Author Archives: Carol Coburn

Like-kind Exchanges Now Limited to Real Property

The Internal Revenue Service reminded taxpayers that like-kind exchange tax treatment is now generally limited to exchanges of real property.

Like-kind exchange treatment now applies only to exchanges of real property that is held for use in a trade or business or for investment. An exchange of real property held primarily for sale still does not qualify as a like-kind exchange.

“Tax Transcript” email scam

The Internal Revenue Service and Security Summit partners today warned the public of a surge of fraudulent emails impersonating the ITS and using tax transcripts as bait to entice users to open documents containing malware.

The scam is especially problematic for business whose employees might open the malware because malware can spread throughout the network and potentially take months to successfully remove.

This well-known malware, known as Emotet, generally poses as specific banks and financial institutions in its effort to trick people into opening infected documents.

In the past few weeks, the scam masqueraded as the IRS, pretending to be from “IRS Online.” The email carries an attachment labeled “Tax Account Transcript” or something similar, and the subject line uses some variation of the phrase “tax transcript.”

The IRS does not send unsolicited emails to the public, nor would it email a sensitive document such as a tax transcript.

Treatment of Leave-Based Donation Payments

 The Internal Revenue Service will not assert that cash payments an employer makes to organizations in exchange for vacation, sick, or personal leave that its employees elect to forgo constitute gross income or wages of the employees if the payments are (1) made to the organizations for the relief of victims of Hurricane Michael; (2) paid to the organizations before January 1, 2020.

Electing employees may not claim a charitable contribution deduction with respect to the value of forgone leave excluded from compensation and wages.

Business Owners Can Claim a Qualified Business Income Deduction

Eligible taxpayers may now deduct up to 20% of certain business income from domestic businesses operated as sole proprietorships or through partnerships, S-corporations, trusts, and estates. The deduction may also be claimed on certain dividends. Eligible taxpayers can claim the deduction for the first time on the 2018 federal income tax return they file in 2019.

Some things business owners should know about this deduction.

The deduction applies to qualified:

  • Business income
  • Real estate investment trust dividends
  • Publicly traded partnership income
  • Only items included in taxable income are counted
  • Deduction is available whether they itemize their deductions on Schedule A or take the standard deduction.
  • Deduction is generally equal to the lesser of these two amounts:
    • Twenty percent of qualified business income plus 20 percent of qualified real estate investment trust dividends and qualified publicly traded partnership income.
    • Twenty percent of taxable income computed before the qualified business income deduction minus net capital gains.
  • Taxpayers with taxable income that exceeds $315,000 for a married couple filing a joint return, or $157,500 for all other taxpayers, the deduction may be subject to additional limitations or exceptions.

 

The New 20% Deduction for Pass-through Businesses

Section 199A of the Internal Revenue Code provides many taxpayers a deduction for qualified business income. The deduction has two components:

  1. Eligible taxpayers may be entitled to a deduction of up to 20% of qualified business income from domestic business operated as a sole proprietor or through a partnership, S corporation, trust or estate.
  2. Eligible taxpayers may also be entitled to a deduction of up to 20% of their combined qualified real estate investment trust and qualified publicly traded partnership income.

For details on figuring the deduction, visit Expert Tax Solutions. The deduction is available for taxable years beginning after December 31, 2017.

Qualified Business Income:

Is the net amount of qualified items of income, gain, deductions and loss from qualified trade or business.

Here’s what taxpayer’s should know about penalty relief

After receiving a notice stating the IRS assessed a penalty, a taxpayer should check that the information in the notice is correct. Those who can resolve the issue may get relief from certain penalties, which include failing to:

  • File a tax return
  • Pay on time
  • Deposit certain taxes as required

Types of Penalty Relief:

  • Reasonable cause: This relief is based on all the facts and circumstances in a taxpayer’s situation.
  • Administrative Wavier
  • Statutory Exception: In certain situations. Legislation may provide an exception to a penalty.

Call our office @ 336-907-3384 and come in for a consultation.

We can assist you!

IRS offers penalty, filing relief to new transition tax on foreign earnings

Section 965 of the Internal Revenue Code, enacted in December 2017, imposes a transition tax on untaxed foreign earnings of foreign corporations owned by U.S. shareholders by deeming those earning to be repatriated. Foreign earnings held in the form of cash and cash equivalents are taxed at a 15.5 percent rate, and the remaining earnings are taxed at an 8 percent rate. The transition tax generally may be paid in installments over an eight-year period when a taxpayer files a timely election under section 965(h).

IRS New Strategic Plan; five- year plan to help taxpayers

Goal: To improve taxpayer service and tax administration.

Strategic plan developed with input from external partners as well as IRS employees, focuses on six goals that will help improve customer service:

  1. Empower and enable all taxpayers to meet their tax obligations.
  2. Protect the integrity of the tax system by encouraging compliance.
  3. Collaborate with external partners proactively to improve tax administration.
  4. Cultivate a well-equipped, diverse, flexible and engaged workforce.
  5. Advance data access, usability to inform decision-making and improve operational outcomes.
  6. Drive increased agility, efficiency, effectiveness and security.

Taxpayers should know the telltale signs of a scam!

Summertime tends to be a period when thieves increase their scam attempts. They try to get people to disclose personal information like Social Security numbers, account information and passwords.

To avoid being a victim, remember these telltale signs of a scam. The IRS will never:

  • Call to demand immediate payment using a specific method such as a prepaid debit card, gift card or wire transfer. The IRS will first mail a bill to taxpayer who owes taxes. Tax payments should only be made payable to the U.S. Treasury. Never make checks out to third parties!
  • Threaten to immediately bring in local police or other law-enforcement groups for non-payment.
  • Demand taxed be paid without opportunity to question or appeal the amount owed.
  • Ask for credit or debit card numbers over the phone.
  • Use email, text messages or social media to discuss tax issues, involving bills or refunds.

For anyone who doesn’t owe taxes and has no reason to think they do, they should:

  • Not give out any information, hang up immediately.
  • Contact Treasury Inspector General for Tax Administration to report.

 For anyone who owes tax or thinks they do, they can:

  • View tax account information online at IRS.gov to see the actual amount owed.
  • Call the number on the billing invoice.
  • Call the IRS at 800-829-1040.

 

 

Ways to Pay Taxes

Several payment options are available where taxpayers can pay immediately. Taxpayer should not ignore a bill from the IRS because as more time passes, interest and penalties accumulate.

Some ways to make payments:

  • Direct Pay. Can pay tax bills directly from a checking or savings account free. Taxpayers receive instant confirmation. With Direct Pay, you can schedule payment up to 30 days in advance.
  • Credit or Debit Cards. Taxpayers can pay their taxes by debit or credit cards online, by phone or with a mobile device. Convenience fees apply and vary depending on the card used.
  • Installment Agreement. Taxpayers unable to pay their tax debt immediately may be able to make monthly payments. Before applying, taxpayers must file all required tax returns.