Withholding Rules Updates Proposed
The IRS and Treasury have proposed regulations updating payroll withholding rules to reflect changes in the Tax Cuts and Jobs Act (TCJA) and related legislation. These updates accommodate the redesigned Form W-4, and the adjusted tables and computations for tax withholding. The regulations also address other withholding issues, such as how to treat an employee who hasn’t turned in a completed W-4.
IRS Increases Visits To High-Income Delinquents
In an effort to promote compliance and fairness among taxpayers, the IRS has committed to increasing face-to-face visits with those taxpayers who haven’t filed tax returns in 2018 or previous years. Their goal is to inform taxpayers of their obligations and to bring them into compliance. Revenue officers will not make threats or demand unusual forms of payment, but rather inform and assist. Taxpayers have the right to see credentials and should do so to protect themselves against fraud. Furthermore, getting ahead of the situation is advisable: “Taxpayers having delinquent filing or payment obligations should consult a competent tax advisor before waiting to be contacted by an IRS revenue officer,” according to Paul Mamo, Director of Collection Operations, Small Business/Self Employed Division.
Meals And Entertainment Deduction Guidance Updated
The IRS has updated its proposed guidance regarding the handling of business meals and entertainment expense deductions. The TCJA eliminated the deduction for activities generally considered entertainment, amusement or recreation. It also limited the deduction for expenses related to food and beverages provided by employers to their employees. The proposed guidelines help determine what qualifies as entertainment and address the meals expense limit. As these are proposed guidelines, the IRS is taking public comment and will hold a public hearing on these proposed regulations on April 7, 2020.
Military Members’ Tax Benefits Explained
A newly-revised publication aims to inform members of the military of their tax benefits under the law. The Armed Forces Tax Guide will help those serving in the military, including National Guard, reservists, and those stationed abroad, understand specific tax issues related to their situation. Moving expenses, treatment of combat pay, IRA contribution limits and extended tax deadlines are included in this helpful guide.
The IRS warns taxpayers to avoid unethical “ghost” tax return preparers. The 2020 filing season is underway and fraudulent predators are taking every advantage. A ghost preparer is someone who prepares a tax return for someone, but does not sign it. They print it out and tell the taxpayer to sign and mail it or, if e-filing, they do not add their digital signature as a paid preparer, as required by law. You can avoid falling prey to a ghost by being aware of their tactics: They may require payment in cash and withhold a receipt; they may invent income or deductions to qualify the taxpayer for credits or refunds; they may direct the tax refund into their own bank account instead of the taxpayer’s. Using a legitimate tax preparer with a valid Preparer Tax Identification Number is a sure way to avoid falling prey to a ghost preparer.
Guidance For Student Borrowers and Creditors
The IRS and Treasury issued guidance that extends the relief for some taxpayers who had student loans discharged. The Revenue Procedure provides relief when the federal loans are discharged by the Department of Education under the Closed School or Defense to Repayment discharge process, or where the private loans are discharged based on certain legal settlements. Taxpayers within the scope of this procedure should not report the amount of discharged loan as gross income, nor should creditors issue a 1099-C to taxpayers or the IRS.
IRS Reconsiders Double Taxation
The IRS is willing to consider requests for relief from double taxation resulting from the repatriation of monies under the Tax Cuts and Jobs Act (TCJA). In a few instances where corporations have paid an unusual dividend, not because of the TCJA, it may be appropriate to provide relief from double taxation. When the same earnings and profits of foreign corporations are taxed both as dividends and under section 965, double taxation could result. Taxpayers who fit these limited circumstances may contact the Office of Associate Chief Counsel (International).
US Tackles International Tax Evasion
The Joint Chiefs of Global Tax Enforcement, known as the J5, brings together leaders of tax enforcement authorities from Australia, Canada, the UK, US and the Netherlands to lead the fight against international tax crime and money laundering. Specifically, it is believed that clients of a financial institution located in Central America may be using a sophisticated system to conceal and transfer wealth anonymously to evade their tax obligations and launder their criminal proceeds. Though this was the first meeting of its kind, the J5 plan to continue coordinating such global enforcement.
IRS Updates Deductible Guidelines
The IRS has issued guidance on some of the changes brought about by the Tax Cuts and Jobs Act (TCJA) regarding certain deductible expenses. The rules for using the optional standard mileage rates in deducting costs of operating an automobile for business, charitable, medical or moving expense purposes have been updated. Taxpayers may opt to substantiate actual allowable expenses with adequate records. Rules vary for members of the Armed Services.
Medical Expenses May Be Tax Free Via FSA
The IRS today reminded eligible employees (self-employed are not eligible) that they may still have time to set up a health flexible spending arrangement (FSA) if their employer offers one. Employees may contribute up to $2,750 during the 2020 plan year not subject to federal income tax, Social Security tax or Medicare tax. Allowable expenses are those not covered by one’s health plan, and may include co-pays, deductibles, dental and vision care, eyeglasses and hearing aids. Unspent amounts may be forfeit. Talk to your employer for details.
National Tax Security Awareness Week Announced
Next week kicks off the fourth National Tax Security Awareness Week, in time for holiday shopping season. Security Summit partners continue to urge taxpayers, businesses and tax professionals to maintain their online security as identity thieves step up their efforts to steal personal and financial data. The Week will feature a series of educational materials to help protect individuals and businesses against identity theft. The effort will include a special social media effort on Twitter and Instagram with @IRSnews and #TaxSecurity.
Large Gifts Won’t Harm Estates After 2025
The Treasury Department and IRS today issued final regulations confirming that individuals taking advantage of the increased gift and estate tax exclusion amounts in effect from 2018 to 2025 will not be adversely impacted after 2025 when the exclusion amount drops to pre-2018 levels. The TCJA temporarily increased the basic exclusion amount (BEA) from $5 million to $10 million for tax years 2018 through 2025 (adjusted for inflation). In 2026, the BEA will revert to the 2017 level of $5 million as adjusted for inflation. Final regulations provide a special rule that allows an estate to compute its estate tax credit using the higher of the BEA applicable to gifts made during life or the BEA applicable on the date of death.
York County Councillors will meet in coming months to determine how and whether the county will offer incentives for businesses relocating to the area.
Financial breaks to spur economic development are common, including fees in lieu of tax (FILOT) agreements, Bailey Bill which freezes taxable value on redevelopment properties, and federal Opportunity Zones (of which parts of Rock Hill, Chester, and Lancaster are designated). In March, legislation for tax and development credits were introduced by state legislators in hopes of bringing the Carolina Panthers training site and headquarters to South Carolina.
However, not everyone is in favor of such tax breaks. Citizens are not privy to any such deals, and the county can’t afford to give these incentives to all businesses.
Councilwoman Christi Cox has asked to schedule a discussion on the impact and value of such incentives. Usually, the economic development committee sees potential FILOT agreements before they’re presented before the whole council, but a workshop is planned to address issues before the entire council. Some of those issues include whether a business seeking a fee agreement is offering livable wages, and that the promised investments are being realized.
Sometimes incentives and fee agreements are worked out behind closed doors, using code names (“Project Combat," for instance). Cox affirms that the county and council members can be pro-business without approving FILOTs for every business and that the county should be selective when it comes to who gets these deals. “ Every business is welcome here in York County — period. The question is, at what point and when do
we extend tax breaks?”