News and Tip of the Day


Small Business Taxes & ManagementTM--Copyright 2019, A/N Group, Inc.

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June 17, 2019

News

T.D. 9867 provides final rules to expand opportunities for working men and women and their families to access affordable, quality healthcare through changes to rules under various provisions of the Public Health Service Act (PHS Act), the Employee Retirement Income Security Act (ERISA), and the Code regarding health reimbursement arrangements (HRAs) and other account-based group health plans. Specifically, the final rules allow integrating HRAs and other account-based group health plans with individual health insurance coverage or Medicare, if certain conditions are satisfied (an individual coverage HRA). The final rules also set forth conditions under which certain HRAs and other account-based group health plans will be recognized as limited excepted benefits. Also, the IRS is finalizing rules regarding premium tax credit (PTC) eligibility for individuals offered an individual coverage HRA. In addition, the Department of Labor (DOL) is finalizing a clarification to provide assurance that the individual health insurance coverage for which premiums are reimbursed by an individual coverage HRA or a qualified small employer health reimbursement arrangement (QSEHRA) does not become part of an ERISA plan, provided certain safe harbor conditions are satisfied. Finally, the Department of Health and Human Services (HHS) is finalizing provisions to provide a special enrollment period (SEP) in the individual market for individuals who newly gain access to an individual coverage HRA or who are newly provided a QSEHRA. The goal of the final rules is to expand the flexibility and use of HRAs and other account-based group health plans to provide more Americans with additional options to obtain quality, affordable healthcare. The final rules affect employees and their family members; employers, employee organizations, and other plan sponsors; group health plans; health insurance issuers; and purchasers of individual health insurance coverage.

The IRS has issued final regulations (T.D. 9868) regarding the statutory expansion of the class of permissible potential current beneficiaries (PCBs) of an electing small business trust (ESBT) to include nonresident aliens (NRAs). In particular, the final regulations ensure that the income of an S corporation will continue to be subject to U.S. Federal income tax when an NRA is a deemed owner of a grantor trust that elects to be an ESBT.

Tip of the Day

Ineligible shareholder can terminate S election . . . S corporation shareholders must be individuals, estates, or certain trusts. Shareholders must also be either citizens or U.S. residents. Partnerships and corporations cannot be shareholders. If a shareholder (or the corporation) sells or transfers his shares to an ineligible shareholder the S corporation election is automatically terminated at the time of the transfer. (Which will result in the corporation becoming a C corporation from that point on.) One way to avoid the problem can be to put a legend on the stock certificates that prohibit the transfer to an ineligible shareholder, or restrict the transfer (talk to your attorney). All may not be lost. You can request a private letter ruling and if you can show the transfer was inadvertent (see Sec. 1362(f)) you may be able to undo the damage. Be prepared. Between professional fees and the filing fee for the ruling, it can be costly.

 

June 14, 2019

News

The IRS has added additional counties where victims may qualify for relief as a result of the severe storms, tornadoes, straight-line winds, and flooding that took place on May 7, 2019 in Oklahoma. The added counties are Delaware, Kay, Mayes, Okmulgee, Payne, Pottawatomie, and Sequoyah. As a result, the complete list is now Canadian, Creek, Delaware, Kay, Logan, Mayes, Muskogee, Okmulgee, Osage, Ottawa, Payne, Pottawatomie, Rogers, Sequoyah, Tulsa, Wagoner, and Washington. 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 May 7, 2019 and before Sept. 16, 2019, are granted additional time to file through Sept. 16, 2019. This includes the quarterly estimated income tax payment due on June 17, 2019, as well as the employment and excise tax returns due on July 31, 2019. For additional details, go to IRS announces tax relief for Oklahoma victims of severe storms, tornadoes, straight-line winds, and flooding.

Victims of the severe storms and flooding that took place on May 21, 2019 in Arkansas may qualify for tax relief from the IRS. The President has declared that a major disaster occurred in the State of Arkansas. Following the recent disaster declaration for individual assistance issued by the Federal Emergency Management Agency, the IRS announced today that affected taxpayers in certain areas will receive tax relief. Individuals who reside or have a business in Conway, Crawford, Faulkner, Jefferson, Perry, Pulaski, Sebastian, and Yell 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 May 21, 2019 and before September 30, 2019, are granted additional time to file through September 30, 2019. This includes the quarterly estimated income tax payment due on June 17, 2019, as well as the employment and excise tax returns due on July 31, 2019. For additional information, go to IRS announces tax relief for Arkansas victims of severe storms and flooding.

Classifying type of income can sometimes be a challenge. But how you classify it can affect how it's taxed. In K. Slaughter (T.C. Memo. 2019-65) the taxpayer was a successful author who was subject to the self-employment tax. During the years in issue,she received payments pursuant to contracts she had entered into during the years 1999 through 2011 (contracts). The contracts all provide for payments in a similar manner. The publishers agree to make two types of payments. The first is a nonrefundable advance, paid in the respective ways set forth in the contracts. The second is a royalty, or a portion of the revenue or profits generated by the sales of the taxpayer's manuscripts.  The contracts specify the royalty rates applied to the revenue or profits from the works; only the amounts in excess of the advance amounts are paid as royalties. The contracting publishers receive more than just the right to print, publish, distribute, sell, and license the works and manuscripts written, or to be written, by petitioner. They also secure the right to use her name and likeness in advertising, promotion, and publicity for the contracted works. Petitioner is required to provide photos and be available for promotional activities. Publishers paid her more because she was well-known because of her promotional activities and had a following and cachet. The taxpayer argued that the amount she received as advances and royalties were reportable on Schedule E (for rental income and royalties) and not subjected to the self-employment tax. Only the amount actually paid for her writing should be subject to the self-employment tax. The Court noted that the contracts she signed made no allocation of income between different actvities and that the accountant's allocation used an approach that was open to challenge. The Court held that all of the payments were trade or business income and subject to the self-employment tax. The Court also held that the taxpayer was not subject to the 20 percent negligence penalty because she reasonably relied on qualified professionals and provided them with all necessary information.

Tip of the Day

Opting out of S corporation status . . . C (regular) corporations are now taxed at a top rate of 21 percent, while the top rate for individuals is 37 percent. And that's the effective rate on pass-through entities such as an S corporation. There are a number of pros and cons to switching, and much depends on your personal situation. Get good advice before electing to switch to a C corporation. You should also be aware that after opting out of S corporation status you can't re-elect for five years.

 

June 13, 2019

News

If you're going to rely on expert testimony in a valuation, the opinion has to meet certain requirements. In the case of Mitchel Skolnick and Leslie Skolnick, et al. (T.C. Memo. 2019-64) the expert testimony was to be a valuation of a number of horses owned by the taxpayers' LLC. The IRS argued the activity was not engaged in for profit. The taxpayers offered the testimony of an expert as to the value of the horses. The expert had served as an agent for sellers at numerous public auctions and private sales. However, he disclosed that he had not authored a publication during the past 10 years and had not testified as an expert witness during the past 4 years. Both are required disclosures in a formal report. The expert's testimony consisted of a 3-1/2 page report with a pair of attached spreadsheets, the substance of which consisted of two pages. The Court noted that the testimony must be based on sufficient facts or data, be the product of reliable principles and methods, and the expert must reliably apply the principles and methods to the facts of the case. The Court concluded that the expert's testimony, as embodied in his written report, does not “rest on a reliable foundation” because it does not set forth the facts or data on which he relied, the methodology he employed, or the manner in which he applied to the facts of these cases the valuation factors he deemed relevant. Noting that while a witness can be qualified as an expert by experience alone, but the testimony must be based on reliable principles and methods. Here the expert's report did not meet that requirement. The Court sided with the IRS in disallowing the testimony.

You can take a loss for a bad debt, but the facts were more complicated in the case of H. Garrett Frey and Mary K. Frey (T.C. Memo. 2019-62). The taxpayer tried to deduct as business expenses on his personal returns amounts he allegedly paid for services performed by his solely owned but defunct corporation. In addition, there was an assignment of income issue. The Court noted that income is taxable to the person that earns it, rather than the person who ultimately receives it. The taxpayer argued that his corporation provided management and accounting services to his business and assigned the income he received to the corporation. The income would be offset by carryforward losses of the corporation. The Court noted there was no evidence funds were actually transferred to the corporation and the taxpayer at all times controlled the earning of the income. The Court held that the assignment of income in the guise of deductions for services was invalid and no deductions were allowed.

Tip of the Day

Analyze the numbers . . . The internet now allows us to have access to far more information, much of it arcane, than ever. We can call up a barrage of numbers, graphs, statistics, etc. But the meaning behind those numbers may be elusive. Two recent statistics are telling. Sales of existing homes are down significantly, but the median price just went up slightly. If you just look at the second statistic, it's good news if you're selling your home. Or is it? The median is the middle value in a list of numbers. For example, the median in the sequence 5, 6, 8, 9, 10,000 is 8; the average is 2006. The market value of your house could have actually decreased, with the median in your town having increased. How? Possibilities include:

Numbers can provide an insight into markets, but be sure they mean something.

 

June 12, 2019

News

The IRS has issued final regulations (T.D. 9864) that require taxpayers to reduce their charitable contribution deductions by the amount of any state or local tax credits they receive or expect to receive in return. In Notice 2019-12 the IRS stated that taxpayers may treat payments they make in exchange for these credits as state or local tax payments. This allows some taxpayers to deduct certain of the payments as taxes. T.D. 9864 finalizes proposed regulations published Aug. 27, 2018, that were designed to clarify the relationship between state and local tax credits and the federal tax rules for charitable contribution deductions. The IRS received over 7,700 written comments before issuing the final regulations. Under the final regulations, a taxpayer making payments to an entity eligible to receive tax-deductible contributions must reduce the federal charitable contribution deduction by the amount of any state or local tax credit that the taxpayer receives or expects to receive in return. The regulations also apply to payments made by trusts or decedents’ estates in determining the amount of their charitable contribution deductions. For example, if a state grants a 70 percent state tax credit pursuant to a state tax credit program, and an itemizing taxpayer contributes $1,000 pursuant to that program, the taxpayer receives a $700 state tax credit. A taxpayer who itemizes deductions must reduce the $1,000 federal charitable contribution deduction by the $700 state tax credit, leaving a federal charitable contribution deduction of $300. The regulations provide exceptions for dollar-for-dollar state tax deductions and for tax credits of no more than 15 percent of the amount transferred.

Victims of the severe storms, tornadoes, straight-line winds, and flooding that began on March 13, 2019 in South Dakota may qualify for tax relief from the IRS. The President has declared that a major disaster occurred. Following the recent disaster declaration for individual assistance issued by the Federal Emergency Management Agency, the IRS announced that affected taxpayers in certain areas will receive tax relief. Individuals and households who reside or have a business in Bennett, Bon Homme, Charles Mix, Dewey, Hutchinson, Jackson, Mellette, Minnehaha, Oglala Lakota, Todd, Yankton, Ziebach counties, the Cheyenne River Sioux Reservation, the Pine Ridge Reservation, and the Rosebud Reservation 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 March 13, 2019 and before July 15, 2019, are granted additional time to file through July 15, 2019. This includes the quarterly estimated income tax payment due on June 17, 2019. In addition, penalties on payroll and excise tax deposits due on or after March 13, 2019, and before March 28, 2019, will be abated as long as the tax deposits were made by March 28, 2019. For additional information, go to IRS announces tax relief for South Dakota victims of winter storm, snowstorm and flooding .

The IRS posted a special early draft of the Publication 15-T, Federal Income Tax Withholding Methods for use in 2020. Publication 15-T will contain all the federal income tax withholding tables. This draft has been released to provide employers with the computation of withholding to be made under the Percentage Method and Wage Bracket Method tables using both the new 2020 Form W-4 and the Forms W-4 from before 2020. The IRS is providing this draft for your information, review, and feedback. Comments must be submitted by July 8, 2019 to be considered timely.

Tip of the Day

Borrowing for your business? . . . Some banks are offering easy money to small businesses--up to a point. You may be able to borrow $100,000 without providing financials. And the interest rate may even be relatively attractive. The question is, should you take the money? Taking on debt increases the risk in the business. When the risk jeopardizes the business depends on a number of factors. How much debt does the business have, relative to it's equity capital? (Many small businesses have only a small amount of equity.) Can the business pay the debt service (interest and any payback of principal), even if times get tough. Borrowing to expand, to replace equipment, borrowing to finance added inventory, etc. can make sense if the debt is not excessive. Borrowing to save a business that's in trouble is generally not a good idea. Unsure? Talk to your accountant or a disinterested financial advisor.

 

June 11, 2019

News

The Tax Cuts and Jobs Act (TCJA) imposes a new 21 percent excise tax on applicable tax-exempt organizations that pay more than $1 million in remuneration to any covered employee for any taxable years beginning after December 31, 2017. Implementation of the new excise tax provision requires changes to tax forms, instructions, and information technology systems as well as additional guidance to assist taxpayers to accurately report the excise tax. The Treasury Inspector General for Tax Administration (TIGTA) performed an audit to provide a status of the IRS’s progress in implementing tax law changes required by the new law.. This audit assessed the actions taken by the IRS to effectively implement the excise tax provision. TIGTA found that the IRS coordinated with various IRS offices and developed an action plan that identified the steps needed for the implementation of the excise tax provision. The TE/GE Division also identified the affected tax forms, instructions, and information technology systems and made accurate, complete, and timely requests for revisions. The revised tax forms were available to affected taxpayers by the end of Calendar Year 2018. In addition, the TE/GE Division coordinated with the Office of Chief Counsel to identify formal guidance needed for the excise tax provision. Although there were delays, the Office of Chief Counsel released formal guidance to the public on December 31, 2018. Exempt Organizations employees received training on the new excise tax, and IRS officials participated in various public speaking events that included presentations about the excise tax. However, TE/GE Division management has not completed a strategy to address noncompliance with the new tax. Although TE/GE Division management acknowledged the need for a compliance strategy and took preliminary steps in that process, as of December 31, 2018, they had not established a timeline for further development and implementation of compliance activities. Affected organizations will begin reporting the excise tax on returns filed as early as May 2019. A fully developed compliance strategy is needed to monitor and track potential noncompliance with the new excise tax. To read the full report, go to www.treasury.gov/tigta/auditreports/2019reports/201914032fr.pdf.

The Social Security Administration has announced that due to a processing error in January, some Medicare Advantage and Part D beneficiaries' requests to have premiums withheld from their Social Security benefit checks did not go through. As a result, those premiums have not been paid. Plans will be sending premium bills to those affected directly instead. If you are affected and haven’t already received a bill in the mail, you will soon. The first bill will likely be for a larger amount than usual to make up for the unpaid premiums. The plan may resubmit your request for Social Security withholding, but you will still need to pay any unpaid premiums. You can find additional information from Medicare in the premium withholding issue notice. This issue affects some 250,000 Medicare recipients.

Tip of the Day

Lead with your best shot . . . Chances are you sell a number of products or provide a number of different services. You can improve your odds of getting a customer if you convince him or her with your best product. Some years ago a publisher had several series of books on different topics. Within each series the appeal of each book varied. The company knew if they got you to keep the first book, the chances of you buying the other 10 plus volumes in the series were high. Customers who returned the first one, had a very low probability of buying another, or even a book in the other series. They test offered the different titles. When they found the best of the series, they promoted just that book. The books were good, but the marketing was great. The same idea can work for many businesses, although it might need small modifications. A restaurant can price a normally expensive entree less than the competition. Many customers may perceive the restaurant is a bargain, even though all the other dishes are comparable to the competition. Most customers, even very cost conscious ones, don't comparison shop beyond a certain range.

 

June 10, 2019

News

The IRS recently updated its identity verification process to create or access online payment plan accounts to better protect your tax information. Here’s what you need to know to apply for, view or change a payment plan. Creating an account has always been fast, secure, easy and free. You need your:

The IRS has added one simple identity protection step. Now, you will need to verify either a financial account linked to your name or a mobile phone number registered in your name If you do not have either of these additional items, you can request the IRS mail a verification code to you, which takes about 5 to 10 business days to arrive.

Tip of the Day

Selling out? . . . If you're planning to retire after selling your business, you should analyze more than just the price you're getting and what you'll be left with after taxes. Many items may be deducted on your business tax return that you'll have to pay on your own after leaving the business--or even after taking on a partner or shareholder. While health insurance and the company car may come to mind, often there's much more than that. Use of the company truck every weekend to work on your vacation home, those lunches with clients, the trips to conferences in resort areas, putting a relative on the payroll for more than they're really worth, etc. Many may be legitimately deductible in whole or part right now, some should not have been deducted, such as use of a business vehicle for personal purposes. You should consider the change in cash flow before you sell out. You might want to clean up your tax return before considering selling out. Your business may be showing a modest profit of $300,000 when you could easily show $450,000 by not deducting that car, getting your brother-in-law off the payroll, etc. That boost in profit could generate a much larger selling price for the business.

 

June 7, 2019

News

What could be a simple sale of property can get complicated if the disposition includes debt in a forclosure. In Charles K. Breland, Jr. and Yvonne S. Breland (T.C. Memo. 2019-59) the taxpayers acquired several properties in a like-kind exchange. One of the properties went into foreclosure. At auction, the bank was the highest bidder. The taxpayers claimed a loss on the foreclosure. The question was what was the selling price. The Court noted that generally the amount a taxpayer realizes from the sale or disposition of property includes the amount of any liabiliites from which the taxpayer is relieved as a result of the transaction. This general rule applies in the case of nonrecourse debt. That is, the amount realized includes all remaining debt in excess of the sale proceeds. Here the debt was recourse and the amount realized from the transfer is the fair market value of the property. Typically, the fair market value of property is the price at which the property would change hands between a willing buyer and willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts. The IRS argued that the bid price for the property at foreclosure does not meet the definition of fair market value. In a foreclosure sale the seller is hardly willing. The Court noted however, that in the case of mortgaged property sold at a foreclosure sale, a court can presume fair market value to be the bid price, absent clear and convincing evidence to the contrary. The Court also noted that since the debt was recourse and in the absence of information to the contrary the taxpayers were still liable for the remaining amount of the debt.

Tip of the Day

Investment management fees . . . Usually they're a percentage of the assets under management. In the case of a hedge fund or similar investment it's a combination of a percentage of assets and a cut of the return. Many investors think that the best investments are those with the lowest fees, thinking that will guarantee the highest return. But that's not always the case. Paying 3 percent to get a 12 percent return is better than 0.5 percent to get a 5 percent return. And there are other factors to consider beyond management fees. A risky fund may have a great return when it's doing well, but that could be more than offset by the bad times. Consider the investment and your situation carefully.

 

June 6, 2019

News

Rev. Rul. 2019-15 provides the interest rates on underpayments and overpayments for the calendar quarter beginning July 1, 2019. The rates for interest determined under Section 6621 of the code and are each down 1 percentage point from the second quarter. The rates will be 5 percent for overpayments (4 percent in the case of a corporation), 5 percent for underpayments, and 7 percent for large corporate underpayments. The rate of interest paid on the portion of a corporate overpayment exceeding $10,000 will be 2.5 percent.

Victims of the severe storms, tornadoes, straight-line winds, and flooding that took place on May 7, 2019 in Oklahoma may qualify for tax relief from the IRS. The President has declared that a major disaster occurred in the State of Oklahoma. Following the recent disaster declaration for individual assistance issued by the Federal Emergency Management Agency, the IRS announced today that affected taxpayers in certain areas will receive tax relief. Individuals who reside or have a business in Muskogee, Tulsa and Wagoner 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 May 7, 2019 and before Sept. 16, 2019, are granted additional time to file through Sept. 16, 2019. This includes the quarterly estimated income tax payment due on June 17, 2019, as well as the employment and excise tax returns due on July 31, 2019. In addition, penalties on payroll and excise tax deposits due on or after May 7, 2019, and before May 22, 2019, will be abated as long as the deposits were made by May 22, 2019. For more details, go to IRS announces tax relief for Oklahoma victims of severe storms, tornadoes, straight-line winds, and flooding.

Tip of the Day

IRS again warning of scams . . . The IRS and its partners have made progress on scammers, but it's a continuous battle. The latest one involves calls purportedly from the Social Security Administration threatening to cancel or suspend your social security number. Your only smart course of action is not to answer the phone. If you do answer, don't provide the caller with any information. There's always a chance they have some info on you and are looking to tease out additional info. And always check your bank and credit card statements at least once a month (more frequently is better). That may allow you to spot fraudulent activity before it goes too far. If you can, set alerts with your bank. That way transactions larger than the threshold you set will be flagged and you'll get either an email or a text message. And keep your older relatives in mind. Once that magic "65" is reached it seems the scammers think you're ripe for the picking.

 

June 5, 2019

News

Taxpayers who underreport their income tax may be subject to accuracy-related penalties (Sec. 6662). The penalty is generally 20 percent of the underpayment of tax that is due, and in certain cases, the penalty may be 40 percent. If the IRS does not properly consider and propose the accuracy-related penalty, taxpayers may be treated inconsistently and unfairly, undermining tax system integrity and diminishing voluntary compliance. The Treasury Inspector General for Tax Administration (TIGTA) did an audit because the largest part of the Tax Gap results from taxpayers who underreport their income, accounting for $387 billion, or about 84 percent of the IRS’s 2008 through 2010 estimated gross Tax Gap. This audit was initiated to determine whether accuracy-related civil tax penalties in the Large Business and International (LB&I) Division are properly considered and proposed. For Fiscal Years 2015 through 2017, TIGTA reviewed IRS databases for closed business return examinations and identified 519 examinations in which examiners proposed accuracy-related penalties totaling $1.8 billion. The Office of Appeals worked and closed 195 appealed examinations totaling $773 million in proposed penalties that ultimately resulted in the elimination or reduction of the proposed penalties for 183 returns totaling $765 million. IRS systems also identified 4,600 business return examinations that resulted in additional tax assessments greater than $10,000, for a total of $14 billion of additional tax due. Of these 4,600 returns, only 295 returns (6 percent) had accuracy-related penalties assessed. IRS policy requires examiners to identify the appropriate penalties, determine whether to propose penalties, document the reasoning for proposal or nonproposal, involve supervisors in penalty development, and obtain supervisory approval for the proposal of all penalties and for the nonproposal of the substantial understatement penalty. TIGTA’s review of a stratified, statistical sample of 50 business tax returns examined by the LB&I Division with additional tax assessment greater than $10,000 and no accuracy-related penalties assessed showed that: in 10 cases (20 percent), examiners did not consider the accuracy-related penalty; in 10 cases (20 percent), examiners did not justify their decisions not to propose the penalty; in 13 cases (26 percent), there was no indication that the supervisor approved the decision not to propose the penalty; and in 13 cases (26 percent) with substantial understatements of income tax, there was no indication of supervisory involvement in penalty development. In addition, TIGTA’s review of a stratified statistical sample of 50 business tax returns examined by LB&I examiners with accuracy-related penalties assessed showed that: in four cases (8 percent), there was no indication the supervisor approved the decision to propose the penalty, and in three cases (6 percent), there was no indication that supervisors were actively involved with the development of the penalty issues. To read the complete report, go to www.treasury.gov/tigta/auditreports/2019reports/201930036fr.pdf .

You may be able to settlement a tax obligation for less than the full amount, but you've got to comply with the rules. In Edward F. Sadjadi and Cynthia M. Sadjadi (T.C. Memo. 2019-58) the taxpayers made payments toward an offer-in-compromise (OIC). The signed OIC could not be found, but under a standard agreement on Form 656 a taxpayer must remain current on tax obligations from that point forward. The taxpayers filled a return during this time period, but failed to pay the tax due. The Tax Court found no abuse of discretion by the settlement officer who found they defaulted on the offer-in-compromise.

Tip of the Day

Looking to buy a retail rental property? . . . While larger, formerly single tenant spaces are coming on the market at attractive prices, they can be risky unless you have experience. Finding a single tenant for a large property can take considerable time. You may also be negotiating with a tenant who is a much larger adversary. Take the space and repurpose it? Split it into smaller spaces? That can be costly. Get good advice before going very far. In some towns it can be relatively easy to get permits for work; in some it can be a horror show. That can up your carrying charges as well as making construction work and signing up tenants more difficult. Get good advice. Better yet, partner up with someone who knows the market.

 

June 4, 2019

News

Victims of the severe storms, tornadoes, straight-line winds, and flooding that took place on May 7, 2019 in Oklahoma may qualify for tax relief from the IRS. The President has declared that a major disaster occurred in the State of Oklahoma. Following the recent disaster declaration for individual assistance issued by the Federal Emergency Management Agency, the IRS announced today that affected taxpayers in certain areas will receive tax relief. Individuals who reside or have a business in Muskogee, Tulsa and Wagoner 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 May 7, 2019 and before Sept. 16, 2019, are granted additional time to file through Sept. 16, 2019. This includes the quarterly estimated income tax payment due on June 17, 2019, as well as the employment and excise tax returns due on July 31, 2019. For additional information, go to IRS announces tax relief for Oklahoma victims of severe storms, tornadoes, straight-line winds, and flooding .

As a result of severe storms, flooding, landslides and mudslides during the period of February 19 to March 30, 2019, the president has declared certain areas of Tennessee eligbile for relief. Taxpayers and the counties of Bedford, Bledsoe, Blount, Campbell, Carter, Cheatham, Claiborne, Clay, Cocke, Coffee, Decatur, Dekalb, Dickson, Dyer, Fentress, Gibson, Giles, Grainger, Greene, Hamblen, Hamilton, Hancock, Hardin, Hawkins, Hickman, Houston, Humphreys, Jackson, Jefferson, Johnson, Knox, Lake, Lauderdale, Lewis, Lincoln, Marion, Marshall, McNairy, Moore, Morgan, Obion, Overton, Perry, Rhea, Roane, Robertson, Scott, Sequatchie, Sevier, Smith, Tipton, Unicoi, Union, Van Buren, Warren and Wayne may deduct losses attributable to the disaster on their 2019 or 2018 returns.

Tip of the Day

Cost cutting backfires . . . There's no question that cutting costs can improve your profit margins. And sometimes you have no other options to keeping profitable. That's particularly true if you have no control of your inputs (labor, materials) and your prices. But if you've already cut obvious waste items, evaluate your next cuts carefully. Denying staffers an out of town seminar to get up to speed on new software won't save money if your employees will spend an extra hour every day using the program. Not buying another printer makes no sense if an employee must spend a couple of minutes several times an hour retrieving his job. Consolidating two manufacturing locations to one may not make sense if shipping costs will rise, training new employees will result in backlogs, etc. It's not unusual for an action to have unintended consequences. Some are pretty obvious and should come to mind quickly. These are the traps to avoid first. After that you can look at the ones that won't have much impact if you're wrong on your cut.

 

. June 3, 2019

News

The IRS has issued a draft of the 2020 Form W-4 Employee's Withholding Allowance Certificate, that will make accurate withholding easier for employees starting next year. “The new draft Form W-4 reflects important feedback from the payroll community and others in the tax community,” said IRS Commissioner Chuck Rettig. “The primary goals of the new design are to provide simplicity, accuracy and privacy for employees while minimizing burden for employers and payroll processors.” The IRS expects to release a near-final draft of the 2020 Form W-4 in mid-to-late July to give employers and payroll processors the tools they need to update systems before the final version of the form is released in November. To make additional improvements to this initial draft for 2020, the IRS is now accepting comments for 30 days. To facilitate review of this form, IRS is also releasing FAQs about the new design.

Section 3405(a)(1) requires the payor of any periodic payment to withhold income tax from the payment. Under Section 3405(a)(2), an individual generally may elect not to have Section 3405(a)(1) apply with respect to periodic payments made to the individual. Section 3405(b)(1) requires the payor of any nonperiodic distribution to withhold income tax from the distribution. Under Section 3405(b)(2), an individual generally may elect not to have Section 3405(b)(1) apply with respect to any nonperiodic distribution. Section 3405(e)(2) defines a periodic payment as a designated distribution that is an annuity or similar periodic payment. Section 3405(e)(3) defines a nonperiodic distribution as any designated distribution that is not a periodic payment. The IRS has issued proposed regulations (REG-132240-15) regarding withholding on certain periodic and nonperiodic distributions under section 3405, other than eligible rollover distributions.

Tip of the Day

Don't click without looking . . . More than a few commercial web pages are designed to trap users into taking a certain action. These aren't necessarily scam sites, but can be legitimate enterprises. Do you want to be put on a list? Want to get faster shipping? Want to extend your subscription? They may be worded in such a way as to trap the unwary or make it difficult for you to select an option of their choice, not yours. Be careful of signing up for "free" services that turn into costly ones down the road. Giving your credit card for a "free" service or product because you had to pay for shipping means they have your card info. And if it's a subscription service and they've got your credit card or bank account number, make sure you've got a way to stop the service.

 


Copyright 2019 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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