections 7874 and 367 of the Code (corporate inversions) and certain post-inversion tax avoidance transactions. These regulations affect certain domestic corporations and domestic partnerships whose assets are directly or indirectly acquired by a foreign corporation and certain persons related to such domestic corporations and domestic partnerships. The text of the temporary regulations also serves as the text of the proposed regulations set forth in the notice of proposed rulemaking on this subject in the Proposed Rules section of this issue (April 8) of the Federal Register. The final regulations revise and add cross-references to coordinate the application of the temporary regulations.

The IRS has once again updated the areas of Louisiana that qualify for relief as a result of severe storms and flooding that took place beginning March 8, 2016 in parts of Louisiana has been updated once again. The parishes now qualifying for relief include Allen, Ascension, Beauregard, Bienville, Bossier, Caddo, Calcasieu, Caldwell, Catahoula, Claiborne, De Soto, East Carroll, Franklin, Grant, Jackson, La Salle, Lincoln, Livingston, Madison, Morehouse, Natchitoches, Ouachita, Rapides, Red River, Richland, Sabine, St. Helena, St. Tammany, Tangipahoa, Union, Vernon, Washington, Webster, West Carroll and Winn. For more information go to Tax Relief for Victims of Severe Storms and Flooding in Louisiana.

When does an activity rise to a trade or business? The question is important for several reasons. In Thomas L. Ryther (T.C. Memo. 2016-56) the taxpayer had a steel fabrication business that went bankrupt. In the bankruptcy proceedings the creditors took all the assets they believed of value, but abandoned the scrap steel under the assumption it was more trouble than it was worth. The taxpayer sporadically sold the scrap steel, but did not reacquire new material. Instead, he slowly liquidated the steel stored on the property. The Court found the taxpayer was not in the trade or business of selling scrap steel and thus was not liable for the self-employment tax.

Tip of the Day

Charitable contribution acknowledgment . . . The rule is you must have an written contemporaneous acknowledgment from the charity of any contribution of $250 or more. That means the contribution must be in your hands by the earlier of the date you file your return, or the due date, including extensions. Made a substantial contribution and don't have the acknowledgment? Delay your return. If you have to file an extension, consider doing so. You may decide to forgo the deduction if it's only $300 and you're getting a substantial refund.

 

April 5, 2016

News

On March 28, 2016 the IRS updated the list of counties where victims of the severe storms tornadoes and flooding that took place beginning on March 7, 2016 in parts of Texas may qualify for tax relief. The counties of Erath, Gregg, Harrison, Hood, Marion and Parker were added to Jasper, Newton, and Orange. For more details, go to Tax Relief for Victims of Severe- Storms, Tornadoes and Flooding in Texas.

FinCEN is proposing amendments to the definitions of "broker or dealer in securities" and "broker-dealer" under the regulations implementing the Bank Secrecy Act. This rulemaking would amend those definitions explicitly to include funding portals that are involved in the offering or selling of crowdfunding securities pursuant to section 4(a)(6) of the Securities Act of 1933. The consequence of those amendments would be that funding portals would be required to implement policies and procedures reasonably designed to achieve compliance with the Bank Secrecy Act requirements currently applicable to brokers or dealers in securities.

Document providers who sell pre-approved pension plans update the plan in its entirety once every six years and request a new opinion/advisory letter from the IRS. The IRS generally approves all updated defined contribution plans at the same time. Most opinion/advisory letters for the latest round of pre-approved defined contribution plans were issued on March 31, 2014. Employers have two years to adopt these updated plans. The IRS is reminding employers that April 30, 2016, is the deadline for employers using pre-approved retirement plan documents to sign an updated version of their 401(k), profit-sharing or other defined contribution retirement plans. For more information go to Deadline to Adopt Restated Pre-Approved Defined Contribution Plans.

Tip of the Day

Rebates generally not taxable . . . Rebates on purchases are generally not taxable. For example, getting a $50 check for the purchase of a new TV. But you must reduce your basis in the property by the amount of the rebate. For example, you purchase a new car and get a $4,000 rebate in the form of a check from the manufacturer. You use the 40 percent for business and use the actual cost method. You've got to reduce the cost of the car by the amount of the rebate when arriving at your cost for depreciation purposes. Receive a rebate on office supplies for your business? Either reduce the cost of the item by the rebate or report the rebate as income for the business.

 

April 4, 2016

News

The IRS has released filing statistics through March 25, 2016. The report shows total returns received down from last year by 0.9%; total returns processed down by 1.6%. The number of e-filed returns is down by 0.1%. Tax professionals e-filed 3.1% less; self-prepared e-filed returns were up by 3.8% Visits to IRS.gov increased by 7.8% to slightly over 262 million.

In James E. Thiessen et ux. (146 T.C. No. 7) the taxpayers rolled over their tax-deferred retirement funds into newly formed IRAs, and caused the IRAs to acquire the initial stock of a newly formed C corporation (E), and caused E to acquire the assets of an existing business. The taxpayers guaranteed the repayment of a loan that E received from the seller of the assets as part of the acquisition price. Their 2003 joint Federal income tax return reported that the rollover of the retirement funds into the IRAs was nontaxable. The return did not reveal that they had guaranteed the loan. The IRS determined that they failed to report for 2003 a taxable distribution from their IRAs. The IRS asserted in support of the determination that the taxpayers' guaranties were prohibited transactions under Sec. 4975(c)(1)(B), resulting in deemed distributions of the IRAs' assets to the taxpayers on Jan. 1, 2003. The IRS did not determine that the taxpayers' rollover of the retirement funds into the IRAs was either invalid or taxable. The Court held the guaranties of the loan were prohibited transactions under Sec. 4975(c)(1)(B), and the IRAs' assets were deemed distributed to the taxpayers on Jan. 1, 2003.

Tip of the Day

Transportation expenses related to education . . . If your education meets the qualifying work-related education requirements, you can generally deduct your education expenses as business expenses. You can deduct local transportation costs of going directly from work to school. If you are regularly employed and go to school on a temporary basis, you can also deduct the costs of returning from school to home. Transportation expenses include the costs of using your car, bus, subway, cab, or other fares. It does not include amounts for travel, meals, or lodging while you are away from home overnight. If you use your car, use the standard mileage rate for business (57.5 cents per mile for 2015).

 

April 1, 2016

News

If the IRS denies your request for an installment agreement or an offer in compromise, you may be able to take your case to Tax Court, but you'll have to show that the IRS abused its discretion in denying either of those options. In Richard R. Rehn and Deborah S. Wheeler (T.C. Memo. 2016-54) the Court noted that IRS can deny an offer in compromise to taxpayers who are not current on estimated tax payments or the filing of required returns. The Court found the taxpayers were not current with their estimated tax payments at the time of Appeals' consideration and ultimate rejection of their collection alternative. The taxpayers also assert the IRS ignored their claim of economic hardship. When reviewing a claim of economic hardship, the settlement officer considers relevant circumstances such as the taxpayer's age, ability to earn an income, number of dependents, and status as a dependent. Reasonable basic living expenses are based on the taxpayer's circumstances but do not include amounts needed to maintain a luxurious standard of living. For the settlement officer to consider economic hardship taxpayers cannot just claim they would suffer economic hardship; they must submit complete and current financial information. The Court noted that the settlement officers did not ignore the financial information the taxpayers provided and informed the taxpayers that their expenses exceeded the allowable amounts for vehicle, housing, utilities, and out-of-pocket medical expenses and additional information requested was not submitted. The Court found the IRS did not abuse its discretion in denying the taxpayers' economic hardship contention.

Tip of the Day

Transportation expenses related to education . . . If your education meets the qualifying work-related education requirements, you can generally deduct your education expenses as business expenses. You can deduct local transportation costs of going directly from work to school. If you are regularly employed and go to school on a temporary basis, you can also deduct the costs of returning from school to home. Transportation expenses include the costs of using your car, bus, subway, cab, or other fares. It does not include amounts for travel, meals, or lodging while you are away from home overnight. If you use your car, use the standard mileage rate for business (57.5 cents per mile for 2015).

 


Copyright 2016 by A/N Group, Inc. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is distributed with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The information is not necessarily a complete summary of all materials on the subject. Copyright is not claimed on material from U.S. Government sources.--ISSN 1089-1536


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