May 18, 2020

May DK Newsletter

Here are your Articles for May 15, 2020.

Proposed regs. issued on meal and entertainment expense deductions
In REG-100814-19, the IRS issued proposed rules clarifying that taxpayers may generally continue to deduct 50% of the food and beverage expenses associated with operating their trade or business, despite changes to the meal and entertainment expense deduction under Sec. 274 made by the tax law known as the Tax Cuts and Jobs Act (TCJA), P.L. 115-97. It noted that the proposed rules generally follow Notice 2018-76 with a few changes or clarifications in response to comments. It also said taxpayers may rely on the guidance in the notice until the regulations are finalized. According to the IRS, when it issued the notice, the TCJA amendments specifically deny deductions for expenses for entertainment, amusement, or recreation, but they do not address the deductibility of expenses for business meals. This omission created much confusion in the business community until the IRS issued the notice.

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How to Confirm the Identity of a Field Revenue Officer If They Come Knocking at Your Door
In November 2019, the IRS announced that, as part of a special compliance effort, its Revenue Officers (ROs) would begin making unannounced visits to taxpayers that have ongoing tax compliance issues. ROs are trained IRS civil enforcement employees who work to resolve compliance issues, such as missing returns or unpaid taxes. The Taxpayer Advocate Service has provided advice on identifying IRS Revenue Officers (ROs) who are making unannounced visits to taxpayers as part of a special compliance effort. Here is what you should expect from ROs during these visits.

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Taxpayers don’t have basis in their labor
The Tax Court rejected a Maryland attorney’s claim that he had “basis in his labor” and that the value or cost of his labor was its fair market value.1 The court quickly disposed of the taxpayer’s frivolous position by citing well established law that the income tax applies to income for personal services and that taxpayers have no basis in their labor for purposes of deciding their income tax liability for income from personal services. In the end, the taxpayer owed $34,144 of penalties and interest on $117,690 of tax deficiency over five tax years.

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Taxpayers should watch out for gift card scam
Taxpayers should always be on the lookout for scams. Thieves want to trick people in order to steal their personal information, scam them out of money, or talk them into engaging in questionable behavior with their taxes. Scam attempts can peak during tax season, but taxpayers need to remain vigilant all year.

Gift card scams are on the rise. In fact, there are many reports of taxpayers being asked to pay a fake tax bill through the purchase of gift cards.

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IRS confirms tax break for large gifts
The Internal Revenue Service and the Treasury Department issued final regulations Friday confirming that individuals who take advantage of the increased gift and estate tax exclusion amounts that are in effect from 2018 to 2025 under the Tax Cuts and Jobs Act won’t be adversely affected after 2025 when the exclusion amount is scheduled to drop to pre-2018 levels.

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IRS: Eligible employees can use tax-free dollars for medical expenses
With health care open season now under way at many workplaces, the Internal Revenue Service today reminded workers they may be eligible to use tax-free dollars to pay medical expenses not covered by other health plans.

Eligible employees of companies that offer a health flexible spending arrangement (FSA) need to act before their medical plan year begins to take advantage of an FSA during 2020. Self-employed individuals are not eligible.

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Can Your Business Survive and Even Thrive in These Trying Times?
Social distancing practices designed to slow the spread of novel coronavirus (COVID-19) have abruptly and dramatically suppressed global economic activity. As a result, many businesses have lowered their profit targets for 2020. But some businesses that seize opportunities may be able to outperform the competition and position themselves for future growth. The keys are to pivot swiftly, communicate often, collect timely data and tweak your pivot strategy as needed.

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Saving for Your Child’s Education With a Section 529 Plan
College costs continue to rise. That’s why if paying for a college education is in your future, it’s never too early to learn about Section 529 plans. These plans include programs for college savings and for prepaid tuition, and can be used to fund higher education for your kids, your grand-kids or even for yourself. Continue reading to learn how the current tax law adds benefits that make Section 529 plans even more attractive.

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What’s So Great about a Rollover?
Changing jobs can be a tumultuous experience. Even under the best of circumstances, making a career move requires a series of tough decisions. One question to answer: What should you do with the funds in your old employer-sponsored retirement plan? Some people choose to roll over these funds into an Individual Retirement Account (IRA). This article describes a number of options.

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Follow Detailed Recordkeeping Rules for Vehicle Expense Deductions
Deductions for vehicle expenses may be easy targets during IRS audits. That’s because many taxpayers misunderstand the rules and fail to maintain detailed mileage logs. Or they mistakenly assume their company qualifies for an exception from the IRS’s strict recordkeeping requirements. Here’s what you should know to preserve your deduction for vehicle expenses.

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