IRS Updates December 31

IRS Issues NOL and Excess Business Loss Guidances

The IRS is reminding taxpayers that changes in the Tax Cuts and Jobs Act (TCJA) affect excessive business loss and net operating loss deductions. An excess business loss is the amount of business deductions which exceed gross income and gains, plus $250,000 ($500,000 for joint returns). Excess business losses that are disallowed are treated as a net operating loss carryover to the following taxable year. Most taxpayers (exceptions apply to certain farming losses and non-life insurance companies) will only be able to carry forward NOLs, and no longer have the option to carryback. Additionally, tax years beginning after December 31, 2017 limit NOL deductions to 80% of taxable income.

There’s Still Time To Make Quarterly Estimated Tax Payment

The IRS advises taxpayers whose 2018 withholding may have fallen short of actual tax liability that they have until January 15, 2019 to make a quarterly estimated tax payment and avoid bad news at tax-time . Taxpayers with complex tax situations, those with non-wage income, those who didn’t update their withholding earlier this year are most at risk. Additionally, some year-end financial transactions that affect income can impact tax liability as well, such as holiday bonuses and capital gain distributions from mutual funds and stocks. The IRS has made the 2018 Form 1040 and its instructions available for those who want to get a head start and avoid surprises later.

IRS Issues Section 179 expenses and Section 168(g) depreciation Guidance

Changes to rules governing Section 179 expenses were part of the TCJA. Section 179 allows taxpayers to deduct the cost of certain property, such as business equipment and machinery, as an expense in the year the property is placed in service.  For tax years beginning after 2017, the TCJA increased the maximum Section 179 expense deduction from $500,000 to $1 million. the TCJA also expanded the businesses that must use the alternative depreciation system (ADS) under Section 168(g), and changed the ADS recovery period of residential rental property. For property placed in service after 2017, the recovery period is 30 years, down from 40 years.

IRS Halts Tax Transcript Faxing Service

To help protect taxpayers and tax professionals, the IRS will be stopping their tax transcript faxing service as of February 4, 2019. Cybercriminals who obtain tax transcripts, which are summaries of taxpayers’ tax returns, use them to file fraudulent returns that are difficult to detect because they closely mirror a legitimate tax return. The IRS will continue to offer tax transcripts online, after identity verification, or via mail.