IRS Updates December 2

The IRS Announces Inflation Adjustments

For tax year 2019 (filed in 2020) several adjustments have been made to dollar amounts. The standard deduction amount, the Alternative Minimum Tax exemption, the Earned Income Credit, foreign earned income exclusion, estate exemption amount, and adoption credit amount have all increased, and tax rates have been established for income levels.

Changes In Small Business Depreciation

The Tax Cuts and Jobs Act (TCJA) changed the tax law such that many small businesses can immediately expense more of the cost of certain business property. This means they are able to write off most depreciable assets in the year they are placed into service. This primarily affects Section 179 property which includes business equipment and machinery, office equipment, livestock and, if elected, qualified real property. See here for more details, including information about 100% first year ‘bonus’ depreciation.

Time to plan for 2019 Health Flexible Spending Arrangements

The IRS encourages interested employees to set up Health FSAs with their employer now, before the new year, since contributions are withheld from payroll checks. Elected funds, up to $2700 during 2019, may be used for qualified expenses not covered by the employee’s health plan, including deductibles, copays, vision and dental care, and more.

‘Tax Transcript’ Scam

The IRS warns the public of an email scam that poses as the IRS to trick taxpayers into opening a ‘tax transcript’ or similar document, but which in reality downloads Emotet malware. Businesses are especially vulnerable to this malware, as it can spread through networks and take months for successful removal. The IRS reminds taxpayers it does not send unsolicited emails to the public, nor would it email sensitive documents. Click here for more details and information on what to do if you receive such an email.

Like-Kind Exchanges and Foreign Tax Credits

Effective January 1, 2018, like-kind exchanges are generally limited to real property (real estate), and exclude personal and intangible property such as machinery, vehicles, artwork, patents, or other intellectual property. The IRS is also proposing changes to regulations on foreign tax credits. Proposed provisions include a dividends-received deduction for dividends from foreign subsidiaries and the addition of Global Intangible Low-Taxed Income rules, which would have been deferred under the previous law.