William Byrnes' Tax, Wealth, and Risk Intelligence

The IRS has released a set of FAQs based upon the regulations governing the new Section 199A deduction for pass-through entities, such as S corporations. One potentially overlooked issue in the S corporation context is the impact of health insurance premium payments on QBI. The FAQ provides that health insurance premiums paid by the S corporation for a greater-than-2-percent shareholder reduce QBI at the entity level (by reducing the ordinary income used to calculate QBI). Similarly, when a self-employed individual takes a deduction for health insurance attributable to the trade or business, this will be a deduction in determining QBI and can reduce QBI at the entity and individual levels. For more information on the treatment of health insurance premiums in the S corporation context, visit Tax Facts Online. Read More

The proposed regulations governing the new life insurance reporting requirements created by the 2017 tax reform legislation (which do not become effective until finalized) would exclude from the new rules situations where one entity acquires a C corporation that owns life insurance contracts, so long as the life insurance contracts do not represent more than half of the corporation’s assets. Generally, the new rule created by tax reform would make cause certain life insurance contracts to lose their tax-preferred status if transferred in a reportable policy sale (and most business combinations would qualify as such). Under the proposed rules, however, the pre-tax reform exceptions to the transfer for value rule could apply when a C corporation is acquired. For more information on the future reporting requirements that will apply, visit Tax Facts Online. Read More

With the 2018 tax filing deadline behind us, many taxpayers who were unable to complete their returns may be wondering what steps to take to file those returns after the deadline has expired. Most taxpayers can easily request an extension through October 15 by using Form 4868 (available at irs.gov) to request the extension. The form will require that the client provide his or her estimated tax liability–remembering that the filing extension only extends the time for filing a return, so that the client’s 2018 tax payment was still due April 15. If the client was impacted by certain recent disasters, including the California wildfires, severe storms in Alabama, and storms and flooding in Nebraska or Iowa, have automatically been granted various extensions, so are not required to complete the paperwork necessary to obtain the extension. For more information on federal income tax filing requirements, visit Tax Facts Online. Read More