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TaxFacts Intelligence August 16, 2021

Posted by William Byrnes on August 16, 2021


The Supreme Court upheld in June, in a unanimous decision of all nine Justices, a District Court’s injunction against the NCAA. The injunction allows the NCAA to maintain rules limiting undergraduate athletic scholarships and other compensation related to athletic performance. BUT the injunction stops as unlawful NCAA rules limiting the education-related benefits schools may make available to student-athletes.

By the way subscribers, the Texas A&M graduate program for wealth and risk management, including tax risk management, is accepting applications for fall. Maximum enrollment for a course section is 30 so that each student receives meaningful feedback throughout the course from the full-time academic, professional part-time faculty, and each other. Learn more about it here: https://law.tamu.edu/distance-education

Prof. William H. Byrnes         Robert Bloink, J.D., LL.M.

Colleges and universities across the country have leveraged sports to bring in revenue, attract attention, boost enrollment, and raise money from alumni. That profitable enterprise relies on “amateur” student athletes who compete under horizontal restraints that restrict how the schools may compensate them for their play. The National Collegiate
Athletic Association (NCAA) issues and enforces these rules, which restrict compensation for student-athletes in various ways. These rules depress compensation for at least some student-athletes below what a competitive market would yield.

Against this backdrop, current and former student-athletes brought this antitrust lawsuit challenging the NCAA’s restrictions on compensation. Specifically, they alleged that the NCAA’s rules violate §1 of the Sherman Act, which prohibits “contract[s], combination[s], or conspirac[ies] in restraint of trade or commerce.”

The Supreme Court upheld, in a unanimous decision of all nine Justices, the District Court’s injunction against the NCAA. The injunction allows the NCAA to maintain rules limiting undergraduate athletic scholarships and other compensation related to athletic performance. BUT the injunction stops as unlawful NCAA rules limiting the education-related benefits schools may make available to student-athletes.

Regarding today’s Supreme Court decision (entire 45-page opinion is available here), first it was expected by industry analysts and court watchers after the Court’s oral arguments March 31, 2021 with a foretelling Q&A session. We are already preparing Tax Facts Intelligence and Q&A for the books/app for financial advisors to leverage the new athletics marketplace and revenue streams and best represent their clients. I know of financial advisory firms that as of Tuesday will be hanging up a ‘sports agent financial advisor shingle’ and trolling SEC high schools, especially Texas, recruiting for tomorrow’s top collegiate athletes to sign up the talent.

Why not? That is how the market already works outside the USA for soccer (what everyone else calls football) and to a lesser extent baseball (albeit not nearly as popular as soccer so we hear much less about baseball camps for Dominican rising star 12 year old players like we hear about for the 12-year-old next Brazilian Pele). 

Interaction with social media followers is the currency of this new era for young athletes and can lead to a couple of hundred thousand during college for the star players, and even millions for the SEC Heisman level types. But, not having the ultimate talent and thus top sports ranking in a field does not also mean that an interactive social media following of millions cannot be created. The Russian tennis star Anna Kournikova, case in point, though she was just a little too early for the modern social media movement. Johnny Manziel, another case in point: had this decision been in place already and had he contracted a great wealth management advisor (thus great personal agent) with social media and promotional background, his life would have been very financially comfortable before his drug abuse ruined him in the pro league (talent or not aside). He certainly could have afforded a stint at the Betty Ford clinic to sober up and cleanout.

Via the advice of a great wealth manager, a personality can be leveraged into millions of dollars before the athlete graduates university, or at least hundreds of thousands.

It is clear from the unanimous ruling and the judges questioning and opinions that this is not a restrictive ruling. NCAA proponents are trying to spin that some restriction remains allowable like direct payments to players. But all it takes is one school that has money that wants to break into the big league to beat ‘Bama and LSU. Kind to think of it, I know that school… and don’t think Bama and LSU are just going to let that happen. Let real market competition begin!

An interesting question that I think will lead to much future litigation: How this ruling plays out throughout all sports regarding Title IX (such as a school spending money on men’s football, basketball, baseball, must by federal and state law also spend an equal amount on the equivalent sports for women). I am for market opportunity and thus I think it is an exciting proposition that opportunities will open up in all sports for athletes and wealth manager advisors alike (to negotiate the optimum financial rewards for the athletes).

Also, if athletic programs, such as golf or hockey, are forced to ‘come up’ with additional dollars to attract the star players to remain competitive, will the programs themselves start to think like SEC football (the most profitable league and sport) to generate additional income to meet the demands of staying or obtaining high ranking?  After all, whether it be academics or sports, it is all about ranking. Deans and Provosts rise and fall based on academic rankings. Coaches based on league rankings and national championships. Sports rankings and academic rankings have connections via alumni fundraising as of course voter university name/brand awareness and recognition. Basketball in particular through March madness has supported the academic rankings of universities though academic and sports ranking are not directly connected in voting and evaluation scoring, the indirect connection is undeniable.

This Supreme Court decision is great news for wealth managers / financial advisors who subscribe to Tax Facts because we are well-positioned to enter the new market of clientele representation created for the high school athlete seeking to share in the value that the athlete creates for a university and for the athlete through social media leveraged revenues. Understanding that “value”, generating more of it, and ‘sharing’ in the value is the bread and butter of a holistic wealth manager’s representation of athletes and entertainers.

Texas A&M already has education in this regard for our wealth management students and JDs who focus on such emerging artist/athlete/entertainer representation. We even have a law clinic for this emerging artists run by JD students supervised by my colleague that joined me at Texas A&M from our former law school in SoCal.

Look in your Tax Facts Online app for our continuing analysis of this bill, the tax reform in the reconciliation bill, and other weekly intelligence.

Wealth & Risk Management Degree for Industry Professionals – learn about the graduate degree here: https://law.tamu.edu/distance-education

Texas A&M, an annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school has the #1 bar passage in Texas, and #1 for employment in Texas (and top 10 in U.S.)

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TaxFacts Intelligence August 12, 2021

Posted by William Byrnes on August 12, 2021


The Biden administration, the OECD, and the European Union are moving full steam ahead with proposals that will modify the U.S. and international tax systems, significantly impacting clients’ aftertax investment returns and business income. We dig into the administration’s domestic and global tax proposals, including that a U.S. corporation may be required to pay a minimum tax amount to each foreign country where it has clients or investments. Are your clients preparing to adjust their portfolio of investments to maintain their after-tax annual investment returns? 

By the way, Texas A&M graduate program for wealth and risk management, including tax risk management, is accepting applications for fall. Maximum enrollment for a course section is 30 so that each student receives meaningful feedback throughout the course from the full-time academic, professional part-time faculty, and each other. Learn more about it here: https://law.tamu.edu/distance-education

Prof. William H. Byrnes         Robert Bloink, J.D., LL.M.

Biden’s Tax Proposals: Two Surprises for Clients Impacting Last Year and 2021 

President Biden’s tax proposals contain two major tax surprises. First, Biden’s tax plans would make any capital gains tax hike retroactive to April 28, 2020. That means clients who have engaged in tax planning strategies to avoid higher rates might wind up subject to the higher rates regardless if this provision makes its way into the final proposal. Second, not only would the stepped-up basis rules be repealed, but taxpayers who inherit property would be required to recognize gain at the time of death—even if the individual doesn’t immediately sell the inherited property. In other words, the property could be immediately subject to both the estate tax and income or capital gains tax. Life insurance proceeds that will remain tax-free under the current proposals will be more valuable than ever in order to cover the tax payments. Click here to get a more in-depth expert analysis of the latest tax proposals. Read More Look in your Tax Facts Online app for our continuing analysis of the impact on your clients from proposed and enacted tax law changes of 2021, especially in the forthcoming reconciliation bill.

Biden’s Tax Proposals: The Biden Administration released its 2021 ‘Green Book’ of legislative tax proposals for Congress to consider.[1] The proposals as published include the following most salient items for clients:

  • Raise the corporate income tax rate from 21 to 28 percent effective for 2022.
  • Impose a 15 percent minimum tax on book earnings of large corporations.
  • Determining global minimum tax inclusion and residual U.S. tax liability on a jurisdiction-by-jurisdiction basis would be a stronger deterrent to profit.
  • Disallow deductions attributable to exempt income, and limit inversions.
  • Repeal the deduction for foreign-derived intangible income (FDII).
  • Replace the base erosion anti-abuse tax (BEAT) with the stopping harmful inversions and ending low-tax developments (SHIELD) rule.
  • Limit foreign tax credits from sales of hybrid entities.
  • Restrict deductions of excessive interest of members of financial reporting groups for disproportionate borrowing in the United States.
  • Reform taxation of foreign fossil fuel income.
  • Eliminate fossil fuel tax preferences.
  • Extend and enhance renewable and alternative energy incentives.
  • Increase the top marginal income tax rate for high earners.
  • Reform the taxation of capital income.
  • Tax carried (profits) interests as ordinary income.
  • Repeal deferral of gain from like-kind exchanges.
  • Make permanent excess business loss limitation of noncorporate taxpayers.
  • Address taxpayer noncompliance with listed transactions (tax shelters).

Regarding the Biden administration’s proposed changes to the minimum tax applicable to U.S. shareholders of controlled foreign corproations (known as “GILTI”), the following three aspects are most impactful for clients:

  • The U.S. shareholder’s entire net CFC tested income will be subject to U.S. tax. The qualified business asset investment (QBAI) exemption that allows 10 percent of the adjusted basis of QBAI to be exempt from GILTI would be repealed.
  • The IRC section 250 deduction of 50 percent of the global minimum tax inclusion would be reduced to 25 percent, thereby generally increasing the U.S. effective tax rate under the global minimum tax to 21 percent under the proposed U.S. corporate income tax rate of 28 percent.
  • The “global averaging” method for calculating a U.S. shareholder’s global minimum tax would be replaced with a “jurisdiction-by-jurisdiction” calculation. Under the new standard, a U.S. shareholder’s global minimum tax inclusion and, by extension, residual U.S. tax on such inclusion, would be determined separately for each foreign jurisdiction in which its CFCs have operations. As a result, a separate foreign tax credit limitation would be required for each foreign jurisdiction. A similar jurisdiction-by-jurisdiction approach would also apply with respect to a U.S. taxpayer’s foreign branch income. These changes mean that foreign taxes paid to higher-taxed jurisdictions will no longer reduce the residual U.S. tax paid on income earned in lower-taxed foreign jurisdictions.

The Biden proposal would repeal the Base Erosion and Anti-Abuse Tax (BEAT), replacing it with a new rule disallowing deductions to domestic corporations or branches by reference to low-taxed income of entities that are members of the same financial reporting group (including a member that is the common foreign parent, in the case of a foreign-parented controlled group). Specifically, under this new Stopping Harmful Inversions and Ending Low-Tax Developments (SHIELD) tax regime, a deduction (whether related or unrelated party deductions) would be disallowed to a domestic corporation or branch, in whole or in part, by reference to all gross payments that are made (or deemed made) to low-taxed members, which is any financial reporting group member whose income is subject to (or deemed subject to) an effective tax rate that is below a designated minimum tax rate. The proposal to repeal BEAT and replace it with SHIELD would be effective from 2023.


[1] General Explanations of the Administration’s Fiscal Year 2022 Revenue Proposals, Dept of Treas (May 2021). Available at https://home.treasury.gov/policy-issues/tax-policy/revenue-proposal (last visited August 1, 2021).

U.S. Agrees to Global Minimum Corporate Tax and a Share the U.S. (Tax) Wealth with 180 Other Countries

On June 5, 2021, the G7 Finance Ministers & Central Bank Governors released a communiqué that the Biden Administration fully supports and is seeking to expand (see U.S. Whitehouse release) with concrete actions for a deeper multilateral economic cooperation that includes the OECD’s Pillar One and Pillar Two proposals. The communiqué presented the following actions:

  • The G7 agreed that beneficial ownership registries are an effective tool to tackle illicit finance. In this regard, each of the G7 countries including the U.S. (see below) is implementing and strengthening registries of company beneficial ownership information to provide timely, direct and efficient access for law enforcement and competent authorities to adequate, accurate and up-to-date information, including through central registries. The G7 further noted that beneficial ownership information should be publicly available where possible.
  • The G7 committed to provide additional expertise and funding to support the FATF’s regional bodies (“FSRB’s”) peer assessment programs by at least US$17 million and 46 assessors over 2021-24 because global implementation of the FATF Standards for combatting money laundering, terrorist financing and proliferation financing remains uneven.
  • The G7 reaffirmed its collective developed country goal to mobilize US$100 billion annually for developing countries from public and private sources, in the context of meaningful mitigation actions and transparency on implementation of developing countries’ climate change adaptation and mitigation efforts.
  • committed to that market countries will be awarded taxing rights on at least 20 percent of profit exceeding a 10 percent margin for large multinational enterprises. In exchange, the G7 stated that it would seek removal of all Digital Services Taxes and other relevant similar measures on all companies.  
  • Regarding Pillar Two, the G7, including the U.S. specifically, committed to a global minimum tax of at least 15 percent on a country-by-country basis. The G7 stated that an agreement would be reached at the July meeting of G20 Finance Ministers and Central Bank Governors.

OECD Countries’ Average Tax Due on Employment Income is 34.6%

In 2020, the OECD average of personal income tax and total employee and employer social security contributions (the ‘tax wedge’) on employment incomes for the single worker earning the average wage was 34.6 percent, a decrease of 0.39 percentage points from 2019 reflecting the impact of the COVID-19 crisis on both wages and labor tax systems.[1] The OECD average tax wedge for the one-earner couple with two children also substantially decreased, declining by 1.15 percentage points to 24.4 percent in 2020.

The OECD average tax wedge decreased for the single worker in 2020, due to falls in 29 out of the 37 OECD countries. The decrease was derived for the most part from lower income taxes, linked in part to lower nominal average wages in 16 countries, and in part to policy changes, including tax and benefit measures introduced in response to the COVID-19 pandemic. In Austria, a marginal tax rate within the income tax schedule was reduced; in Lithuania, the tax-exempt amount was increased; in Canada, the decline in the tax wedge resulted from a one-time special payment through the Goods and Services Tax credit that was delivered on April 9, 2020; in the United States, the decrease in the tax wedge was mainly due to the Economic Impact Payment (EIP) that was part of the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act). Seven OECD countries experienced an increase in the tax wedge for the single worker earning the average wage in 2020. The increases in the tax wedge were even smaller than the decreases observed and did not exceed half a percentage point in any country. In all but one country (Korea), they occurred primarily due to wage growth.

European Commission proposes to extend the EU state aid regime to third party countries (i.e. the U.S.) The European Commission has proposed expanding its state aid rules to foreign countries’ actions to address distortions of trade & investment caused by foreign subsidies.[2]  The EU Commission investigated in 2020 whether those subsidies granted by non-EU governments to companies active in the EU may have a distortive effect on the Single Market.[3] Through the subsidy provisions laid down in Free Trade Agreements, the EU is seeking to achieve a level playing field between all companies that operate within the Single Market. Subsidy provisions vary from FTA to FTA and they are adjusted to the trade relationship with the third country in question. Whereas some bilateral agreements seek approximation with the EU State aid acquis with enhanced enforcement mechanisms (e.g. independent state aid authority, recovery, unilateral measures, etc.), other bilateral agreements provide for the prohibition of the most distortive type of subsidies as well as more limited enforcement mechanisms, like transparency, consultations, and a dispute settlement mechanism.

The European Commission proposed May 5, 2021, a new instrument to address the potentially distortive effects of foreign subsidies in its internal market. The new instrument aims at closing the regulatory gap in the internal market whereby subsidies granted by non-EU governments currently go largely unchecked, while subsidies granted by the Member States are subject to state aid scrutiny. EU rules on competition, public procurement, and trade defense instruments play an important role in ensuring fair conditions for companies operating in the EU market. But none of these tools applies to foreign subsidies which provide their recipients with an unfair advantage when acquiring EU companies, participating in public procurements in the EU, or engaging in other commercial activities in the EU. Such foreign subsidies can take different forms, such as zero-interest loans and other below-cost financings, unlimited State guarantees, zero-tax agreements, or direct financial grants.

Under the proposed Regulation, the Commission will have the power to investigate financial contributions granted by public authorities of a non-EU country that benefit companies engaging in an economic activity in the EU and redress their distortive effects, as relevant.

In this context, the proposed Regulation introduces three tools, two notification-based and a general market investigation tool.

  1. A notification-based tool to investigate concentrations involving a financial contribution by a non-EU government, where the EU turnover of the company to be acquired (or of at least one of the merging parties) is €500 million or more and the foreign financial contribution is at least €50 million.
  2. A notification-based tool to investigate bids in public procurementsinvolving a financial contribution by a non-EU government where the estimated value of the procurement is €250 million or more.
  3. A tool to investigate all other market situations and smaller concentrations and public procurement procedures which the Commission can start on its own initiative (ex-officio) and may request ad-hoc notifications.

With respect to the two notification-based tools, the acquirer or bidder will have to notify ex-ante any financial contribution received from a non-EU government in relation to concentrations or public procurements meeting the thresholds. Pending the Commission’s review, the concentration in question cannot be completed and the investigated bidder cannot be awarded the contract. Binding deadlines are established for the Commission’s decision.

Under the proposed Regulation, where a company does not comply with the obligation to notify a subsidized concentration or a financial contribution in procurements meeting the thresholds, the Commission may impose fines and review the transaction as if it had been notified. The general market investigation tool, on the other hand, will enable the Commission to investigate other types of market situations, such as greenfield investments or concentrations and procurements below the thresholds, when it suspects that a foreign subsidy may be involved. In these instances, the Commission will be able to start investigations on its own initiative (ex-officio) and may request ad-hoc notifications. Based on the feedback received on the White Paper, the enforcement of the Regulation will lie exclusively with the Commission to ensure its uniform application across the EU.[4]

If the Commission establishes that a foreign subsidy exists and that it is distortive, it will where warranted consider the possible positive effects of the foreign subsidy and balance these effects with the negative effects brought about by the distortion. When the negative effects outweigh the positive effects, the Commission will have the power to impose redressive measures or accept commitments from the companies concerned that remedy the distortion. With respect to the redressive measures and commitments, the proposed Regulation includes a range of structural or behavioral remedies, such as the divestment of certain assets or the prohibition of certain market behavior. In case of notified transactions, the Commission will also have the power to prohibit the subsidized acquisition or the award of the public procurement contract to the subsidized bidder.

The European Parliament and the Member States will now discuss the Commission’s proposal in the context of the ordinary legislative procedure with a view of adopting a final text of the Regulation.

Estimating Offshore Wealth and International Tax Evasion.[5] A European Commission 2019 report on global offshore wealth estimated USD 7.8 trillion in 2016 (EUR 7.5 trillion) or 10.4 percent of global GDP, a considerable amount. The EU share is valued at USD 1.6 trillion (EUR 1.5 trillion), or 9.7 percent of GDP. The corresponding EU estimated revenue lost to international tax evasion is EUR 46 billion in 2016 (0.32 percent of GDP). Another important finding is that the increase in global offshore wealth is primarily driven by non-OECD countries, with an estimated contribution in dollar terms growing from US$ 1.1 trillion in 2001 to US$ 4.6 trillion in 2016. Among non-OECD economies, the surge of China is especially strong, with a 21-fold increase of offshore wealth held by Chinese residents over the period (from US$ 90 billion in 2001 to US$ 1.9 trillion in 2016).[6]

How Much is U.S. Tax Evasion? Closing the Tax Gap: Lost Revenue from Non-Compliance and the Role of Offshore Tax Evasion.[7] On May 11, 2021, the Treasury Inspector General For Tax Administration (TIGTA) stated that individual

taxpayers are responsible for $245 billion of the underreporting tax gap, the largest share. TIGTA identified 314,586 business taxpayers with $335.5 billion in Form 1099-K income that appeared to have a filing obligation but were not identified as nonfilers by the IRS. The problem is that the IRS cannot use third-party information returns, such as Form 1099-K data, to identify business nonfilers and create cases if the taxpayers’ accounts are coded as not having an open filing requirement, or no tax account exists because the business has never filed a tax return. TIGTA recommended that the IRS fund and implement a programming revision to its process that identifies these types of business taxpayers.

Tax Gap studies have found that self-employed individuals underreported their net income by 64 percent (based on the average for TYs 2008 through 2010), which is up from 57 percent in the TY 2001 estimate. The law did not require third-party settlement organizations to issue Form 1099-K, Payment Card, and Third Party Network Transactions, unless those transacting business earn at least $20,000 and engage in at least 200 transactions annually. TIGTA judgmentally selected eight P2P payment applications and found that these companies appear not to meet the current definition of a third-party settlement organization, and therefore are not required to file Form 1099-K. However, three P2P companies filed 950,965 Forms 1099-K involving $198.6 billion of payments in TY 2017, which included amounts below the reporting thresholds. The IRS did not always take compliance actions on nonfilers of tax returns and underreporters related to P2P payments even when information reporting was available. In total, 169,711 taxpayers potentially did not report up to $29 billion of payments received per Form 1099-K documents issued to them by three P2P payment application companies. Section 9674 of the American Rescue Plan Act changed the exception for de minimis payments by third-party settlement organizations, reducing the exception threshold to $600 annually so that these organizations are subject to the same reporting requirements as other businesses.

TIGTA reported in 2018 that after eight years and spending at least $380 million on IRS systems and efforts to establish international agreements across the globe, the IRS had taken virtually no compliance actions to meaningfully enforce the Foreign Account Tax Compliance Act (FATCA). Withholding agents are required to file Forms 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding, to report on an individual taxpayer basis the income and withholding for each foreign person. For Tax Year 2017, the IRS received 6.3 million Forms 1042-S from 49,618 withholding agents. TIGTA reported that IRS processes did not identify 1,919 withholding agents with reporting discrepancies totaling more than $182.7 million. Its review identified 366 withholding agents that claimed $506 million more in credits for tax withheld than was reported on Forms 1042-S.

The Foreign Investment in Real Property Tax Act of 198036 (FIRPTA) imposes an income tax on foreign persons selling U.S. real property interests. Buyers are required to withhold a percentage of the anticipated taxes due on the amount realized from the sale. A foreign seller of U.S. property can claim a credit for the tax withheld by the buyer. If the seller’s tax liability is less than the amount of tax withheld, the seller gets a refund of the difference. TIGTA reported that the IRS’s reconciliation processes do not effectively identify and address FIRPTA reporting and payment noncompliance.

TIGTA identified 2,988 buyers with discrepancies of more than $688 million between the withholding reported on Forms 8288-A, Statement of Withholding on Dispositions by Foreign Persons of U.S. Real Property Interests, filed during Processing Year 2017, and the withholding assessed to the buyer’s tax account. Extensive data inaccuracies in the FIRPTA database, incorrect and unclear guidelines and employee errors contributed to these discrepancies. The IRS also has not established processes to use Form 1099-S, Proceeds from Real Estate Transactions, to identify buyers that do not report and pay FIRPTA withholdings. TIGTA’s analysis of Forms 1099-S for TY 2017 identified approximately $22 million in FIRPTA withholding that was not reported and paid to the IRS. Finally, employee errors resulted in 1,835 foreign individuals potentially receiving more than $60 million in FIRPTA withholding credits than they were entitled.

Expatriates are required to file Form 8854, Initial and Annual Expatriation Statement, to certify that they have followed all Federal tax laws during the five years preceding the year of expatriation.[8] However, TIGTA found that the IRS database of expatriates was incomplete for 16,798 expatriates who did not file Form 8854. In addition, TIGTA found instances of potential non-filing, underreporting of income, and/or payment compliance issues by expatriates. From a sample of 26 expatriates who did not file a Form 8854, five had potential unreported income over $6 million. From a sample of 61 expatriates who filed a Form 8854, 15 had potential unreported income over $17 million. Lastly, TIGTA also found that expatriates with high net worth appear to not be paying their exit tax.

All individuals who expatriate are published in the Federal Register quarterly, a requirement established by IRC section 6039G.[9]

American Families Plan Tax Compliance Agenda. The Biden administration proposed an increase in the IRS budget by $80 billion over the next decade, approximately 10 percent annually. The IRS would have these additional resources to invest in large fixed costs like modernizing information technology, improving data analytic approaches, and hiring and training agents dedicated to complex enforcement activities.[10] The administration reported that audit coverage for large corporations was cut in half since 2010 for companies with $20 billion or more in assets, from 98 percent in FY 2010 to around 50 percent currently. During the past 10-year period, the administration found that global high wealth examinations have taken roughly two years on average to complete and have averaged around 284 hours per return. Partnerships audits averages around 333 hours per return.

National Bureau Of Economic Research Working Paper 2021.[11] The authors of an NBER report using IRS audit data estimated that 36 percent of federal income taxes unpaid are owed by the top percent of incomes and that collecting the unpaid federal income tax from this one percent would increase federal revenues by about $175 billion annually. The authors estimate that 21 percent of the income of these earners is unreported of which 6 percentage points correspond to undetected sophisticated evasion. High-income people are then more likely to adopt positions in the “gray area” between legal avoidance and evasion, the team concluded. Under-reporting of Schedule C income comprises 50 percent of all evasion detected, the authors found.[12]

National Taxpayer Advocate Fiscal Year 2022 Report. The National Taxpayer Advocate in her Fiscal Year 2022 report to Congress[13] recognized the importance of international information return (IIR) penalties in fostering voluntary tax compliance. However, the IRS’ systemic assessment of these penalties often produces excessively large penalties disproportionate to any underlying income tax liability. The IRS assesses IIR penalties on returns it considers to be filed late, but more than 55 percent of systemically assessed IRC §§ 6038 and 6038A penalties are abated because the returns were timely because reasonable cause relief was granted, or in situations where the failure-to-file penalty on the related Form 1120 or Form 1065 filing is abated under the First Time Abatement (FTA) provisions or the return has no tax due. Taxpayers and the IRS expend significant time, energy, and money addressing penalties that the IRS should not have assessed. Thus, these systemic assessments are ineffective in promoting taxpayer compliance and do not promote equity and fairness.

Because the penalties are immediately assessed, taxpayers’ recourse is to rely on IRS discretion to grant a reasonable cause abatement of the penalties, request a Collection Due Process proceeding, or pay the assessed penalty and file suit in district court or the Court of Federal Claims seeking a refund. One means of proactively addressing this disadvantage to taxpayers is to send preassessment correspondence, giving potentially impacted taxpayers the opportunity to explain why the IRS should not assess the penalty. This approach would educate taxpayers and minimize the inefficient and burdensome practice of first assessing and then abating these penalties. Further, it would contribute to tax equity by placing the IRS in a better position to distinguish between good-faith mistakes and intentional tax noncompliance.

The Taxpayer Advocate recommended that the IRS send taxpayers a proposed penalty notice to allow them to provide mitigating evidence such as reasonable cause; if timely filed, proof of timely filing; or application of the FTA administrative relief. The Taxpayer Advocate also recommended that the IRS provide taxpayers 60 days to respond to proposed penalty notices and give IRS employees time to review and consider reasonable cause relief, FTA relief, or the issue of timeliness. Finally, the Taxpayer Advocate continues to call for the IRS to reinstitute a penalty-free voluntary disclosure program, similar to the former FAQ 18 of the 2012 Offshore Voluntary Disclosure Program, in which taxpayers will be encouraged to come forward, file delinquent information returns, and be compliant for future years. Specifically address those taxpayers who do not have other tax liabilities besides penalties associated with the missing IIRs, are not under examination, and have not been contacted for the delinquent IIRs.

Nina Olson, the former Taxpayer Advocate, stated that of the current $441 billion gross tax gap estimate by IRS, some portion of the underreporting gap is attributable to errors made as a result of tax law complexity (unknowing noncompliance) and others are attributable to procedural complexity and barriers – for example, where taxpayers are eligible for a deduction or credit but cannot navigate the bureaucracy on their own and cannot afford representation, so they just give up (functional or characteristic noncompliance).[14] She stated that studies estimating the amount of unreported income by the highest-income taxpayers, and proposals to reduce the underreporting component of the tax gap by increased information reporting, along with the Commissioner’s guestimate that the annual tax gap could be as much as $1 trillion, have led policymakers, commentators, and the media to equate the tax gap with tax evasion. She cautioned that the ubiquitous usage of this phrase actually dilutes its meaning and impact because it allows very different types of noncompliance attributable to very different causes to be lumped together. She found that “framing noncompliance as tax evasion not only undermines compliance among the currently compliant, who will begin to feel naïve for complying, but it creates an environment in which tax agency personnel can feel justified in undermining if not outright ignoring taxpayer rights and protections.”

Nina Olson pointed out the IRS’ heavy emphasis on data-matching and rule-based systems, instead of pattern/network recognition algorithms that include feedback loops.[15] The IRS underutilizes financial account data it receives pursuant to FATCA because it cannot match much of it to existing returns. She also uncovered that many IRS systems have high false-positive and abatement rates. The National Taxpayer Advocate has reported that during the 2020 filing season, the IRS “refund fraud filters” selected 3.2 million returns of which approximately 66 percent were false positives. She concluded that the IRS requires a culture shift about how it approaches data and that the IRS must proactively use data to assist taxpayers, avoiding labeling taxpayer returns as “potentially fraudulent” before the IRS has conclusive evidence of fraud because most taxpayer error is not fraud. Regarding the Biden administration’s proposed changes to GILTI, the following three aspects are most impactful: The U.S. shareholder’s entire net CFC tested income will be subject to U.S. tax. The qualified business asset investment (QBAI) exemption that allows 10 percent of the adjusted basis of QBAI to be exempt from GILTI would be repealed.

The IRC section 250 deduction of 50 percent of the global minimum tax inclusion would be reduced to 25 percent, thereby generally increasing the U.S. effective tax rate under the global minimum tax to 21 percent under the proposed U.S. corporate income tax rate of 28 percent. The “global averaging” method for calculating a U.S. shareholder’s global minimum tax would be replaced with a “jurisdiction-by-jurisdiction” calculation. Under the new standard, a U.S. shareholder’s global minimum tax inclusion and, by extension, residual U.S. tax on such inclusion, would be determined separately for each foreign jurisdiction in which its CFCs have operations. As a result, a separate foreign tax credit limitation would be required for each foreign jurisdiction. A similar jurisdiction-by-jurisdiction approach would also apply with respect to a U.S. taxpayer’s foreign branch income. These changes mean that foreign taxes paid to higher-taxed jurisdictions will no longer reduce the residual U.S. tax paid on income earned in lower-taxed foreign jurisdictions.

The Biden proposal would repeal the Base Erosion and Anti-Abuse Tax (BEAT), replacing it with a new rule disallowing deductions to domestic corporations or branches by reference to the low-taxed income of entities that are members of the same financial reporting group (including a member that is the common foreign parent, in the case of a foreign-parented controlled group). Specifically, under the Stopping Harmful Inversions and Ending Low-Tax Developments (SHIELD) rule, a deduction (whether related or unrelated party deductions) would be disallowed to a domestic corporation or branch, in whole or in part, by reference to all gross payments that are made (or deemed made) to low-taxed members, which is any financial reporting group member whose income is subject to (or deemed subject to) an effective tax rate that is below a designated minimum tax rate. The proposal to repeal BEAT and replace with SHIELD would be effective from 2023.

Draft Schedules K-2 and K-3 released to enhance reporting of international tax matters for pass-through entities. The IRS released April 30, 2021, updated early drafts of new Schedules K-2 and K-3 for Forms 1065, 1120-S, and 8865 for tax year 2021 (filing season 2022).[17] The schedules are designed to provide greater clarity for partners and shareholders on how to compute their U.S. income tax liability with respect to items of international tax relevance, including claiming deductions and credits. The drafts of the schedules are intended to give a preview of the changes before final versions are released. The release of an early draft of the instructions for the schedules is planned for later in 2021. The redesigned forms and instructions will also give useful guidance to partnerships, S corporations and U.S persons who are required to file Form 8865 with respect to controlled foreign partnerships on how to provide international tax information. The updated forms will apply to any persons required to file Form 1065, 1120-S or 8865, but only if the entity for which the form is being filed has items of international tax relevance (generally foreign activities or foreign partners). The changes do not affect partnerships and S corporations with no items of international tax relevance. To promote compliance with adoption of Schedules K-2 and K-3 by affected pass-through entities and their partners and shareholders, the IRS intends to provide certain penalty relief for the 2021 tax year.


[1] OECD (2021), Taxing Wages 2021, OECD Publishing, Paris, available at https://doi.org/10.1787/83a87978-en (last visited May 30, 2021).

[2] Proposal for a Regulation of the European Parliament and of the Council on foreign subsidies distorting the internal market, SWD (2021) 99 final – SWD (2021) 100 final – SEC (2021) 182 final (May 5, 2021).

[3] Inception Impact Assessment of Commission proposal(s) for Regulation(s) of the European Parliament and the Council to address distortions caused by foreign subsidies in the internal market generally and in the specific cases of acquisitions and public procurement. Ref. Ares (2020) 5160372 (Oct 1, 2020).

[4] Commission Staff Working Document Impact Assessment, Accompanying the Proposal for a Regulation of the European Parliament and of the Council on foreign subsidies distorting the internal market, COM (2021) 223 final – SEC (2021) 182 final – SWD (2021) 100 final (May 5, 2021).

[5] Estimating International Tax Evasion by Individuals – Final Report 2019, Taxation Papers, Working Paper No 76 – 2019, European Commission Directorate-General for Taxation and Customs Union (Sept 2019) at 9.

[6] Estimating International Tax Evasion by Individuals – Final Report 2019, Taxation Papers, Working Paper No 76 – 2019, European Commission Directorate-General for Taxation and Customs Union (Sept 2019) at 11.

[7] “Closing the Tax Gap: Lost Revenue from Non-Compliance and the Role of Offshore Tax Evasion”, Testimony Of The Honorable J. Russell George, Treasury Inspector General For Tax Administration, Committee On Finance Subcommittee On Taxation And IRS Oversight, United States Senate (May 11, 2021).

[8] Available at https://www.irs.gov/forms-pubs/about-form-8854 (last visited June 1, 2021).

[9] Quarterly Publication of Individuals, Who Have Chosen To Expatriate, 86 FR 22781 (April 29, 2021). Available quarterly at https://www.federalregister.gov/documents/2021/04/29/2021-08977/quarterly-publication-of-individuals-who-have-chosen-to-expatriate-as-required-by-section-6039g (last visited June 1, 2021).

[10] The American Families Plan Tax Compliance Agenda, Dept of Treas (May 2021).

[11] Tax Evasion at the Top of the Income Distribution: Theory and Evidence, John Guyton, Patrick Langetieg, Daniel Reck, Max Risch, and Gabriel Zucman, NBER Working Paper No. 28542, March 2021 at 3.

[12] Tax Evasion at the Top of the Income Distribution: Theory and Evidence, John Guyton, Patrick Langetieg, Daniel Reck, Max Risch, and Gabriel Zucman, NBER Working Paper No. 28542, March 2021 at 8.

[13] Objectives Report To Congress, National Taxpayer Advocate, Fiscal Year 2022 at p 45.

[14] Statement by Nina E. Olson, Executive Director, Center for Taxpayer Rights, Hearing on Closing the Tax Gap: Lost Revenue from Noncompliance and the Role of Offshore Tax Evasion, Subcommittee on Taxation and IRS Oversight Committee on Finance United States Senate (May 11, 2021) at 9.

[15] Statement by Nina E. Olson, Executive Director, Center for Taxpayer Rights, Hearing on Closing the Tax Gap: Lost Revenue from Noncompliance and the Role of Offshore Tax Evasion, Subcommittee on Taxation and IRS Oversight Committee on Finance United States Senate (May 11, 2021) at 10.

[16] General Explanations of the Administration’s Fiscal Year 2022 Revenue Proposals, Dept of Treas (May 2021). Available at https://home.treasury.gov/policy-issues/tax-policy/revenue-proposal (last visited June 1, 2021).

[17] The IRS published draft tax forms at https://apps.irs.gov/app/picklist/list/draftTaxForms.html (last visited June 1, 2021).


Wealth & Risk Management Degree for Industry Professionals – learn about the graduate degree here: https://law.tamu.edu/distance-education

Texas A&M, an annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school has the #1 bar passage in Texas, and #1 for employment in Texas (and top 10 in U.S.)

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TaxFacts Intelligence August 9, 2021

Posted by William Byrnes on August 9, 2021


Did Your Clients Properly Report Their Pre-Tax Reform Cryptocurrency Trading Gains? Seven years after the IRS declared cryptocurrency would be taxed as personal property under capital gains rules, it has now announced that pre-tax reform trades won’t qualify for like-kind exchange treatment under Section 1031, creating a potential tax headache for taxpayers with substantial pre-reform crypto gains. Meanwhile, challenges to the IRS’s ability to impose substantial FBAR penalties for failure to report foreign accounts continue to flare up in federal courts despite a clear consensus in both Texas and the 9th Circuit. Read on to make sure you’re up to speed.

By the way subscribers, Texas A&M graduate program for wealth and risk management, including tax risk management, is accepting applications for fall. Maximum enrollment for a course section is 30 so that each student receives meaningful feedback throughout the course from the full-time academic, professional part-time faculty, and each other. Learn more about it here: https://law.tamu.edu/distance-education

Prof. William H. Byrnes         Robert Bloink, J.D., LL.M.

New IRS Guidance Nixes Tax-Free Exchange Treatment for Cryptocurrency Swaps.  New IRS guidance has confirmed that pre-2018 exchanges of Bitcoin, Ether and Litecoin do not qualify for Section 1031 exchange treatment.  Prior to 2018, taxpayers were permitted to defer capital gains taxes under Section 1031 for certain exchanges of personal property (1031 is now limited only to exchanges of real property).  The IRS’s rationale is that these were not exchanges of like-kind property and so were taxable even prior to tax reform.  The IRS found that Bitcoin and Ether each had special roles in cryptocurrency trading because if taxpayers wanted to trade in other types of virtual currency, they had to first exchange the other currency into or from Bitcoin or Ether.  Therefore, exchanges between Litecoin and Bitcoin/Ether did not qualify as “like kind”.  Further, the IRS identified differences in design, intended use and actual use of Bitcoin and Ether.  While this guidance currently only extends to exchanges involving Bitcoin, Ether and Litecoin, it is possible that the IRS could extend the rationale to other types of cryptocurrency.  Taxpayers who trade in cryptocurrency under current tax rules should remember that these trades are taxable events. For more information, visit Tax Facts Online. Read More

Related Questions:

7723. How does a taxpayer identify with bitcoin or other virtual currency are involved in a sale, exchange or other disposal of the virtual currency?

7725. What considerations apply when an employer pays employees or independent contractors using bitcoin or other virtual currency?

Related Questions:

559. What are the rules that allow 401(k) plan sponsors to include deferred annuities in target date funds (TDFs)?

561. Can a taxpayer combine a deferred income annuity (“longevity annuity”) with a traditional deferred annuity product?

New Challenge Posed to Federal Courts’ $10,000 Per-Year Limit on FBAR Penalties.  Several recent federal court decisions have confirmed that the total FBAR penalties that can be imposed on an individual should be limited to $10,000 per year, rather than $10,000 per financial account.  Now, a federal court in Georgia is once again hearing a similar case.  In 2018, the IRS assessed $120,000 in penalties for a three-year period for each of the foreign banks with which the taxpayer had a relationship that she failed to report via FBAR filing.  Federal courts in both Texas and California have confirmed that the IRS must limit penalties for a non-willful failure to file FBAR reports based on the year, not the number of the taxpayer’s foreign accounts.  In the current case, the taxpayer had also participated in an amnesty program where she paid back taxes on the accounts she held with banks in France, Lebanon and Monaco.  For more information on the FBAR filing requirements and penalties for noncompliance, visit Tax Facts Online. Read More

Related Questions:

980. What is the effect of a disposition of Canadian real property in respect of a U.S. citizen that is a Canadian resident for tax purposes?

981. What is the effect of a disposition of Canadian real property in respect of a U.S. individual that is not a Canadian resident for tax purposes?

IRS Extends Relief for Employee Donations of Unused Sick, Vacation & PTO.  The IRS has extended the relief provided in Notice 2020-46 to allow employees to continue to forgo, or “donate”, sick, vacation and personal leave because of the COVID-19 pandemic without adverse tax consequences through the end of the 2021 tax year.  After December 31, 2020 and before January 1, 2022, employers may make cash payments to Section 170(c) charitable organizations that provide relief to victims of the COVID-19 pandemic in exchange for sick, vacation or personal leave which their employees gave up.  Those amounts will not be treated as compensation and the employees will not be treated as receiving the value of the leave as income.  While taxable income will not be increased, employees cannot claim a charitable deduction for the leave donated to their employer. Employers, however, may deduct these cash payments as Section 162 business expenses or Section 170 charitable contributions if the employer otherwise meets the respective requirements of either section.  For more information on the deduction for charitable contributions, visit Tax Facts Online. Read More

Related Questions:

8540. What are the income percentage ceilings that limit the income tax deduction for charitable contributions?

8541. How does the income percentage ceilings calculated if charitable contributions of money are made to both public charities and private foundations in the same tax year?

Look in your Tax Facts Online app for our continuing analysis of this bill, the tax reform in the reconciliation bill, and other weekly intelligence.

Wealth & Risk Management Degree for Industry Professionals – learn about the graduate degree here: https://law.tamu.edu/distance-education

Texas A&M, an annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school has the #1 bar passage in Texas, and #1 for employment in Texas (and top 10 in U.S.)

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TaxFacts Intelligence August 5, 2021

Posted by William Byrnes on August 5, 2021


It’s been another busy week for the IRS and DOL.  Both agencies have responded to taxpayer questions on various issues–the DOL, by providing helpful clarifications on plan sponsors’ obligations under the new SECURE Act lifetime income disclosure rules, and the IRS by expanding the availability of tax credits for employers who offer paid leave to encourage COVID-19 vaccination.  On another note, the IRS reminds taxpayers: remember your substantiation when claiming reimbursement from tax-preferred health savings accounts!

By the way subscribers, Texas A&M graduate program for wealth and risk management, including tax risk management, is accepting applications for fall. Maximum enrollment for a course section is 30 so that each student receives meaningful feedback throughout the course from the full-time academic, professional part-time faculty, and each other. Learn more about it here: https://law.tamu.edu/distance-education

Prof. William H. Byrnes         Robert Bloink, J.D., LL.M.

A Reminder for Clients: IRS Emphasizes Need for Health FSA Substantiation

Recent IRS activity indicates that the agency is paying attention to whether or not clients are properly substantiating items reimbursed through tax-preferred health savings accounts.  In IRS Information Letter 2021-13, the IRS restated that flexible spending account (FSA) items paid using an FSA debit card must have substantiation containing all of the information required for claims submitted through other means.  A simple receipt is usually not sufficient.  Substantiation from a third-party must include: (1) the name of the person receiving the services, (2) the date the service was provided, (3) a description of the service or item purchased, (4) the name of the provider or merchant and (5) the claim amount.  The only exception is for certain merchants and providers that can be automatically substantiated by the Merchant Category Code (MCC) on the provider’s debit card machine and the actual item/service via identification by an Inventory Information Approval System (IIAS) from non-healthcare providers.  For more information on the health FSA rules, visit Tax Facts Online. Read More

Related Questions:

8888. What is a dependent care flexible spending arrangement (FSA)?

DOL Releases FAQ on SECURE Act Lifetime Income Illustrations

The DOL issued a temporary set of FAQ to implement the interim final rule on the SECURE Act lifetime income illustration provisions.  Under the SECURE Act, plan sponsors must disclose a participant’s account balance as both a single life annuity and joint and survivor annuity income stream.  Plans must furnish lifetime income illustrations annually (or more frequently).  The FAQ clarifies that the earliest statement for which the illustrations are required is a statement for a quarter ending within 12 months of the rule’s effective date (September 18, 2021) if the plan issues quarterly statements.  Therefore, the illustrations can be incorporated into any quarterly statement up to the second calendar quarter of 2022.  For non-participant-directed plans, the lifetime income illustrations must be included on the statement for the first plan year ending on or after September 19, 2021 (or, no later than October 15, 2022, which is the last day for filing the annual return for a calendar year plan that year).  The FAQ also clarifies that plans are permitted to provide additional lifetime income illustrations as long as the required illustrations are also provided, recognizing that some plans have been including illustrations for many years.  For more information on the lifetime income disclosure rules, visit Tax Facts Online. Read More

Related Questions:

559. What are the rules that allow 401(k) plan sponsors to include deferred annuities in target date funds (TDFs)?

561. Can a taxpayer combine a deferred income annuity (“longevity annuity”) with a traditional deferred annuity product?

IRS Updates FAQ on ARPA Paid Sick and Family Leave Tax Credits

The IRS updated its frequently asked questions on the American Rescue Plan Act (ARPA) paid sick and family leave credits.  Now, employers are entitled to claim the tax credits if they provide paid leave for employees to accompany family, household members and certain others to obtain a COVID-19 vaccine or to care for someone recovering from immunization.  The new eligibility requirement also applies to self-employed taxpayers.  Generally, employers are no longer obligated to provide employees with paid sick and family leave.  However, those who choose to offer paid leave for qualifying reasons may claim a tax credit for wages paid.  To date, the tax credits for leave have been extended through September 30, 2021.  For more information on the FFCRA paid leave tax credits for sick and family leave, visit Tax Facts Online. Read More

Related Questions:

768. What initial guidance has the Department of Labor (DOL) provided to help employers and employees understand their rights and duties under the Families First Coronavirus Response Act (FFCRA)?

769. What documentation should employers request and keep with respect to the Families First Coronavirus Response Act (FFCRA) COVID-19 paid leave? Are there any reporting requirements? How does the employee request leave?

$1.2 Trillion Infrastructure Bill

The 2,702-page bi-partisan “Infrastructure Investment and Jobs Act of 2021” has been released by the Senate. The bill may be downloaded from the U.S. Senate website here. The bill contains approximately $550 billion of new project spending and carries over an additional $650 billion from previously funded projects for a total of over $1.2 trillion in infrastructure spending that will begin in 2021 and most end in 2026.

But the bill contains many energy provisions and excise taxes as well as fees that will impact all segments of the energy industry. These provisions include billions of dollars for the industry for expenditure and incentives for carbon capture; clean hydrogen R&D; nuclear; among others. By example, $500,000,000 is provided for clean hydrogen technology R&D (see page 1550 at section 40314). The excise taxes and fees include the extensions of the highway-related taxes, superfund excise taxes, and customs user fees.

The major tax reform provisions addressing estate and gift tax, capital gains, carried interests, real estate exchanges, retirement plans, and high-income earners have been reserved to the forthcoming yet-to-be-agreed/released Democratic reconciliation bill. However, the Infrastructure Investment and Jobs Act of 2021 contains some new tax provisions including:

  • Sec. 80501. Modification of automatic extension of certain deadlines in the case of taxpayers affected by Federally declared disasters.
  • Sec. 80502. Modifications of rules for postponing certain acts by reason of service in combat zone or contingency operation.
  • Sec. 80503. Tolling of time for filing a petition with the tax court.
  • Sec. 80504. Authority to postpone certain tax deadlines by reason of significant fires.
  • Sec. 80601. Modification of tax treatment of contributions to the capital of a corporation.
  • Sec. 80602. Extension of interest rate stabilization.
  • Sec. 80603. Information reporting for brokers and digital assets.
  • Sec. 80604. Termination of employee retention credit for employers subject to closure due to COVID–19.

The automatic extension for certain tax deadlines for Federally declared disasters addresses the situation of multiple declarations relating to a disaster area which are issued within a 60-day period. A separate 60-day period shall be determined with respect to each such declaration pursuant to the bill’s language.

The bill will resurrect energy industry-related tax credits (expired IRC Section 48C) worth up to 30 percent of expenditure for converting fossil energy production into green energy production. Senator Joe Manchin is doing his job of representing his West Virginia coal industry constituency!

The bill’s cryptocurrency reporting regime (Sec. 80603. Information reporting for brokers and digital assets) is marked to raise $28 billion from current non-compliance and tax evasion regarding taxpayers’ either ignorance or purposeful oversight of including gross income derived from investments or trading digital currency. The reporting threshold will only be lowered to $10,000 which is still rather high in our personal opinion. It creates a potential perspective (or perhaps incentive among cheaters) that only digital currency income of at least $10,000 is reportable for gross income. On the other hand, it is often better to build out first then and scale up an operation, tweaking it. For example, the $10,000 reporting amount will capture a substantial pool of taxpayers, and that threshold can be lowered in the future (with grossly overstated estimates of the ‘evasion’ income it will bring in to pay for an extension or some new program in next year’s budget bills).

The bill contains hundreds of not-obvious federal grants and contract opportunities for business. By the example of one provision related to education and training of workers, section 401513 includes $10 million dollars for FY2022 for government grants of 50 percent of the cost to provide ‘career skills training’ to identify and involve in training programs target populations of individuals who would benefit from training and be actively involved in activities relating to energy efficiency and renewable energy industries; and the ability to help individuals achieve economic self-sufficiency. The program students must concurrently receive classroom instruction and on-the-job training for the purpose of obtaining an industry-related certification to install energy-efficient buildings.

Look in your Tax Facts Online app for our continuing analysis of this bill, the tax reform in the reconciliation bill, and other weekly intelligence.

Wealth & Risk Management Studies for Industry Professionals

Check out the graduate program here: https://law.tamu.edu/distance-education

Texas A&M, an annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school has the #1 bar passage in Texas, and #1 for employment in Texas (and top 10 in U.S.)

Posted in Retirement Planning, Taxation | Tagged: , | Leave a Comment »

TaxFacts Intelligence August 2, 2021

Posted by William Byrnes on August 2, 2021


This week’s newsletter offers the download to the Infrastructure Investment and Jobs Act of 2021 plus insight into different issues that may be important to clients who sponsor employee benefit plans. It’s time to file annual Form 5500—and this year, potential penalties for noncompliance may be higher than ever. We also offer analysis of the newly-popular retirement plan auto-enrollment features—and a reminder that small business clients may now benefit from a new post-SECURE Act tax credit for adopting the feature—as well as information about the ARPA pension relief law. Read on for more!

Prof. William H. Byrnes         Robert Bloink, J.D., LL.M.

$1.2 Trillion Infrastructure Bill Released Sunday night (August 1, 2021)

The 2,702-page bi-partisan “Infrastructure Investment and Jobs Act of 2021” has been released by the Senate. The bill may be downloaded from the U.S. Senate website here. The bill contains approximately $550 billion of new project spending and carries over an additional $650 billion from previously funded projects for a total of over $1.2 trillion in infrastructure spending that will begin in 2021 and most end in 2026.

But the bill contains many energy provisions and excise taxes as well as fees that will impact all segments of the energy industry. These provisions include billions of dollars for the industry for expenditure and incentives for carbon capture; clean hydrogen R&D; nuclear; among others. By example, $500,000,000 is provided for clean hydrogen technology R&D (see page 1550 at section 40314). The excise taxes and fees include the extensions of the highway-related taxes, superfund excise taxes, and customs user fees.

The major tax reform provisions addressing estate and gift tax, capital gains, carried interests, real estate exchanges, retirement plans, and high-income earners have been reserved to the forthcoming yet-to-be-agreed/released Democratic reconciliation bill. However, the Infrastructure Investment and Jobs Act of 2021 contains some new tax provisions including:

  • Sec. 80501. Modification of automatic extension of certain deadlines in the case of taxpayers affected by Federally declared disasters.
  • Sec. 80502. Modifications of rules for postponing certain acts by reason of service in combat zone or contingency operation.
  • Sec. 80503. Tolling of time for filing a petition with the tax court.
  • Sec. 80504. Authority to postpone certain tax deadlines by reason of significant fires.
  • Sec. 80601. Modification of tax treatment of contributions to the capital of a corporation.
  • Sec. 80602. Extension of interest rate stabilization.
  • Sec. 80603. Information reporting for brokers and digital assets.
  • Sec. 80604. Termination of employee retention credit for employers subject to closure due to COVID–19.

The automatic extension for certain tax deadlines for Federally declared disasters addresses the situation of multiple declarations relating to a disaster area which are issued within a 60-day period. A separate 60-day period shall be determined with respect to each such declaration pursuant to the bill’s language.

The bill contains hundreds of not-obvious federal grants and contract opportunities for business. By example of one provision related to education and training of workers, section 401513 includes $10 million dollars for FY2022 for government grants of 50 percent of the cost to provide ‘career skills training’ to identify and involve in training programs target populations of individuals who would benefit from training and be actively involved in activities relating to energy efficiency and renewable energy industries; and the ability to help individuals achieve economic self-sufficiency. The program students must concurrently receive classroom instruction and on-the-job training for the purpose of obtaining an industry-related certification to install energy efficient buildings.

Look in your Tax Facts Online app for our continuing analysis of this bill, the tax reform in the reconciliation bill, and other weekly intelligence.

Reminder: It’s Time to File Form 5500 for Employee Benefit Plans

It’s that time of year again. The deadline for filing Form 5500 for health plans and retirement plans with the IRS and DOL is July 31 for most calendar-year plans. The deadline is seven months after the end of the plan year. However, clients who aren’t yet ready to file should be advised that they may obtain a filing extension of up to 2.5 months. Penalties for failure to file Form 5500 on time have increased in recent years—and can equal as much as $2,000 per day in some cases. The forms are used by the IRS and DOL to identify potential compliance issues, so small business clients with employment benefits offerings should be advised to prepare the forms carefully and expect scrutiny. Form 5500 is filed under the penalty of perjury—for the employer who signs the document, not the service provider who prepared the document. For more information on Form 5500 filing requirements and increased penalties under the SECURE Act, visit Tax Facts Online. Read More

Related Questions:

3774. What requirements apply to matching contributions in the context of a 401(k) safe harbor plan?

3777. What are the requirements for a SIMPLE 401(k) plan?

Auto-Enrollment Popularity Soars Post-COVID

According to recent surveys, the majority of workers who have been automatically enrolled in employer-sponsored retirement savings plan have indicated that they are pleased with the decision. On the other hand, only about 30 percent of U.S. employers currently provide an auto-enrollment option. When asked whether they hoped their employer would offer financial wellness programs to help them better understand savings options, 80 percent of employees surveyed answered “yes”. At least one version of the “SECURE Act 2.0” bill would require a minimum 3 percent auto-enrollment rate for most newly adopted 401(k)s. Under the existing SECURE Act, small business owners may be entitled to a tax credit for adopting a plan that automatically enrolls employees. For more information on the tax credit, visit Tax Facts Online. Read More

Related Questions:

8553. When does a taxpayer qualify for the tax credit for the elderly and the permanently and totally disabled and how is the credit computed?

8554. When is a taxpayer entitled to claim the child tax credit?

PBGC Issues Interim Guidance on ARPA Special Financial Assistance for Multiemployer Pension Plans

The PBGC issued an interim final rule implementing the special financial assistance (SFA) rule for multiemployer pension plans in the American Rescue Plan Act. Eligible plans may apply to receive a lump-sum payment from a new Treasury-backed PBGC fund. Under the new rules, eligible plans are entitled to amounts that are sufficient to pay all benefits for the next 30 years. According to the PBGC interpretation, that means sufficient funds to forestall insolvency through 2051 (but not thereafter). Plans are entitled to receive the difference between their obligations and resources for the period. Surprisingly, the PBGC rule provides that SFA funds will be taken into account when calculating a plan’s withdrawal liability. However, plans are required to use mass withdrawal interest rate assumptions published by the PBGC when calculating withdrawal liability until the later of (1) 10 years after the end of the year in which the plan received the SFA or (2) the time when the plan no longer holds SFA funds. For more information on multiemployer pension plan withdrawal liability, visit Tax Facts Online. Read More

Related Questions:

3740. Are there any limitations on a pension plan’s ability to reduce participant benefit levels under the Multiemployer Pension Reform Act of 2014?

3741. What procedures and notices are required in order for a pension plan to reduce participant benefit levels under the Multiemployer Pension Reform Act of 2014?

Wealth & Risk Management Studies for Industry Professionals

The Texas A&M graduate programs for risk management for areas like wealth management, tax risk management, financial risk, economic crimes, ESG risk, are accepting applications for fall. Over 500 candidates are currently enrolled in the graduate courses yet maximum enrollment per course section is maintained at 30 so that each student receives meaningful feedback throughout the course from the full-time academic and professional part-time faculty. Check out the graduate program here: https://law.tamu.edu/distance-education

Texas A&M, an annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school has the #1 bar passage in Texas, and #1 for employment in Texas (and top 10 in U.S.)

Posted in Retirement Planning, Taxation, Uncategorized | Leave a Comment »

TaxFacts Intelligence June 10, 2021

Posted by William Byrnes on June 10, 2021


The Biden administration is moving full steam ahead with proposals to modify the U.S. and international tax systems. Some proposals would create a huge benefit for taxpayers–while others could leave clients on the hook for a surprise tax bill. This week, we dig a little deeper into the proposals–and outline a few surprises contained in the newly-released Green Book. Are your clients ready for what’s to come?

Prof. William H. Byrnes         Robert Bloink, J.D., LL.M.

Biden’s Latest Tax Proposals: Two Big Surprises for Tax Professionals 

More details about President Biden’s tax plan have emerged—and the latest proposal contains two major tax surprises. First, Biden’s tax plans would make any capital gains tax hike retroactive to April 28, 2020. That means clients who have engaged in tax planning strategies to avoid higher rates might wind up subject to the higher rates regardless, if this provision makes its way into the final proposal. Second, not only would the stepped-up basis rules be repealed, but taxpayers who inherit property would be required to recognize gain at the time of death—even if the individual doesn’t immediately sell the inherited property. In other words, the property could be immediately subject to both the estate tax and income or capital gains tax. Click here to get a more in-depth expert analysis of the latest tax proposals. Read More

Related Questions:

692. How is the tax basis of property acquired from a decedent determined?

G-7 Announces Support for Global Minimum Corporate Tax

Democrats have often advocated for imposition of a global minimum corporate tax rate—and the latest Biden tax plan would increase the U.S. corporate income tax rate from 21% to 28%. Over the weekend, top international finance officials in the Group of Seven (G-7) indicated broad support for a worldwide minimum corporate income tax of at least 15%. If implemented, the global minimum tax would ensure that large corporations pay a minimum tax on their earnings, regardless of where the entity is located. International support could be a critical turning point for President Biden’s corporate tax increase proposals. After all, a key criticism of increasing U.S. corporate income taxes is that it puts U.S. corporations at a global disadvantage and incentivizes techniques to shift income to lower tax jurisdictions. With a worldwide minimum tax in place, U.S. corporations would lose incentive to move their income elsewhere. Of course, it remains to be seen whether the proposals will come to fruition, and advisors should continue to monitor the evolving situation closely when advising on corporate tax issues. For more information on the U.S. corporate income tax structure, visit Tax Facts Online. Read More

Related Questions:

797. How is a corporation taxed on capital gains?

798. How was a corporation’s alternative minimum tax calculated prior to repeal by the 2017 Tax Act?

When Can an Employer Require All Employees to be Vaccinated: The Details

The EEOC recently clarified the incentive issue when it comes to employers who wish to encourage vaccination in the workplace. The guidance also addresses whether employers can strictly require employees to be vaccinated for COVID-19 before they re-enter the workplace. Generally, employers can require vaccination if vaccination is job-related and a business necessity given COVID-19 safety concerns. However, if an employee has a disability or sincerely-held religious belief that would prevent vaccination, the employer must offer reasonable accommodation—unless the accommodation requested would create an undue hardship. The employer generally cannot require those employees with medical reasons or religious objections to choose between obtaining the vaccine and returning to work unless allowing the unvaccinated employee to return to work would pose a “direct threat” to the health and safety of the workforce. For more information on the employer tax credit for vaccine-related leave, visit Tax Facts Online. Read More

Related Questions:

0101. Mandatory COVID Vaccination

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Texas A&M, annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school has the #1 bar passage in Texas, and #1 for employment in Texas (and top 10 in U.S.)

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TaxFacts Intelligence December 16, 2020

Posted by William Byrnes on December 16, 2020


There have been a number of challenges to the requirement for physical damages in business interruption insurance policies, and this week we see a court ruling in North Carolina that CVOID-related restrictions were enough to meet the test for physical damages because they prevented the policyholder from using their property. More on this in Tax Facts, and also at our sister site FC&S.  Also, if you missed the late November webinar on “The Biggest Tax Implications for 2021” you can still register and view the recording at the link below. William Byrnes and Robert Bloink walked us through an hour of what the CARES Act and FFCRA changes may look like in 2021. Tune in!

Prof. William H. Byrnes         Robert Bloink, J.D., LL.M.

ACA Likely To Withstand Latest Challenge The U.S. Supreme Court recently heard oral arguments that will be instrumental in determining the fate of the Affordable Care Act.  Since the 2017 tax reform legislation reduced the individual mandate to $0, many challenged whether the ACA was constitutional–in other words, whether it could be considered a valid exercise of Congress’ power to tax.  Confirmation of new Supreme Court justice Amy Barrett created the real possibility that the ACA could be overturned.  However, after hearing oral arguments, two conservative justices–Roberts and Kavanaugh–indicated their support for severance.  If that happens, the individual mandate portion of the ACA would be severed from the remainder of the law.  For more information on the ACA, visit Tax Facts Online.  Read More. Read More

State Court Rules in Favor of Restaurants in Business Interruption Insurance Case A North Carolina court has ruled in favor of a group of restaurants and required the insurance company to provide business interruption coverage.  The court agreed with the plaintiffs that government stay-at-home orders and travel restrictions caused the restaurants to suffer a physical loss because they lost physical use and physical access to their businesses.  The policy at issue defined “loss” as “accidental physical loss or accidental physical damage,” but did not define “direct”, “physical loss”, or “physical damage.”  The court agreed that the businesses lost the full use and advantage of their business premises.  The court rejected the insurance company’s argument that tangible physical loss was required because, even if true, that rendered the policy language ambiguous.  Despite the fact that this was a state-level case, other courts may find the reliance on standard contract interpretation principles persuasive.  For more information on business insurance issues, visit Tax Facts Online. Read More

DOL Releases Final Rule on Considering Non-Financial Factors in Selecting Retirement Plan Investments The DOL has released a final rule on whether environmental, social and governance (ESG) factors can be considered when retirement plan fiduciaries are selecting plan investments without violating their fiduciary duties.  Plan fiduciaries are obligated to act solely in the interest of plan participants and beneficiaries when making investment decisions.  The final rule confirms the DOL position that plan fiduciaries must select investments based on pecuniary, financial factors.  Fiduciaries are required to compare reasonably available investment alternatives–but are not required to scour the markets.  The rule also includes an “all things being equal test”–meaning that fiduciaries are not prohibited from considering or selecting investments that promote or support non-pecuniary goals, provided that they satisfy their duties of prudence and loyalty in making the selection.  For more information, visit Tax Facts Online. Read More

Texas A&M, an annual budget of $6.3 billion (FY2020) and $1 billion of research grants/budget, is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space!

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TaxFacts Intelligence December 14, 2020

Posted by William Byrnes on December 14, 2020


Looks like we have more guidance from the IRS on PPP forgiveness and deductibility of expenses. This is getting more complicated as we approach the end of the year and many taxpayers are anticipating, but have not yet received, the forgiveness of their PPP loans. The new guidance helps deal with a couple of potential types of situations that companies may find themselves in while they wait for forgiveness applications to be reviewed.

Prof. William H. Byrnes         Robert Bloink, J.D., LL.M.

IRS Releases Safe Harbors to Allow Certain PPP Loan Recipients to Deduct Business Expenses One controversial element of the PPP loan rules involves whether taxpayers who receive loan forgiveness qualify to deduct otherwise deductible business expenses.  To date, IRS’ guidance has confirmed that otherwise eligible deductions will be denied.  However, the agency has now released a safe harbor for certain taxpayers whose application for forgiveness was denied or who opted to forgo applying for forgiveness.  The safe harbors allow a taxpayer to claim a deduction in the 2020 tax year for certain otherwise deductible eligible expenses.  For more information on the safe harbor requirements, visit Tax Facts Online. Read More

IRS Confirms Position on Non-Deductibility of Business Expenses for PPP Loan Recipients Who Expect Loan ForgivenessThe IRS has released guidance confirming that PPP loan recipients who have a reasonable expectation that they will have loan amounts forgiven cannot deduct otherwise eligible business expenses.  A taxpayer that received a covered loan guaranteed under the PPP and paid or incurred certain otherwise deductible expenses may not deduct those expenses in the tax year in which the expenses were paid or incurred if, at the end of such taxable year, the taxpayer reasonably expects to receive forgiveness of the covered loan on the basis of the expenses it paid or accrued during the covered period.  That’s true even if the taxpayer has not yet submitted an application for forgiveness of the covered loan by the end of the tax year.  For more information on the implications of PPP loan forgiveness, visit Tax Facts Online. Read More

Complex Contribution Limits for Employees Participating in Multiple Employer-Sponsored Retirement PlanAs we approach the end of the year, many taxpayers may have questions about their 2020 retirement plan contribution limits.  Employees who participate in more than one plan are subject to two sets of limits: the annual additions limit and the deferral limit.  The deferral limit maxes out at $19,500, or $26,000 for clients 50 and older, in 2020.  Each participant is limited in contributing $19,500 across all retirement plans.  The annual additions limit in 2020 is $57,000 ($63,500 for those 50 and up).  The annual additions limit includes all employer and employee contributions.  Each employer-based plan gets its own annual additions limit.  Therefore, if you have two employers, each employer can contribute up to the $57,000 limit.  In other words, contributions from unrelated employers aren’t aggregated.  For more information on the 401(k) contribution limits, visit Tax Facts Online. Read More

Texas A&M, annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space!

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TaxFacts Intelligence Dec. 7, 2020

Posted by William Byrnes on December 7, 2020


Well, it looks like there will be a work-around for the SALT cap that was enacted under the Trump tax reform bill, at least for taxpayers who own pass-throughs. The IRS has officially announced that those pass-through entities can pay (and then deduct) the SALT taxes above the $10,000 limit.  Also, those who took our PPP loans for $2 million or more are getting a rather detailed questionnaire from the SBA inquiring about the economic necessity of those loans. Recall that PPP loans of less than $2 million are presumed to be requested in good faith, so this doesn’t apply to those borrowers. Happy Thanksgiving (or Zoomsgiving)!

Prof. William H. Byrnes         Robert Bloink, J.D., LL.M.

IRS Offers Guidance on Covid-19 Era Qualified Transportation BenefitsWith so many employees working from home for the bulk of 2020, employees have begun to question whether they will lose their unused qualified transportation benefits.  Some employees are driving rather than using public transit–and others aren’t commuting at all.  The IRS recently released an information letter explaining that unused qualified transportation benefit amounts can be rolled over to subsequent periods and used for future commuting expenses.  To qualify, the employee must have made a valid compensation reduction election and remain employed by the employer in the subsequent period.  Further, the IRS confirmed that unused amounts could be applied to other types of qualified transportation benefits, including parking, if the employer offers that benefit.  On the other hand, the IRS noted that refunds of unused qualified transportation benefits are not permitted if those benefits are provided through a compensation reduction agreement.  For more information on qualified transportation benefits, visit Tax Facts Online.  Read More

SBA Issues PPP Loan Necessity Questionnaires to PPP Loan RecipientsIn a surprise move, the SBA has begun asking paycheck protection program (PPP) lenders to issue loan necessity questionnaires to recipients of loans of at least $2 million.  The questionnaires are detailed and request significant information, and were issued without warning or fanfare.  It’s expected that these information requests might be used in enforcement of PPP loan requirements or in determining eligibility for forgiveness.  According to the SBA, the forms will be used to evaluate whether a recipient’s loan was made necessary by economic uncertainty.  Information provided in the forms must be certified under threat of criminal action for false statements.  The questions essentially ask borrowers to certify actual detrimental economic impact.  Borrowers will also have to provide information about local Covid-19 shutdown orders, other CARES Act aid, financial information and compensation to highly compensated owners and employees.  Upon receipt, the borrower has only 10 days to complete the questionnaire and submit supporting documents.  For more information on the PPP loan program, visit Tax Facts Online.  Read More

IRS Regs Bless SALT Cap Workarounds for Pass-Through EntitiesThe IRS has released regulations confirming that partnerships and S corporations who pay entity-level taxes at the state level can deduct those taxes on their federal income tax returns.  By now, most people are familiar with the $10,000 SALT deduction cap created by the 2017 tax reform legislation.  High-tax state governments have attempted to create workarounds that would allow taxpayers to get around this cap.  At the individual level, the IRS has responded to shut those efforts down.  The recent regulations confirm, however, that the entity is permitted the deduction for state-level taxes even if the entity could have elected to pass the tax liability through to the actual individual owners.  For more information on the SALT cap, visit Tax Facts Online.  Read More

Texas A&M University School of Law’s online wealth and international tax risk management graduate curricula for industry professionals has attracted over 160 enrollment this fall semester. Apply now for courses that begin on January 19 spring semester. See the international tax course list by > weekly topic here. <

Texas A&M, annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space!

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TaxFacts Intelligence December 3, 2020

Posted by William Byrnes on December 3, 2020


This week, we examine the new October regs (subscribers received this analysis the next day) on the process of establishing an ABLE account. The new rules provide increased flexibility in terms of who can establish the account, which may be an important factor when support for the beneficiary comes from multiple family members. We also have additional clarification on the Small Business Exemption to the Business Interest Deduction rules and a new online resource from the IRS that assists those who are closing a business. . .

Prof. William H. Byrnes         Robert Bloink, J.D., LL.M.

Final ABLE Account Regulations Offer New Flexibility

The IRS final ABLE account regulations broaden the range of parties who are eligible to establish an account.  Under the new rules, the beneficiary can designate any person to establish an account on their behalf.  If the beneficiary is unable to designate a person, the account can be set up by an agent under a power of attorney, a conservator, legal guardian, spouse, parent, sibling, grandparent or representative payee appointed by the Social Security Administration (in that order of priority).  The ABLE program itself is entitled to rely upon the person’s certification that he or she is authorized to set up the account for the benefit of a disabled person, and that there is no person with a higher priority who is willing and able to set up the account.  Similarly, the person who establishes the account will generally have signature authority over the account.  For more information on the ABLE Account rules, visit Tax Facts Online. Read More

IRS Clarifies Small Business Exemption to Business Interest Deduction Rules

The 2017 tax reform legislation changed the general rules for deducting business interest.  While the 2020 CARES Act relaxed the new limitations, the new rule generally limits the business interest deduction.  Small businesses that are not tax shelters are not subject to the new limits if they pass the gross receipts test (by having average annual gross receipts of no more than $26 million for the past three tax years).  Related entities are generally aggregated if they’re aggregated for other tax code purposes.  In past years, some small businesses were uncertain whether they fell into the definition of “tax shelter” because there was some uncertainty in the way “syndicate” was defined–multiple definitions apply in different tax code sections.  The IRS clarified this by releasing proposed regulations specifying that “syndicate” is defined using the Treasury Regulation Section 1.448-1T(b)(3) definition.  Because of this, only small businesses that have passive investors who are actually allocated losses are treated as tax shelters that are ineligible.  For more information, visit Tax Facts Online. Read More

IRS Creates Online Resource for Closing a Business

Unfortunately, many small business owners have been forced to close due to the economic fallout of the Covid-19 pandemic.  The IRS has now created an online resource giving business owners step-by-step information about how to close a business.  The website reminds taxpayers that they are required to file a final tax return for the year the business closes.  The relevant form will depend upon the type of business entity involved.  Employers are also required to pay employees all compensation that they’re owed—and must pay related employment taxes on those wages.  They must also report any payments in excess of $600 made to independent contractors.  The business should also close all business accounts and cancel their EIN by sending a letter to the IRS.  For more information on the tax obligations of employers, visit Tax Facts Online. Read More

Texas A&M University School of Law’s online wealth and international tax risk management graduate curricula for industry professionals has attracted over 160 enrollment this fall semester. Apply now for courses that begin January 11 spring semester. See the international tax course list by > weekly topic here. < Texas A&M, annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space!

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TaxFacts Intelligence Nov 23, 2020

Posted by William Byrnes on November 23, 2020


This week we analyze two updates on how the CARES Act is impacting retirement plans. First, we have additional information about re-contributing COVID hardship distributions for qualified plans. Recall that the CARES Act offers a generous window in which to make those re-contributions, so this may be an important topic for end-of-the year tax planning. We also see an update for single-employer defined benefit plans, including some important deadlines. Happy tax reading for Thanksgiving week!

Prof. William H. Byrnes         Robert Bloink, J.D., LL.M.

Clearing up Confusion About Re-Contributing Coronavirus-Related Retirement Distributions

The CARES Act relaxed the hardship distribution rules so that plan participants suffering hardships because of the coronavirus pandemic could access their retirement savings. The law also allows participants to re-contribute those funds within three years of the distribution without penalty. Employer-sponsored plans, however, are only able to accept rollovers from participants (and sometimes new hires). Therefore, if an employee takes their entire account balance as a coronavirus-related hardship distribution and later stops working for the employer, the person is no longer a participant or new hire. For more information on the rules regarding CRDs, visit Tax Facts Online. Read More

Agencies Offer New CARES Act Contribution Relief for Single-Employer Defined Benefit Plans

Sponsors of defined benefit plans are generally required to pay premiums annually to the PBGC. Calculating the premium amount is complex. The first factor imposes a flat-rate, per-participant amount. The second portion is variable, and is based on the plan’s unfunded vested benefits. In calculating this amount, the sponsor is allowed to include any contributions made up to the filing due date. The CARES Act extended the deadline for making a 2019 defined benefit contribution until January 1, 2021. For more information on the defined benefit plan funding rules, visit Tax Facts Online. Read More

IRS Issues Final Regs on Post-TCJA Deductions for Estates and Non-Grantor Trusts

The IRS has released final regulations to clarify that estates and non-grantor trusts are entitled to take certain deductions even after the 2017 tax reform legislation eliminated miscellaneous itemized deductions and suspended the personal exemption for 2018-2025. Generally, non-grantor trusts are entitled to deduction otherwise deductible expenses that would not be incurred but for the fact that the property or assets are held in trust. For more information on the taxation of trusts and estates, visit Tax Facts Online. Read More

Texas A&M University School of Law’s online wealth and international tax risk management graduate curricula for industry professionals has attracted over 160 enrollment this fall semester. Apply now for courses that begin on January 18 spring semester. See the international tax course list by > weekly topic here. <

Texas A&M, annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space!

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TaxFacts Intelligence Nov 20, 2020

Posted by William Byrnes on November 20, 2020


This week we look at the three sets of updates from the IRS regarding various SECURE Act changes (subscribers will find our coverage the same week as the release in Tax Facts Online). First, we have guidance for employers on vesting schedules for long-term part-time employees. Next is an update on how QCDs are affected by (newly) deductible qualified plan contributions made after age 70½. Finally, we have guidance that accepting contributions from plan holders who are past age 70½ is not mandatory, and may be disallowed by financial institutions.

Prof. William H. Byrnes         Robert Bloink, J.D., LL.M.

IRS Offers Guidance on Vesting Rules for Long-Term, Part-Time Employees Post-SECURE Act

The SECURE Act generally amends the 401(k) qualification rules to allow participation for certain long-term, part-time employees. IRC Section 401(k)(15)(B)(iii) provides special vesting rules for employees who become eligible to participate solely by reason of having completed three consecutive 12-month periods where the employee completed at least 500 hours of service (long-term, part-time employee). The rule providing that 12-month periods beginning before January 1, 2021 are not taken into account does not apply for purposes of the vesting rules. Generally, all years of service with the employer maintaining the plan must be taken into account for purposes of determining a long-term, part-time employee’s nonforfeitable right to employer contributions under the special vesting rules in § 401(k)(15)(B)(iii). For purposes of determining whether a long-term, part-time employee has a nonforfeitable right to employer contributions (other than elective deferrals), each 12-month period for which the employee has at least 500 hours of service is treated as a year of service. For more information, visit Tax Facts Online. Read More

IRS Provides Details on Reducing Excludable QCDs Caused by Deductible Post-70½ Contributions

The SECURE Act amended the rules governing qualified charitable distributions (QCDs), which are distributions from an individual’s IRA, made directly to charity on or after age 70½. The amendment provides that the excludable amount of QCDs for a taxable year is reduced by the aggregate amount of IRA contributions deducted for the year and any earlier taxable years in which the individual was age 70½ or older by the last day of the year (post-age 70½ contributions). The excludable amount of QCDs for a taxable year is not reduced by the amount of post-age 70½ contributions that caused a reduction in the excludable amount of QCDs for earlier taxable years. For more information on the IRS guidance, visit Tax Facts Online. Read More

IRS Provides Clarity on SECURE Act Post-70½ IRA Contributions

The IRS has released guidance clarifying that while the SECURE Act removed the age 70½ restriction on making traditional IRA contributions, the provision is not mandatory. In other words, financial institutions can choose whether or not to accept IRA contributions after the account owner has reached age 70½. If the financial institution does choose to accept post-70½ contributions, the institution must amend its contracts to provide for the change. The IRS has announced that it plans to release revised model IRAs and prototype language to help reflect these changes. Further, the IRS guidance clarifies that post 70½ contributions cannot be used to offset RMDs—the contributions and distributions are treated as separate transactions. For more information on the IRA contribution rules, visit Tax Facts Online. Read More

Texas A&M University School of Law’s online wealth and international tax risk management graduate curricula for industry professionals has attracted over 160 enrollment this fall semester. Apply now for courses that begin on January 18 spring semester. See the international tax course list by > weekly topic here. <

Texas A&M, annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space!

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TaxFacts Intelligence Nov 19, 2020

Posted by William Byrnes on November 19, 2020


There is an updated self-certification process for taxpayers who miss the 60-day rollover deadline. The new process is easier than obtaining a PLR, but it is still only available in a limited set of circumstances. Notably, one of those circumstances is an extreme illness of the taxpayer or a family member, so there may be some COVID-related relief available. Also, we have the new 2021 inflation-adjusted tax numbers! Many of them stayed the same in our current low-inflation environment, but the estate tax exemption is up to $11.7 million.

Prof. William H. Byrnes         Robert Bloink, J.D., LL.M.

Retirement Plan Contribution Limits for 2021 Remain Steady; Estate Tax Exemption Soars

The IRS has released the 2021 inflation-adjusted figures to be used for determining deductible retirement plan contributions, tax brackets and a number of other relevant figures.  In the retirement arena, contribution limits will remain steady–401(k) pre-tax contribution limits remain at $19,500 and catch-up limits remain at $6,500.  IRA contribution limits similarly remain at $6,000.  For 2021, every individual can exempt up to $11.7 million from the federal estate tax (up from $11.58 million).  The annual $15,000 gift tax exclusion remained unchanged.  For more information on the rules on deductible retirement contributions, visit Tax Facts Online. Read More

Instructions for 2020 Forms 1094/1095 Contain New ICHRA Reporting Information

The instructions for Forms 1094 and 1095 contain reporting information for clients who have decided to offer individual coverage health reimbursement arrangements (ICHRAs) beginning in 2020.  ICHRAs allow employers to reimburse employees for the cost of individual health insurance premiums without violating the ACA market reform rules.  Forms 1095-B and 1095-C are provided to both the IRS and the employee who receives coverage.  The employee’s ICHRA contributions now count for purposes of determining whether the employee’s contribution is affordable.  For more information on ICHRAs, visit Tax Facts Online. Read More

IRS Updates Self-Certification Process for Taxpayers Who Miss Retirement Plan Rollover Deadline

Missing the 60-day rollover deadline for tax-free transfers between retirement accounts can cause considerable problems for a client.  In the past, the only way to correct a delayed rollover was to obtain a private letter ruling (PLR) directly from the IRS.  Now, certain clients are eligible to self-certify to avoid the time and expense of obtaining a PLR.  Circumstances that qualify for a waiver via self-certification include: (1) an error was committed by the financial institution, (2) the distribution check was misplaced and never cashed, (3) the taxpayer’s principal residence was severely damaged, (4) a member of the taxpayer’s family died, (5) the taxpayer or a member of his or her family was severely ill, (6) a postal error occurred or (7) restrictions were imposed by a foreign country.  For more information, visit Tax Facts Online. Read More

Texas A&M University School of Law’s online wealth and international tax risk management graduate curricula for industry professionals has attracted over 160 enrollment this fall semester. Apply now for courses that begin on January 18 spring semester. See the international tax course list by > weekly topic here. <

Texas A&M, annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space!

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Free Webinar Today | What will be the biggest tax implications for 2021?

Posted by William Byrnes on November 18, 2020


New RMD tables! SECURE Act 2.0? Should you defer SALT expenses until 2021? Tune into Tax Facts Online this week for these exciting updates! Also, check it out, we’re having a webinar today at 2pm CST (Dallas/Chicago time)

Free Webinar | What will be the biggest tax implications for 2021?

Between an election year and a worldwide pandemic, 2020 has left tax and financial planners with a LOT to consider, and the new year is just around the corner. Join the expert-authors behind Tax Facts in this free, live webinar as they discuss important questions many will have about the state of tax in 2021, including potential changes, implications, and more. Register Here

Prof. William H. Byrnes         Robert Bloink, J.D., LL.M.

Bipartisan Retirement Legislation Dubbed “SECURE Act 2.0”

New retirement legislation with bipartisan support would expand upon the changes made by the 2019 SECURE Act to promote more options and greater retirement security for millions of Americans.  Importantly, if passed, the law would increase the required minimum distribution age from 72 to 75.  It would promote auto-enrollment in new employer retirement plans and also provide an expanded tax credit for small business owners who offer a retirement savings option.  The law would provide more options for clients approaching retirement age by allowing greater “catch up” options for clients who are at least 60.  Employers would also be able to provide an employer matching contribution to employees who are unable to contribute to retirement accounts, but instead use funds to pay down student loans.  The law would also ease the burden for clients who make honest mistakes while managing their own IRAs.  For more information about some of the sweeping changes made by the SECURE Act late in 2019, visit Tax Facts Online. Read More

Updated RMD Tables

Although RMDs were waived for 2020, the IRS recently released final and updated tables that are used in calculating taxpayers’ required minimum distributions (RMDs) from traditional retirement accounts.  However, the IRS has also announced that the new tables won’t apply in calculating 2021 RMDs (existing tables remain in effect for 2021).  Starting in 2022, savers who have reached age 72 (up from age 70 1/2 prior to 2020) will be entitled to use the updated life expectancy tables.  For more information on the RMD rules, visit Tax Facts Online. Read More

Defer SALT Expenses Until 2021?

By this point, we’re all familiar with the cap on the deduction for state and local taxes (SALT) that was put into place for 2018-2025.  With the uncertainty of an election year looming, some taxpayers might wonder whether they can take any steps to maximize the value of these deductions.  The answer is: maybe.  For more information on the SALT cap, visit Tax Facts Online. Read More

Byrnes & Bloink’s Tax Facts Offers a Complete Web, App-Based, and Print Experience: Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone. All four volumes of Tax Facts in print PLUS

  • Tax Facts Intelligence weekly newsletters
  • weekly strategy articles for client advisory
  • weekly transcribed debate discussion for client soft-skill discussion
  • among other weekly client advisory critical updates

Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

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What will be the biggest tax implications for tax season 2021 for your financial advisory clients? free TaxFacts webinar

Posted by William Byrnes on November 17, 2020


Wed, Nov 18, 2020 1:00 PM – 2:00 PM CST (Dallas time) Register for the Webinar Here


Between an election year and a worldwide pandemic, 2020 has left tax and financial planners with a LOT to consider, and the new year is just around the corner. Join the expert-authors behind Tax Facts in this free, live webinar as they discuss important questions many will have about the state of tax in 2021, including potential changes, implications, and more.

It can be difficult to keep up with the latest industry changes – make sure you’re prepared for next year and how certain policies may affect your clients and their retirement plans, both immediately and long-term!

If you have questions about the webinar, please contact Dana Wan at dwan@alm.com. Register for the Webinar Here

Byrnes & Bloink’s Tax Facts Offers a Complete Web, App-Based, and Print Experience: Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone. All four volumes of Tax Facts in print PLUS

  • Tax Facts Intelligence weekly newsletters
  • weekly strategy articles for client advisory
  • weekly transcribed debate discussion for client soft-skill discussion
  • among other weekly client advisory critical updates

Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

From Tax Facts Online Q3757. What is the limit on elective deferrals to employer-sponsored plans?

By way of example, here is the recently updated Tax Facts Q&A on the 2021 retirement plan contribution limits. Look for more great updates from Tax Facts soon! Read More

From Tax Facts Weekly September 10, 2020: The Trump payroll tax deferral has been announced, and we have details below. It’s optional, and there are a lot of questions about how it will work now and in early 2021 when the deferred payroll taxes would be due (assuming no legislative changes occur between now and then). We also have an interesting update from the DOL on how schools’ reopening plans might impact employees’ right to paid leave under the Families First Coronavirus Response Act (FFCRA). Given the wide variety in schools’ opening plans there may be some interesting scenarios to play out related to staff paid leave if they are affected by the Corona virus.

Trump Payroll Tax Deferral Program Now Available

Beginning September 1, employers have the option of deferring the employee portion of the payroll tax through December 31, 2020. Employers can choose to stop withholding the 6.2% employee portion of the Social Security tax for employees who earn less than around $4,000 bi-weekly (pre-tax), but are required to continue contributing the employer half. However, employees should note that under current IRS guidance, deferred payroll taxes must be repaid during the period beginning January 1, 2021 and ending April 30, 2021. Taxes that are not repaid during that period will accrue interest and penalties, and employers can pass those amounts on to employees who have not repaid their deferral amounts. While it remains possible that Congress could pass legislation to forgive any payroll taxes that are deferred during 2020, it is far from certain. For more information on payroll tax relief provided in response to COVID-19, visit Tax Facts Online. Read More

DOL Releases New Guidance in Response to School Reopening Plans

The DOL has released additional FAQ on how a school’s reopening plans might impact employees’ right to paid leave under the Families First Coronavirus Response Act (FFCRA). The IRS examined various scenarios and provided clarification on each. If the child’s school remains closed to in-person instruction (so that only remote learning is offered), the employee has a qualifying reason to take FFCRA leave. If the school offers a hybrid program, so that students attend school in-person on certain days and receive remote instruction on other days, employees have a qualifying reason, but only with respect to the days that their children are not eligible for in-person instruction. If it is completely up to the family whether to send the child to school every day or keep the child home for remote instruction, the employee does not have a qualifying FFCRA leave reason. This is true regardless of whether the family keeps the child home out of fear of contracting COVID-19. For more information on the availability of FFCRA leave, visit Tax Facts Online. Read More

IRS Provides Relief for Victims of Hurricane Laura

The IRS has extended various deadlines for victims of Hurricane Laura. Victims located in FEMA-designated disaster areas qualify to extend tax filing and payment deadlines that occurred starting August 22, 2020 through the end of the year. Taxpayers who extended their 2019 federal income tax filing deadline to October 15 now have until December 31, 2020. For information on the casualty loss rules, visit Tax Facts Online. Read More

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Estate Planning Update 2020-21 (Lexis)

Posted by William Byrnes on October 22, 2020


Texas Estate Planning Publication Update (2020) [Lexis permalink is here]

Highlights

Current Developments: In this Release 27 of Texas Estate Planning, Prof. William Byrnes analyzes the latest developments and decisions in the federal and Texas courts, including the 2017 Tax Cuts and Jobs Act, the Bipartisan Budget Act of 2018, the SECURE Act of 2019, as well as legislation and consideration resulting from the 2020 COVID-19 pandemic that impact estate planners.

Release 27 of Texas Estate Planning includes 21 chapter revisions of the latest rulings, regulations, cases, and inflationary adjustments, as well as the amendments and additions to law by the biennial 2019 86th Texas legislative session, the Tax Cuts and Jobs Act, the Bipartisan Budget Act of 2018, the SECURE Act of 2019, and CARES Act of 2020. Highlights of this release include:

The SECURE Act. The SECURE Act that took effect in 2020 specifically targets estate planning opportunities for individual retirement accounts. The impact is analyzed in Chapter 1.

T.D. 9884; Treas. Reg. § 20.2010-1(c)The I.R.S. confirmed that gifts made during 2018 through 2025 will attach the transfer tax exemption amount applicable on the date of the gift, and thus allow credit for the higher pre-2026 amount post-2026 even though the transfer tax exemption will have reverted to the pre-2018 amount (adjusted for inflation). The impact is analyzed in Chapter 2.

State Imposition of Tax on Trust Income. Some states attempt to tax trust income based on the residency of the beneficiary. In North Carolina Department of Revenue v. The Kimberly Rice Kaestner 1992 Family Trust, the State of North Carolina imposed an income tax on accumulated income of an irrevocable trust created in New York because of the residency of three beneficiaries in North Carolina. The U.S. Supreme Court in a decision based on the specific facts of the case held that the tax violated the Due Process Clause. See Chapter 31.

Impact of Tax Cuts and Jobs Act Exclusion. The IRS for 2018 reported that it received 34,092 total estate tax returns and 245,584 gift tax returns. Of the estate tax returns for 2018, the IRS reported that it received 5,484 taxable returns (which most likely relate to deaths in 2017) reporting $106 billion of estate gross assets and a tentative estate tax liability of $34 billion. The Urban Institute Tax Policy Center estimates that for 2020 only 1,900 estate tax returns will have tax owing of a total $16 billion.

Tax Cuts and Jobs Act Exclusion. The Tax Cuts and Jobs Act of 2017 (“TCJA”) increases from 2018 until 2026 the transfer tax exemption to $10 million per individual indexed for inflation so that for 2020 the amount is $11.58 million or $23.16 million per married couple. The 2020 annual gift tax exclusion for gifts made to a non-citizen spouse is $157,000. In 2026, the transfer tax exemption reverts back to the 2017 level indexed for inflation (in 2018 it would have been $5.6 million). All chapters have been updated to reflect these changes as well as the inflation adjustments of Rev. Proc. 2019-44.

U.S. Estate Tax Regime On High Net Wealth Immigrants. Chapter 7 analyzes planning strategies to mitigate exposure of foreign assets to U.S. estate tax.

IRS Settlement Offer For Microcaptives. See Chapter 5.

Author and Contributors

Professor William Byrnes of Texas A&M University School of Law and author of ten Lexis legal treatises is the author of Texas Estate Planning. He has assembled a team of preeminent subject matter experts as chapter contributors, including: Tena Fox (Leach & Fox), Terry Leach (Leach & Fox), Patrick McCormick (Drucker Scaccetti), Benjamin Terner (The Einstein Group), Kim Donovan Uskovich (Kelly Hart), and James Weller (Greenway Capital Advisors).

Interested in the two volumes of Estate Planning book? See here

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Byrnes & Bloink’s TaxFacts Intelligence (October 15, 2020)

Posted by William Byrnes on October 15, 2020


Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

Prof. William H. Byrnes         Robert Bloink, J.D., LL.M.

This week we have new info on the definition of “business interest” as it relates to the 2017 tax reform and CARES Act modifications. The IRS has released both final and proposed regs on the matter, and there are new rule changes regarding some of the ancillary costs that can come with debt issuance, such as commitment fees and guaranteed payments that are broadly categorized as “substitute” interest costs. We also see new regs on the elimination of qualified transportations benefits and updated deadlines for Form 1095.

Texas A&M University School of Law’s online wealth and international tax risk management graduate curricula for industry professionals has attracted over 160 enrollment this fall semester. Apply now for courses that begin January 11 spring semester. See the international tax course list by > weekly topic here. <

Final Business Interest Regs Relax Definition of “Business Interest” 

The IRS has released final regulations and a new set of proposed regulations on the deduction for business interest, which was modified by the 2017 tax reform legislation.  The new proposed IRS regulations on the business interest expense implement many of the new CARES Act provisions designed to help small business owners in 2020 and future years. While the final regulations largely mirror earlier proposed rules, one significant change relaxes the previous definition of “business interest”.  Under the proposed regulations, interest included commitment fees, debt issuance costs, guaranteed payments and other “substitute” interest costs.  Under the final rules, commitment fees and debt issuance costs are excluded from the definition of interest. For more information on the business interest deduction and the 2020 CARES Act changes, visit Tax Facts Online. Read More

IRS Proposes Regs on TCJA Elimination of Qualified Transportation Benefits

The IRS issued proposed regulations on the 2017 tax reform legislation’s elimination of deductions for certain employer-provided transportation benefits.  Under the proposed rules, if the employer owns or leases the parking facility, the employer can elect to apply a general rule, or one of three simplified methods, for calculating the amount of nondeductible expenses.  Taxpayers may elect to apply the general rule or a simplified methodology for each taxable year and for each parking facility.  For more information on the simplified methods, visit Tax Facts Online. Read More

IRS Provides New ACA Transition Relief for Employer Reporting

As usual, the IRS has released transition relief to extend the deadline for providing Form 1095-C to individuals from February 1, 2021 to March 2, 2021.  However, unlike other years, the IRS has indicated that absent comments indicating a need for future extensions, this will be the last year the extension applies.  The due date to furnish the Forms 1095-B and 1095-C to requisite individuals is extended from February 1, 2021 to March 2, 2021.  Form 1094-C and Form 1095-C that must be provided to the IRS are not subject to the extension.  The employer must furnish these filings to the IRS by March 1, 2021 if the filing is on paper and March 31, 2021 if the employer is filing electronically.  For more information, visit Tax Facts Online. Read More

Texas A&M, annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space!

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Byrnes & Bloink’s TaxFacts Intelligence (October 8, 2020)

Posted by William Byrnes on October 8, 2020


 

Byrnes & Bloink’s Tax Facts Offers a Complete Web, App-Based, and Print Experience: Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone. All four volumes of Tax Facts in print PLUS

  • Tax Facts Intelligence weekly newsletters
  • weekly strategy articles for client advisory
  • weekly transcribed debate discussion for client soft-skill discussion
  • among other weekly client advisory critical updates

Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

 

Prof. William H. Byrnes
        Robert Bloink, J.D., LL.M.

Well, the August 31 deadline for repaying RMDs is a month behind us now, though the 60-day window still applies for later RMDs. Be sure to check out who is a qualifying individual below to see if the three-year repayment window applies. We also have some info on the new lifetime income estimates for 401(k) participants and some advice on making the most of an FSA this year.

Moving Beyond the August 31 RMD Repayment Deadline

Clients are excused from the RMD rules in 2020 because of the COVID-19 pandemic. Importantly, the IRS gave individuals until August 31, 2020 to repay any RMDs that were taken earlier in the year–even if the 60-day rollover window had already closed. Now that August 31 has come and gone, the usual 60-day rollover window will only help clients who took RMDs in July and August. However, clients should remember that “qualifying individuals” can repay their distributions at any time within three years of the distribution. Qualifying individuals include those who (1) have been diagnosed with COVID-19, (2) have a spouse or dependent who has been diagnosed, (3) have experienced financial hardship due to quarantine orders, layoffs, childcare obligations, etc. To learn more about who qualifies for repayment relief, visit Tax Facts Online. Read More

DOL Releases Rules on SECURE Act Lifetime Income Estimates for 401(k) Participants

The SECURE Act requires plan sponsors to provide plan participants with certain projections designed to increase awareness of their accounts’ income-producing potential. Under the DOL interim final rule implementing this law, 401(k) plans and other ERISA-covered defined contribution plans must show plan participants the estimated monthly payment they could receive based upon their account balance and life expectancy. For more information on how the DOL has interpreted the law, visit Tax Facts Online. Read More

Health FSA Checkup: Understanding the Facts to Make the Most of FSAs in the COVID Era

Tax-friendly health payment options may be more important than ever in the wake of the COVID-19 global health emergency. Employees should take the time to gain an understanding of the benefits and limitations of various options. Health flexible spending accounts (FSAs) allow employees to save up to $2,750 (in 2020) pre-tax for use on health expenses incurred during the year. At the plan’s discretion, up to $550 can be carried over to 2021. Because of the “use it or lose it” rule, it’s important for clients to understand just when their health expenses are deemed incurred. To learn more about health FSAs, visit Tax Facts Online. Read More

Texas A&M University School of Law’s online wealth and international tax risk management graduate curricula for industry professionals has attracted over 160 enrollment this fall semester. Apply now for courses that begin January 11 spring semester. See the international tax course list by > weekly topic here. <

Texas A&M, annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space!

 

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Byrnes & Bloink’s TaxFacts Intelligence (October 5, 2020)

Posted by William Byrnes on October 5, 2020


Byrnes & Bloink’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.

  • all Tax Facts books
  • Tax Facts Intelligence weekly newsletters
  • weekly strategy articles for client advisory
  • weekly transcribed debate discussion for client soft-skill discussion
  • among other weekly client advisory critical updates

Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

 

Prof. William H. Byrnes
        Robert Bloink, J.D., LL.M.

This week we see a reminder from the IRS on tax treatment of unemployment compensation. This may be especially important this year with a large number of people receiving unemployment benefits, and the benefit levels being raised considerably for several months to deal with the COVID pandemic. Because withholding is not mandated, there is a greater risk of taxpayers owing a lot of money next year for unemployment benefits received this year.

IRS Reminder on Tax Treatment of Unemployment Compensation

In response to the fact that an unprecedented number of Americans are currently claiming unemployment benefits, the IRS has issued a reminder that these benefits are fully taxable. However, the IRS reminds taxpayers that withholding is completely optional. Taxpayers can elect to have a flat 10% withheld from their unemployment compensation and paid over automatically to the IRS. For more information on the rules for making estimated payments, visit Tax Facts Online. Read More

Proposed Regs on Post-TCJA Qualified Plan Loan Offsets

The IRS proposed regulations help clients with timing for rollover of qualified plan loan offset amounts. The ability to take a qualified plan loan can offer a valuable source of funding in an emergency. However, plan loans are governed by strict repayment rules. Violations can result in the participant’s account balance being reduced (offset) to repay the unpaid balance (after which it is treated as a taxable distribution). These rules are problematic if the employee is terminated or if the plan itself is terminated. TCJA gave these employees extra time to roll over qualified plan loan amounts to prevent unintended consequences. Instead of the 60-day rollover period, the borrower has until the income tax filing deadline to rollover the offset amount. The regulations provide that if the taxpayer files on time, an additional six-month window to complete the rollover will apply even if the taxpayer doesn’t request the extension. For more information, visit Tax Facts Online. Read More

October 15 Deadline for Creditable Coverage Notice

Medicare-eligible individuals who do not enroll in Medicare Part D when first available, but who enroll later, must pay higher premiums permanently unless they have creditable prescription drug coverage. Higher premiums apply if the individual goes at least 63 consecutive days without creditable coverage. To help avoid this, employers are required to provide notice each year as to whether employer-provided coverage is creditable. This year, these notices are due by October 15, 2020. For more information on the creditable coverage requirement, visit Tax Facts Online. Read More

Texas A&M University School of Law’s online wealth and international tax risk management graduate curricula for industry professionals has attracted over 160 enrollment this fall semester. Apply now for courses that begin January 11 spring semester. See the international tax course list by > weekly topic here. <

Texas A&M, annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space!

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Byrnes & Bloink’s TaxFacts Intelligence (October 2, 2020)

Posted by William Byrnes on October 2, 2020


Byrnes & Bloink’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.

  • all Tax Facts books
  • Tax Facts Intelligence weekly newsletters
  • weekly strategy articles for client advisory
  • weekly transcribed debate discussion for client soft-skill discussion
  • among other weekly client advisory critical updates

Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

 

Prof. William H. Byrnes
        Robert Bloink, J.D., LL.M.

We don’t normally cover a lot from the EEOC here at Tax Facts, but this week has some relevant guidance pertaining to ending telework options. Right now companies are sending mixed signals about returning the office work, and it looks like the EEOC is recognizing that the situation may be different for different employers. We also have updates on using 401(k) funds for adoption expenses and Roth IRA conversions in the COVID era.

EEOC Confirms: Employers Are Not Required to Permit Telework Forever

The EEOC released guidance last week clarifying that employers who have permitted employees to work remotely during the pandemic are not required to continue to permit telework indefinitely. The EEOC guidance clarifies that the rules haven’t changed, so that employers are not required to continue to permit telework as a “reasonable accommodation” under the law. However, an employee’s ability to successfully complete all essential job requirements remotely may be a factor in considering whether a request for remote work is reasonable. For more information, visit Tax Facts Online. Read More

IRS Provides Guidance on Exception for 401(k) Withdrawals for Qualified Birth or Adoption

The SECURE Act amended the IRC to allow qualified plan participants to withdraw up to $5,000 for a qualified birth or adoption without becoming subject to the 10% penalty on early distributions. The distribution must be taken within the one-year period following the birth or adoption. For more information, visit Tax Facts Online. Read More

Enhanced Benefits of Roth Conversions in the COVID-19 Era

Clients who have been considering a Roth conversion might want to take a second look, as 2020 has created a unique opportunity for clients to maximize the value of the Roth conversion strategy. The combination of relatively low tax rates and the potential for future tax hikes might make 2020 the ideal time to convert. Clients who convert traditional retirement funds to a Roth opt to pay income taxes on retirement funds now in exchange for a source of tax-free income in the future. With the federal deficit skyrocketing and the election just around the corner, it’s widely expected that tax rates will be higher in the near future than they are today. Clients might consider taking action to “lock in” 2020 tax rates by converting to a Roth. For more information about the details of a Roth conversion strategy, visit Tax Facts Online. Read More

Texas A&M University School of Law’s online wealth and international tax risk management graduate curricula for industry professionals has attracted over 160 enrollment this fall semester. Apply now for courses that begin January 11 spring semester. See the international tax course list by > weekly topic here. <

Texas A&M, annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space!

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Byrnes & Bloink’s TaxFacts Intelligence (September 30, 2020)

Posted by William Byrnes on September 30, 2020


Texas A&M University School of Law’s online wealth and international tax risk management graduate curricula for industry professionals has attracted over 160 enrollment this fall semester. Apply now for courses that begin January 11 spring semester. See the international tax course list by > weekly topic here. <

Texas A&M, annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space!

 

Prof. William H. Byrnes
        Robert Bloink, J.D., LL.M.

Happy October Fest! Several states now allow employers to use federal forms (1094-C and 1095-C) for state reporting requirements. This may be the beginning of an interesting trend towards simplification of state filing requirements. Obviously, not everything from a federal filing translates directly into state filings (for example, many states treat pension income differently in an attempt to lure retirees), but often much of the information that is filed for a state is redundant to the respective federal forms.

California Allows Employers to Use Federal Forms 1094-C and 10-95-C. Will Other States Follow?

California and several other states have imposed their own state-level individual mandates that closely resemble the Affordable Care Act mandate (now reduced to $0). California’s mandate became effective in 2020. Recently, the state announced that employers can satisfy their state-level reporting responsibilities using the same forms that apply for federal purposes. Employers who offer health insurance to California residents must now also submit their Forms 1094-C and 1095-C to the state franchise tax board (as well as the IRS under federal rules that continue to require employer reporting). Currently, however, the state-level forms must be filed by January 31. Historically, the IRS has extended the federal deadline to March 2. Employers should continue to pay close attention to ensure both state and federal requirements are satisfied. For more information on the employer reporting obligations, visit Tax Facts Online. Read More

PBGC CARES Act Relief for Defined Benefit Plans

Sponsors of defined benefit plans are generally required to pay premiums annually to the PBGC. Calculating the premium amount is complex. The CARES Act extended the deadline for making a 2019 defined benefit contribution until January 1, 2021. However, according to PBGC guidance, these contributions must be made by October 15, 2020 in order to be included in calculating the variable portion of the plan sponsor’s PBGC premium. Contributions paid before January 1, 2021 are not considered late, so the plan sponsor does not have to worry about incurring any additional filing obligations. For more information on the defined benefit plan funding rules, visit Tax Facts Online. Read More

Updated Model Safe Harbor Notice for Rollover Transactions

Retirement plan qualification rules periodically require employers to provide notice to participants who are eligible to take rollover distributions. In Notice 2020-62, the IRS released an updated safe harbor model notice that taxpayers can use under Section 402(f). That notice identifies several types of new distributions that are not eligible for rollover. This model notice can be modified, but is generally required for all 401(k), 403(b) and 457 plans that make distributions that are eligible for rollover to another retirement account. For more information on the notice requirements, visit Tax Facts Online. Read More

 

Byrnes & Bloink’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.

  • all Tax Facts books
  • Tax Facts Intelligence weekly newsletters
  • weekly strategy articles for client advisory
  • weekly transcribed debate discussion for client soft-skill discussion
  • among other weekly client advisory critical updates

Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

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Byrnes & Bloink’s TaxFacts Intelligence (September 28, 2020)

Posted by William Byrnes on September 28, 2020


Texas A&M University School of Law’s online wealth and international tax risk management graduate curricula for industry professionals has attracted over 160 enrollment this fall semester. Apply now for courses that begin January 11 spring semester. See the international tax course list by > weekly topic here. <

Texas A&M, annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space!

 

Prof. William H. Byrnes
        Robert Bloink, J.D., LL.M.

The big news this week: A New York federal court vacated four DOL rules implementing the FFCRA paid leave provisions. The CARES Act provided relief to IRA owners by eliminating the need to take required minimum distributions for 2020. This relief also extends to certain beneficiaries of inherited accounts.

NY Federal Court Vacates Four Aspects of the DOL FFCRA Guidance

A New York federal court vacated four DOL rules implementing the FFCRA paid leave provisions. The court struck down the DOL “work availability” rule, meaning that employers may be eligible for paid leave even if there is no work available (assuming they meet the criteria for paid leave). The court also vacated the DOL definition of “healthcare provider” and partially invalidated the “intermittent leave” rules. Now, New York employers cannot require employees to gain consent for intermittent leave. Finally, the court ruled that employers cannot condition FFCRA leave on advance employee documentation of the details leading to the need for paid leave. Employers located in New York (and elsewhere) should review their policies and consult with advisors to determine the best course of action in light of the new uncertainty. For more information on the FFCRA paid leave rules, visit Tax Facts Online. Read More

IRS PLR Allows Employees to Allocate Contributions Between HRAs and a Profit Sharing Plan

The IRS recently blessed an amendment to a profit sharing plan that would also permit employees to make HRA contributions. The issue up for consideration was whether a profit sharing plan covering collectively bargained employees could be amended to allow participants to allocate contributions toward HRAs and the plan on an annual schedule (a default would apply in the absence of an election). The IRS found that the proposed amendment would not cause the plan to be treated as a 401(k), because it would not create an opportunity for participants to elect cash or to use the contributions to pay for taxable benefits. Therefore, the profit sharing plan would not offer a cash or deferred arrangement under IRC Section 401. The IRS also found that the arrangement would not violate the HRA rules. For more information on the profit sharing plan qualification rules, visit Tax Facts Online. Read More

Understanding CARES Act Relief for Inherited IRA Beneficiaries

The CARES Act provided relief to IRA owners by eliminating the need to take required minimum distributions for 2020. This relief also extends to certain beneficiaries of inherited accounts. Under pre-SECURE Act rules, certain inherited IRA beneficiaries were required to drain the account within five years of the original account owner’s death. Now, the CARES Act provides that if 2020 was one of those five years, it is not counted—essentially extending the distribution period to six years. This gives IRA beneficiaries the benefit of tax-free IRA growth for an additional year. For more information on the RMD rules for inherited IRAs, visit Tax Facts Online. Read More

Byrnes & Bloink’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.

  • all Tax Facts books
  • Tax Facts Intelligence weekly newsletters
  • weekly strategy articles for client advisory
  • weekly transcribed debate discussion for client soft-skill discussion
  • among other weekly client advisory critical updates

Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

Posted in Retirement Planning, Taxation, Wealth Management | Tagged: | Leave a Comment »

Byrnes & Bloink’s TaxFacts Intelligence (September 24, 2020)

Posted by William Byrnes on September 24, 2020


Texas A&M University School of Law’s online wealth and international tax risk management graduate curricula for industry professionals has attracted over 160 enrollment this fall semester. Apply now for courses that begin January 11 spring semester. See the international tax course list by > weekly topic here. <

Texas A&M, annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space!

 

Prof. William H. Byrnes
        Robert Bloink, J.D., LL.M.

The big news this week: A couple of COVID-related updates from the IRS. First, we have some guidance on the refundable FFCRA employment tax credits. We also some additional leeway is given on mid-year changes to 401(k), which again may be important if employers have seen the contribution patterns for their plans shift dramatically and are now concerned about being about pass nondiscrimination testing for the year. Both of these are fairly technical issues but may be important issues for employers as we approach the end of the year.

Employers Beware: IRS Guidance on Recapture of Excess FFCRA Employment Tax Credits

The IRS released rules providing for the recapture of refundable employment tax credits under CARES and FFCRA. Form 7200 now allows employees to claim advance payments of any amounts remaining. However, the IRS guidance makes clear that employers are required to reconcile any advance payments claimed on Form 7200 with total credits claimed and total taxes due on their employment tax returns. For more information on the credits, visit Tax Facts Online. Read More

Understanding IRS Relief for Safe-Harbor 401(k) Plans

In Notice 2020-52, the IRS provided relief allowing certain safe harbor plans to institute mid-year amendments to reduce or suspend safe harbor contributions. Safe harbor plans generally require employer matching contributions in exchange for exemption from the onerous 401(k) nondiscrimination testing rules. Even when employers are permitted to make changes mid-year, they must provide notice at least 30 days in advance. Under the IRS relief, the IRS clarified that contributions for highly-compensated employees are not safe harbor contributions–so they can always be reduced or suspended. The Notice also allows plan amendments reducing or suspending safe harbor contributions to non-highly compensated employees so long as they are made by August 31, 2020. To learn more about safe harbor plans, visit Tax Facts Online. Read More

Appeals Court Blesses Trump-Era Short-Term Health Insurance Plans

The D.C. Circuit Court of Appeals upheld the joint rule released by the DOL, Treasury and HHS that relaxed restrictions on short-term limited-duration insurance (STLDI) health plans. These plans are not required to satisfy the ACA requirements, including those that govern minimum essential health coverage. For more information on STLDI, visit Tax Facts Online. Read More

Byrnes & Bloink’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.

  • all Tax Facts books
  • Tax Facts Intelligence weekly newsletters
  • weekly strategy articles for client advisory
  • weekly transcribed debate discussion for client soft-skill discussion
  • among other weekly client advisory critical updates

Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

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Byrnes & Bloink’s TaxFacts Intelligence (September 21, 2020)

Posted by William Byrnes on September 21, 2020


Texas A&M University School of Law’s online wealth and international tax risk management graduate curricula for industry professionals has attracted over 160 enrollment this fall semester. Apply now for courses that begin January 11 spring semester. See the international tax course list by > weekly topic here. <

Texas A&M, annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space!

 

Prof. William H. Byrnes
        Robert Bloink, J.D., LL.M.

The big news this week: One complication to the FFCRA and FMLA leave changes introduced by the CARES Act is the issue of W-2 reporting. While it’s not front-and-center in everyone’s mind right now, reporting season will come around again before you know it and the IRS has new guidance about how those types of leave should appear on an employee’s W-2. We also see updates on the Section 199A deduction for REIT shareholders and Premium Tax Credit-Related Inflation Adjustments for 2021.

IRS Provides Guidance on W-2 Reporting of FFCRA Paid Sick Leave and Expanded FMLA Leave

The Families First Coronavirus Response Act (FFCRA) requires smaller employers (under 500 employees) to provide paid sick leave and expanded FMLA leave for COVID-19-related reasons. IRS guidance requires W-2 reporting of those payments that provides important clarity for self-employed taxpayers. Self-employed taxpayers can claim a tax credit for FFCRA sick leave amounts. If they receive any FFCRA pay as an employee, they must reduce their credit amount by the amount paid by the employee. Because of this, employers are required to separately state the paid leave portion of employee compensation on their Form W-2, in Box 14. The employer can also report the FFCRA pay on a separate statement included with the employee’s W-2 for 2020. If the W-2 is provided electronically, the separate statement must be provided in the same manner and at the same time. For more information, visit Tax Facts Online. Read More

IRS Final Rules Confirm: RIC Shareholders Receiving REIT Dividends Qualify for 199A Deduction

The IRS released final rules that allow dividends that a RIC shareholder receives from a REIT to qualify for the Section 199A deduction. These REIT dividends qualify for conduit treatment–so they are treated as though the shareholder received them directly. On the other hand, the treatment of qualified PTP income remains uncertain. The law itself states that directly received PTP income is eligible for the 20% deduction, but the IRS has not permitted similar conduit treatment for PTP income. This uncertainty could encourage more investors to invest directly in the PTP. For more information on the treatment of REIT dividends and PTP income in calculating the Section 199A deduction, visit Tax Facts Online. Read More

IRS Releases Premium Tax Credit-Related Inflation Adjustments for 2021

The IRS has released the Affordable Care Act (ACA) premium tax credit-related inflation-adjusted numbers for use in 2021. In 2021, the percentage used to determine whether an individual is eligible for employer-sponsored health insurance that is affordable is 9.83 percent (up from 9.78 percent in 2020). This means that if the individual is required to contribute more than 9.83 percent of his or her household income toward health insurance in 2021, he or she may be eligible for premium tax credit assistance. For more information on determining when health coverage is deemed affordable for ACA purposes, visit Tax Facts Online. Read More

 

Byrnes & Bloink’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

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  • all Tax Facts books
  • Tax Facts Intelligence weekly newsletters
  • weekly strategy articles for client advisory
  • weekly transcribed debate discussion for client soft-skill discussion
  • among other weekly client advisory critical updates

Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

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Byrnes & Bloink’s TaxFacts Intelligence Weekly (Wednesday July 22, 2020)

Posted by William Byrnes on July 22, 2020


Texas A&M University School of Law has launched its online international tax risk management graduate curricula for industry professionals.  Apply now for courses that begin August 23: International Tax Risk Management, Data, and Analytics; International Tax & Tax Treaties (complete list here

Texas A&M University is a public university, ranked in the top 20 universities by the Wall Street Journal / Times Higher Education university rankings, and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018).

 

Prof. William H. Byrnes
        Robert Bloink, J.D., LL.M.

 

The big news this week is the DOL’s new rules on fiduciary exemptions for rollover transactions. This plus the SEC’s Reg BI is starting to fill in the gaps for fiduciary rules since the DOL’s original Obama-era fiduciary rules were mostly invalidated through litigation. We also see new rules for COVID-related distributions and loans from qualified plans.

DOL Fiduciary Exemption: Application to Rollover Transactions

The new DOL proposed exemption for fiduciary advice specifically applies to rollover advice, assuming the circumstances qualify under the five-part test for determining whether the advisor is an investment advice fiduciary. However, the DOL commentary included with the proposed exemption makes clear that not every rollover triggers investment advice fiduciary status. For more information, visit Tax Facts Online. Read More

New Regs on Tax-Exempt Excise Tax Create Exceptions for Certain Individuals Performing Limited Services

To encourage continued volunteer work and avoid double-taxation, the proposed regulations contain some useful exceptions. An individual will not be subject to the 21 percent excise tax if the limited hours exception or non-exempt funds exception applies. For more information on the new exceptions, visit Tax Facts Online. Read More

Expanded Eligibility for CARES Act Retirement Distribution and Loan Relief
The IRS has expanded the list of individuals who qualify under the expanded distribution and loan rules to include anyone whose pay was reduced due to COVID-19 (regardless of whether hours were reduced or whether the individual was laid off). If a taxpayer was planning to start a new job and the start date was pushed back (or the offer was rescinded entirely) due to COVID-19, that taxpayer also qualifies for relief. Further, if a spouse or member of the plan participant’s household has suffered an enumerated impact, the participant becomes eligible for the expanded retirement account access. For more information, visit Tax Facts Online. Read More

 

Byrnes & Bloink’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.

  • all Tax Facts books
  • Tax Facts Intelligence weekly newsletters
  • weekly strategy articles for client advisory
  • weekly transcribed debate discussion for client soft-skill discussion
  • among other weekly client advisory critical updates

Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

Posted in Retirement Planning, Taxation | Tagged: | Leave a Comment »

Byrnes & Bloink’s TaxFacts Intelligence Special Edition for July 15, 2020 – Tax Filing and Tax Payments Due Today

Posted by William Byrnes on July 15, 2020


Texas A&M University School of Law has launched its online international tax risk management graduate curricula for industry professionals.  Apply now for courses that begin August 23: International Tax Risk Management, Data, and Analytics; International Tax & Tax Treaties (complete list here

Texas A&M University is a public university, ranked in the top 20 universities by the Wall Street Journal / Times Higher Education university rankings, and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018).

 

 

Prof. William H. Byrnes
        Robert Bloink, J.D., LL.M.

 

Back in April we sent out a special newsletter detailing all of the COVID-related tax changes that we had made to Tax Facts Online content up to that point. Not surprisingly, we have continued to see significant changes since then. This week we’re back with a second special newsletter detailing the changes that we have seen since April. Below are all of the changes made that are related to the Families First Coronavirus Response Act, the CARES Act (including the PPP program), and various regulations from the IRS and DOL. As always, log into Tax Facts Online for the full text of these updates and many others.

Families First Coronavirus Response Act: FFCRA Exemption for Very Small Business Clients

Generally, business owners with fewer than 50 employees can claim an exemption from the paid sick leave and expanded FMLA law if they can show that payment would jeopardize their business as a going concern. DOL FAQ have provided new details, which substantially narrow the availability of the exemption. To qualify, the employee must be taking leave to care for children because of COVID-19 and must satisfy one of three possible criteria to demonstrate that paid leave would jeopardize the business. The three conditions are: (1) providing leave would result in the small business expenses and financial obligations exceeding available business revenues, causing the business to stop operating at minimal capacity, (2) absence of the employee requesting leave would result in a substantial risk to the financial health or operational capabilities of the small business because of their specialized skills, knowledge of the business, or responsibilities; or (3) there are not sufficient workers who are able, willing, and qualified, and who will be available at the time and place needed, to perform the labor or services provided by the employee requesting paid leave, and these labor or services are needed for the small business to operate at a minimal capacity. For more information on the FFCRA paid leave requirements, visit Tax Facts Online. Read More

Families First Coronavirus Response Act: DOL FAQ Clarify Concurrent Use of FFCRA Leave

The FFCRA implemented a new paid sick leave law and expanded FMLA leave options for employees impacted by COVID-19. Many employers have independent policies in place that provide employees with leave options, and the DOL regulations raised questions about when the employer can require the employee to use that leave prior to, or concurrently with, FFCRA leave. Employers cannot require employees to use leave concurrently during the first two weeks of paid sick leave for non-childcare related reasons. Employers can, under some circumstances, require use of employee leave concurrently with expanded FMLA leave for childcare reasons. Employers are only eligible for tax credits with respect to leave paid out under the new law. If the employer requires the employee to use otherwise available employer-paid leave, the tax credit is unavailable with respect to that portion of the employee’s pay. For more information, visit Tax Facts Online. Read More

Families First Coronavirus Response Act: Employee Rights after FFCRA Leave

Employers are generally prohibited from retaliating against employees to take paid sick leave or expanded FMLA leave under the FFCRA. However, the law does not protect employees from layoffs or furloughs undertaken for other reasons, such as the general economic downturn. Exceptions exist for key employees and very small employers with fewer than 25 employees. The exception allows employers to refuse returning the employee to work in the same position if the employee took leave for childcare-related reasons, and all four of the following hardship conditions exist: (1) the position no longer exists due to economic or operating conditions that affect employment and due to COVID-19 related reasons during the period of leave; (2) the employer makes reasonable efforts to restore the employee to the same or an equivalent position; (3) the employer makes reasonable efforts to contact the employee if an equivalent position becomes available; and (4) the employer continues to make reasonable efforts to contact the employee for one year beginning either on the date the leave related to COVID-19 reasons concludes, or the date 12 weeks after the leave began, whichever is earlier. For more information on the FFCRA, visit Tax Facts Online. Read More

Families First Coronavirus Response Act: Moving to Reopen, Employers Begin Evaluating FFCRA Leave Provisions

Now that many more employers are beginning to evaluate whether to reopen as governments relax restrictions, those who have been closed for upwards of two months will have to evaluate whether they must provide paid leave under the FFCRA as COVID-19 continues to spread. The FFCRA paid sick leave and expanded FMLA provisions only applied to employers who continued to operate in the wake of the pandemic–employees who were simply laid off or furloughed were required to seek unemployment benefits. Upon first glance, the new paid leave requirements under the FFCRA seem to provide 12 weeks of paid time off for most small business employees. However, the benefit triggers differ depending on whether the employee is claiming (1) 80 hours paid sick leave or (2) expanded relief under the FMLA. For more information on the benefit triggers, visit Tax Facts Online. Read More

Families First Coronavirus Response Act and CARES Act: Qualifying Healthcare Expenses Eligible for Tax Credits Even for Furloughed Employees

The FFCRA and CARES Act each provide tax credits for employers who continue to pay employee wages through 2020. The amount of wages paid also includes qualifying health expenses that the employer pays on the employee’s behalf. Qualifying health expenses are amounts paid by the employer to maintain a group health plan if the amounts would be excluded from employees’ income under IRC Section 106(a). These expenses should generally be prorated between employees and based on the periods of coverage relating to the payment of wages. Health insurance plans, prescription drug plans, dental and vision plans, health FSAs, HRAs and most employee assistance plans should all qualify. Additionally, the IRS has confirmed that employers can claim the tax credits for qualified healthcare expenses, regardless of whether the employee is paid qualified wages during the same timeframe. As a result, employers who have furloughed employees, but continue to cover healthcare expenses, can claim a tax credit for those expenses. For more information, visit Tax Facts Online. Read More

CARES Act: Telehealth Coverage and HDHP/HSA Eligibility

In response to the evolving COVID-19 pandemic, the CARES Act further expands the pre-deductible services high deductible health plans (HDHPs) may offer. HDHPs are now permitted to cover the cost of telehealth services without cost to participants before the HDHP deductible has been satisfied. HDHPs providing telehealth coverage do not jeopardize their status as HDHPs. Plan members similarly retain the right to fund HSAs after taking advantage of cost-free telehealth services. Under normal rules, HDHPs cannot waive costs for anything other than certain preventative services without jeopardizing HDHP status. Remote health services can be provided under a safe harbor rule through December 31, 2021. For more information on the HDHP qualification rules, visit Tax Facts Online. Read More

CARES Act: Bonus Depreciation Fix, Amended Returns for Partnerships

The CARES Act provided retroactive relief to partnerships on multiple fronts, including by fixing the so-called “retail glitch” to allow businesses to take advantage of 100% bonus depreciation on qualified improvement property through 2022. Existing law may have prevented partnerships from filing amended Forms 1065 and Schedules K-1. Instead, partnerships would have been required to file an administrative adjustment request, so that partners would not have received relief until filing returns for the current tax year. Revenue Procedure 2020-23 allows partnerships to file amended returns and issue revised Schedules K-1 for 2018 and 2019 to take advantage of retroactive CARES Act relief (and, absent further guidance, even if they are not taking advantage of CARES Act relief). The relief applies for 2018 and 2019 as long as the original Forms 1065 and Schedules K-1 were filed/issued before April 13, 2020 (the date Rev. Proc. 2020-23 was released). Partnerships can file amended Form 1065 and Schedule K-1 (electronically or by mail), by checking the Form 1065 “amended return” box and writing “FILED PURSUANT TO REV PROC 2020-23” at the top. The same statement must be included in a statement attached to amended Schedules K-1 sent to partners. The amended returns must be filed/furnished to partners by September 30, 2020. For more information, visit Tax Facts Online. Read More

CARES Act: IRS Guidance on Business Interest Elections

The IRS gives businesses substantial flexibility in making and revoking elections related to business interest expense deductions under the CARES Act. A taxpayer may elect under Section 163(j)(10)(A)(iii) not to apply the 50 percent ATI limitation for a 2019 or 2020 taxable year (2020 only for partnerships). A taxpayer permitted to make the election makes the election not to apply the 50 percent ATI limitation by timely filing a federal income tax return or Form 1065 (or amendments) using the 30 percent ATI limitation. No formal statement is required to make the election. The taxpayer can then later revoke that election by filing an amended return or form. Similarly, to use 2019 ATI for 2020, the taxpayer merely files using 2019 ATI (and can then later revoke that election by filing a timely amended return or form). For more information, visit Tax Facts Online. Read More

CARES Act: IRS Allows Corporations to Use Prior Year AMT Credits Retroactively
The 2017 Tax Act generally repealed the corporate AMT, but also permitted corporations to continue claiming a minimum credit for prior year AMT paid. The credit can generally be carried forward to offset corporate tax liability in a later year. The CARES Act eliminates certain limitations that applied to the carryover provision, so that corporations can claim refunds for their unused AMT credits for the first tax year that began in 2018 (i.e., the corporation can take the entire amount of the refundable credit for 2018). The corporation must submit the application for refund before December 31, 2020 and, for convenience, the IRS has institutes a fax procedure for both AMT credit and NOL refund purposes. For more information, visit Tax Facts Online. Read More

CARES Act: Relief for Qualified Plan Loans
The CARES Act relaxed the rules to provide relief for qualified plan participants with existing plan loans. If a participant had an existing plan loan with a repayment obligation falling between March 27 and December 31, 2020, that repayment obligation was extended for one year. Any subsequent repayment obligations are to be adjusted to reflect this extension. For plan participants who are “qualifying individuals,” the plan loan limits were increased to the greater of $100,000 or 100% of the vested balance in the participant’s account. For more information, visit Tax Facts Online. Read More

CARES Act: Expanded Charitable Donation Deduction for 2020
The CARES Act made several changes designed to encourage charitable giving during the COVID-19 outbreak. For the 2020 tax year, the CARES Act amended IRC Section 62(a), allowing taxpayers to reduce adjusted gross income (AGI) by $300 worth of charitable contributions made in 2020 even if they do not itemize. Under normal circumstances, taxpayers are only permitted to deduct cash contributions to charity to the extent those donations do not exceed 60% of AGI (10% for corporations). The CARES Act lifts the 60% AGI limit for 2020. Cash contributions to public charities and certain private foundations in 2020 are not subject to the AGI limit. Individual taxpayers can offset their income for 2020 up to the full amount of their AGI, and additional charitable contributions can be carried over to offset income in a later year (the amounts are not refundable). The corporate AGI limit was raised to 25% (excess contributions also carry over to subsequent tax years). For more information, visit Tax Facts Online. Read More

CARES Act: IRS Releases Initial Q&A on Qualified Plan Loan & Distribution Provisions
The IRS released the first Q&A in what is likely to be a series of guidance on the CARES Act retirement-related provisions. One overarching issue is the IRS confirmation that plan sponsors can rely upon past guidance issued in response to Hurricane Katrina in 2005 and the RMD waiver in 2009 for help implementing the CARES Act provisions. Under initial guidance, individuals are only eligible for COVID-19 related distributions or loans if they themselves are impacted (qualification cannot currently be based on a spouse or dependent’s job loss). The Q&A also clarifies that increased loan limits are currently available between March 27, 2020 and September 22, 2020. Further, the guidance confirms that the loan and distribution relief is optional for plan sponsors–and sponsors can elect to adopt one provision and not another (including the loan repayment option). For more information on the CARES Act loan provisions, visit Tax Facts Online. Read More

CARES Act: Calculating Qualified Plan Loans and the One-Year Look-back Rule

The CARES Act allows plan sponsors to double the qualified plan loan limit for qualified individuals. Plan loans made between March 27, 2020 and September 23, 2020 are limited to the lesser of (1) $100,000 or (2) 100% of the participant’s vested account balance. Despite this, even if the individual is qualified, plan sponsors must remain aware of the one-year look-back rule. IN reality, the $100,000 limit is reduced by the excess of the employee’s highest outstanding plan loan balance during the one-year period ending on the day before the loan is made, over the employee’s outstanding balance of any plan loan on the date the loan is made (this calculation also includes loans from any other plans maintained by the employer or member of a controlled group). For more information on the qualified plan loan rules, visit Tax Facts Online. Read More

CARES Act: IRS Waives Physical Presence Requirement for Spousal Consent to Participant Benefit Elections

IRC Section 417 generally requires spousal consent to a waiver of a qualified joint and survivor annuity (QJSA), which includes the waiver of a QJSA as part of a participant’s request for a plan distribution or a plan loan (the availability of which were expanded under the CARES Act). The spousal consent must generally be witnessed by a plan representative or notary public in person (the physical presence requirement). Notice 2020-42 provides relief in permitting remote electronic notarization executed via live auto-video technology that satisfies any state-level requirements that apply to a notary public. The relief in Notice 2020-42 applies to any participant election that requires a signature to be witnessed in the physical presence of a plan representative or notary in 2020. For more information on spousal consent requirements, visit Tax Facts Online. Read More

CARES Act: IRS Expands RMD Waiver Relief for 2020

The CARES Act waived all RMD requirements for 2020. Despite this, the law was enacted after some taxpayers had already taken their 2020 RMDs early in the year. For those who took RMDs very early in the year, the 60-day rollover period had already expired. In response, the IRS announced that anyone who took a 2020 RMD is eligible to roll the funds back into their account penalty-free. The 60-day rollover period was extended through August 31, 2020, so clients still have only a limited amount of time in which to act. Further, the rollover does not count toward the otherwise applicable “one rollover per 12-month period” rule or the restriction on rollovers for inherited IRAs. For more information on the RMD rules, visit Tax Facts Online. Read More

Payroll Protection Program: Defining “Payroll Costs” for PPP

Taxpayers with fewer than 500 employees are eligible for new “payroll protection loans” administered via the Small Business Administration. In general, the loans may be forgiven (and amounts excluded from income for tax purposes) if used to cover payroll costs, which are defined in the CARES Act to include the sum of (A) payments of any compensation with respect to employees that is (1) salary, wage, commission, or similar compensation, (2) payment of cash tip or equivalent, (3) payment for vacation, parental, family, medical, or sick leave, (4) allowance for dismissal or separation, (5) payment required for the provisions of group health care benefits, including insurance premiums, (6) payment of any retirement benefit or (7) payment of State or local tax assessed on the compensation of employees; and (B) the sum of payments of any compensation to or income of a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment, or similar compensation that is not more than $100,000 in one year, as prorated for the covered period. Payroll costs exclude (1) compensation of an individual employee over $100,000 per year, as prorated for the covered period, (2) taxes imposed or withheld under chapters 21, 22, or 24 of the Internal Revenue Code of 1986 during the covered period, (3) any compensation of an employee whose principal place of residence is outside of the United States, (4) qualified sick leave wages for which a credit is allowed under the FFCRA or (5) qualified family leave wages for which a credit is allowed under the FFCRA. For more information, visit Tax Facts Online. Read More

Payroll Protection Program: The Finer Points of PPP Loan Forgiveness

Loan forgiveness offers powerful assistance to those small businesses who were actually able to receive Paycheck Protection Program loan funds. However, loan forgiveness is not without its costs. While amounts forgiven will not be included in income under the usual cancellation of indebtedness rules, business owners may not be entitled to their typical business deductions either. Notice 2020-32 clarifies that otherwise allowable deductions are disallowed if the payment of the expense (1) results in loan forgiveness under the PPP loan program and (2) the income associated with the loan forgiveness is excluded from income under CARES Act Section 1106(i). Although legislation proposed in Congress may change this result, small business clients should pay close attention to the potential future tax impact of loan forgiveness. For more information on implications of loan forgiveness, visit Tax Facts Online. Read More

Payroll Protection Program: Guidance on PPP Eligibility

The Treasury has updated its guidance related to the CARES Act Paycheck Protection Program (PPP) loan forgiveness requirements. The Treasury now notes that most companies with adequate sources of alternative liquidity are likely not eligible for the program. In order to qualify for the loans, PPP borrowers are now required to provide a good faith certification stating that current economic conditions and uncertainty make the loan necessary to support ongoing operations. While Treasury calls out public companies with substantial market value and access to the capital markets specifically, the guidance could also impact businesses who have adequate alternative liquidity to support operations. PPP borrowers who find they cannot make the certification in good faith are permitted to return the funds. For more information on the PPP loan rules, visit Tax Facts Online. Read More

Payroll Protection Program: Increased Flexibility for PPP Recipients

PPP loan forgiveness is determined based on how the small business client spent the loan proceeds. Under the PPPFA, at least 60% of the loan must be used for payroll costs (this 60% threshold was reduced from 75% under the CARES Act). Under the terms of the CARES Act, amounts used to cover eligible expenses could be forgiven if used during the eight-week period following the loan origination date. The PPPFA extended the eight-week period to 24 weeks from the date the lender made the first loan payment to the small business owner. Unless Congress acts again, the funds must all be spent by December 31, 2020 in order to be eligible for forgiveness. The amount forgiven can also be reduced if the employer made certain staffing cuts or cut employee compensation levels. The PPPFA gives employers until December 31, 2020 to bring workers back to work/restore wage levels and continue to qualify for loan forgiveness (extended from prior law, which set the deadline at June 30)). Read More

IRS, DOL Announce Extension of COBRA Election Period

Under normal circumstances, an individual has 60 days from the date when a COBRA qualifying event occurs to elect COBRA coverage (or make a new COBRA election). In light of the COVID-19 outbreak, the IRS and DOL have announced an extension of this 60-day window. The 60-day election window is essentially paused for relevant time periods that include March 1, 2020. The clock is stopped and will not resume until the end of the “outbreak period”. The outbreak period is defined as the window of time beginning March 1, 2020 and ending 60 days after the date that the COVID-19 national emergency is declared ended. The 45-day payment clock and 30-day grace period for late COBRA payments are also paused. For more information on the COBRA election rules, visit Tax Facts Online. Read More

DOL Releases New COBRA Notice in Light of Growing Employment Litigation

The DOL released a revised COBRA general notice and election notice on May 1, 2020, in response to increasing furloughs and layoffs in the wake of COVID-19–and a growing risk of employment litigation. Employers are not required to post the new notices, but may wish to in light of the evolving situation. These new notices add information about how Medicare eligibility impacts COBRA eligibility (highlighting the fact that COBRA coverage is usually secondary to Medicare). Employers who use the model notices are deemed to comply with COBRA notice requirements. For more information on COBRA coverage election requirements and COVID-19, visit Tax Facts Online. Read More

IRS Provides Relief for Cafeteria Plan Participants in Response to COVID-19

Under normal circumstances, cafeteria plans are not permitted to allow participants to make mid-year election changes except in limited situations. Notice 2020-29 permits employees to allow certain mid-year elections made during calendar year 2020 that would otherwise be impermissible, including changes to salary reduction contribution elections. The guidance also allows participants to revoke (or make) an election with respect to health and dependent care FSAs on a prospective basis during 2020 to respond to changing needs during the COVID-19 pandemic. Further, the guidance clarifies that the relief for high deductible health plans (HDHPs) and expenses related to COVID-19 (regarding an exemption for telehealth services) may be applied retroactively to January 1, 2020. For more information on the mid-year election rules for cafeteria plans, visit Tax Facts Online. Read More

IRS Makes Temporary & Permanent Changes to the FSA Grace Period Rules

IRS Notice 2020-33 and Notice 2020-29, released concurrently, provides relief with respect to unused funds in a flexible spending account. Under Notice 2020-29, if an employee has unused amounts remaining in a health FSA or a dependent care assistance program at the end of a grace period (or plan year) ending in 2020, a cafeteria plan may permit employees to apply those unused amounts to pay or reimburse medical care expenses or dependent care expenses incurred through December 31, 2020. Notice 2020-33 makes a change to the carryover rules that apply to health FSAs, so that the amount that can be carried over to the following year will equal 20 percent of the maximum inflation-indexed salary reduction amount under Section 125 (increasing the carryover amount from $500 to $550 for 2020). For more information on the rules governing health FSAs, visit Tax Facts Online. Read More

Treasury Allows Tax Credit for Employers Paying Health Expenses of Furloughed Workers

Clearing up confusion (and revising initial guidance), the Treasury has announced that if an employer continues to pay an employee’s health insurance costs during a furlough period, the employer is entitled to claim a tax credit with respect to those expenses. This is the case even if the employer is not currently paying the employee’s wages. The employee retention credit is generally equal to up to 50% of the employee wages and certain other qualifying expenses. For more information on the employee retention tax credit, visit Tax Facts Online. Read More

Required Business Expense Reimbursement in the Age of COVID-19

Some employers are now permitting employees to work from home–while others are requiring it. In some jurisdictions (California and Illinois, for example) employers are required to reimburse employees for employment expenses. This may create the need for employers to reimburse employees for the cost of maintaining a home office. Further, the FLSA does not permit an employer to require an employee to pay for business expenses if doing so would reduce the employee’s earnings to below the minimum wage. However, simply providing cash reimbursement may generate additional taxable income for the employee. The miscellaneous itemized deduction for expenses incurred in the “trade or business of being an employee” was suspended for 2018-2025. Employers may instead wish to consider a program where the employer leases or purchases the required equipment for the employee’s use. For more information on the impact of reimbursing business expenses, visit Tax Facts Online. Read More

Dependent Care FSAs Provide Flexibility in the Face of a Pandemic

With so many employees working from home–and scrambling to find childcare options as businesses begin to reopen–many employees rethinking contributions to dependent care FSAs. The rules governing changes to dependent care FSA contributions are more flexible than health FSAs. Employees are permitted to make mid-year changes in pre-tax contributions if their circumstances relating to the need for dependent care changes. Employees can reduce their contributions if they are working from home and do not need childcare, or can increase the contributions when they return to work and need to provide for increased childcare costs. Further, employees who have been furloughed and laid off might want to ask whether their plan contains a spend-down feature. These features are optional, but allow former employees to seek reimbursement for dependent care expenses incurred through the end of the tax year (even if their employment has been terminated). Employers have the option of adding a spend-down feature at any time. For more information on dependent care FSAs, visit Tax Facts Online. Read More

IRS Provides Relief for Employee Donations of Unused Sick, Vacation & PTO

The IRS has provided relief so that employees can forgo sick, vacation or personal leave because of the COVID-19 pandemic without adverse tax consequences. Under the guidance, an employer can make cash payments to charitable organizations that provide relief to victims of the COVID-19 pandemic in exchange for sick, vacation or personal leave which their employees forgo. Those amounts will not be treated as compensation and the employees will not be treated as receiving the value of the leave as income. Therefore, taxable income will not be increased, but the employee cannot claim a deduction for the leave donated to their employer. Employers, however, may deduct these cash payments as a business expense or as a charitable contribution deduction if the employer otherwise meets the respective requirements of either section. For more information on the charitable contributions, visit Tax Facts Online. Read More

Home Office Deductions in the Age of Covid-19

With so many taxpayers working from home—some indefinitely—do to Covid-19, many are likely wondering whether they can deduct their home office expenses. In short, traditional W-2 employees cannot deduct their home office expenses regardless of whether they would otherwise qualify for the deduction. The 2017 tax reform legislation eliminated this deduction for 2018-2025. Self-employed taxpayers can deduct expenses associated with maintaining a home office if the office is used regularly and exclusively as the taxpayer’s principal place of business (if the office is within the dwelling unit). A home office deduction is permitted for self-employed taxpayers with separate structures if the office/workspace is used “in connection with” the trade or business. For more information on the home office deduction, visit Tax Facts Online. Read More

 

Byrnes & Bloink’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.

  • all Tax Facts books
  • Tax Facts Intelligence weekly newsletters
  • weekly strategy articles for client advisory
  • weekly transcribed debate discussion for client soft-skill discussion
  • among other weekly client advisory critical updates

Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

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Byrnes & Bloink’s TaxFacts Intelligence Weekly (Monday July 12, 2020)

Posted by William Byrnes on July 12, 2020


Texas A&M University School of Law has launched its online international tax risk management graduate curricula for industry professionals.  Apply now for courses that begin August 23: International Tax Risk Management, Data, and Analytics; International Tax & Tax Treaties (complete list here

Texas A&M University is a public university, ranked in the top 20 universities by the Wall Street Journal / Times Higher Education university rankings, and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018).

 

Prof. William H. Byrnes
        Robert Bloink, J.D., LL.M.

This week we analyze the DOL’s new prohibited transactions exemption for fiduciaries, the DOL’s clarification of which parents are eligible for the FFCRA during the summer school recess when children are normally at home, and Congress’ new exemption for PPP Loan Forgiveness.

DOL Unveils New Prohibited Transaction Exemption (PTE) for Fiduciaries

The DOL has released its long-awaited follow-up to the 5th Circuit’s vacation of its 2016 fiduciary rule. The DOL proposed a new class exemption that grants relief for financial advisors and institutions who provide investment advice (including retirement-related advice) if the terms of the PTE are satisfied. Generally, fiduciaries who receive certain forms of commission with respect to investment advice can run afoul of the prohibited transaction rules unless an exemption applies. For more information on the new exemption, visit Tax Facts Online. Read More

DOL Clarifies FFCRA Eligibility for Parents Who Lack Summer Childcare

FFCRA leave is generally available to parents who cannot work because of childcare needs when the child’s usual place of care or school is closed or unavailable due to COVID-19. Now that schools are closed for summer, many have questioned their eligibility based on cancellations for summer camps, summer enrichment programs or other childcare alternatives. The DOL has clarified its original guidance to provide that an employee’s mere interest in a summer program that was cancelled is insufficient to establish FFCRA eligibility. For more information, visit Tax Facts Online. Read More

Congress Creates New Exemption to Preserve PPP Loan Forgiveness

PPPFA created an exemption to preserve loan forgiveness eligibility in the face of the reality that some employees may not be available or willing to return to work. Employers will not be subject to a proportionate reduction in loan forgiveness based on reductions that occur under either of two scenarios during February 15, 2020 and December 31, 2020. For more information, visit Tax Facts Online. Read More

 

Byrnes & Bloink’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.

  • all Tax Facts books
  • Tax Facts Intelligence weekly newsletters
  • weekly strategy articles for client advisory
  • weekly transcribed debate discussion for client soft-skill discussion
  • among other weekly client advisory critical updates

Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

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Byrnes & Bloink’s TaxFacts Intelligence Weekly (Friday June 26, 2020)

Posted by William Byrnes on June 26, 2020


Texas A&M University School of Law has launched its online wealth management, risk management, and international tax risk management graduate curricula for industry professionals.

Apply now for fall courses that begin in August: Enterprise Risk Analytics; Information Security Risk Management; Terrorism Risk Management; International Tax Risk Management, Data, and Analytics II; International Tax & Tax Treaties I and II; Securities Regulation; Investment & Portfolio Management; Financial Innovation (and Risk)

Texas A&M University is a public university, ranked in the top 20 universities by the Wall Street Journal / Times Higher Education university rankings, and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018).

 

Prof. William H. Byrnes
        Robert Bloink, J.D., LL.M.

 

This week the new ERISA E-disclosure safe harbor was finalized, we have some news on GRATs, and some additional COVID-related updates pertaining to PTO donations and the always loved (but often misunderstood!) home office deduction. How goes the home office for you, dear reader?

DOL Finalizes E-Disclosure Safe Harbor

The DOL finalized its e-disclosure safe harbor proposal, allowing electronic distribution of notices and disclosures required by ERISA. Under the safe harbor documents, retirement plans can deliver documents electronically by posting required documents on the plan sponsor’s website and furnishing notice of internet availability to participants via email. The sponsor can also send the documents directly via email to plan participants, whether in an attachment or in the body of the email. For more information on the new e-disclosure safe harbor, visit Tax Facts Online. Read More

9th Circuit Affirms GRAT Included in Decedent’s Estate

The Ninth Circuit recently confirmed that a decedent’s estate included the value of a grantor retained annuity trust because the decedent received annuity payments up until the date of her death. The decedent in this case died before the GRAT terminated, meaning that there was no actual transfer of the trust property. She had created the GRAT structure to transfer interests in a family business to her daughters, receiving a $302,529 annuity payment annually for 15 years. The business generated enough income so that the value of the partnership interest was not decreased by the monthly annuity payments. Under IRC Section 2036(a), because the decedent was still enjoying the economic benefit of the property at death, the entire value was included in her gross estate. The court rejected the argument that the value should be excluded because the statute does not specifically list “annuities” as property that may be pulled into the estate. For more information on the use of GRATs, visit Tax Facts Online. Read More

Home Office Deductions in the Age of Covid-19

With so many taxpayers working from home–some indefinitely–do to Covid-19, many are likely wondering whether they can deduct their home office expenses. In short, traditional W-2 employees cannot deduct their home office expenses regardless of whether they would otherwise qualify for the deduction. The 2017 tax reform legislation eliminated this deduction for 2018-2025. Self-employed taxpayers can deduct expenses associated with maintaining a home office if the office is used regularly and exclusively as the taxpayer’s principal place of business (if the office is within the dwelling unit). A home office deduction is permitted for self-employed taxpayers with separate structures if the office/workspace is used “in connection with” the trade or business. For more information on the home office deduction, visit Tax Facts Online. Read More

IRS Provides Relief for Employee Donations of Unused Sick, Vacation & PTO

The IRS has provided relief so that employees can forgo sick, vacation or personal leave because of the COVID-19 pandemic without adverse tax consequences. Under the guidance, an employer can make cash payments to charitable organizations that provide relief to victims of the COVID-19 pandemic in exchange for sick, vacation or personal leave which their employees forgo. Those amounts will not be treated as compensation and the employees will not be treated as receiving the value of the leave as income. For more information on the charitable contributions, visit Tax Facts Online. Read More

 

Byrnes & Bloink’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.

  • all Tax Facts books
  • Tax Facts Intelligence weekly newsletters
  • weekly strategy articles for client advisory
  • weekly transcribed debate discussion for client soft-skill discussion
  • among other weekly client advisory critical updates

Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

Posted in Retirement Planning, Taxation, Wealth Management | Tagged: , , , | Leave a Comment »

Tax Facts’ COVID Weekly by William Byrnes and Robert Bloink (June 22, 2020)

Posted by William Byrnes on June 23, 2020


Texas A&M University School of Law has launched its online wealth management, risk management, and international tax risk management graduate curricula for industry professionals.

Apply now for fall courses that begin in August: Enterprise Risk Analytics; Information Security Risk Management; Terrorism Risk Management; International Tax Risk Management, Data, and Analytics II; International Tax & Tax Treaties I and II; Securities Regulation; Investment & Portfolio Management; Financial Innovation (and Risk)

Texas A&M University is a public university and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018).

 

Prof. William H. Byrnes
        Robert Bloink, J.D., LL.M.

Yes, there are new PPP Rules that allow a lot more flexibility in qualifying for forgiveness. But this week we also have a number of new rules on employee benefits and compensation issues, including a Supreme Court decision on a defined benefits case.

Increased Flexibility for PPP Recipients

PPP loan forgiveness is determined based on how the small business client spent the loan proceeds. Under the PPPFA, at least 60 percent of the loan must be used for payroll costs (this 60 percent threshold was reduced from 75 percent under the CARES Act The PPPFA extended the eight-week period to twenty-four weeks from the date the lender made the first loan payment to the small business owner. Unless Congress acts again, the funds must all be spent by December 31, 2020 in order to be eligible for forgiveness. The amount forgiven can also be reduced if the employer made certain staffing cuts or cut employee compensation levels. The PPPFA gives employers until December 31, 2020 to bring workers back to work/restore wage levels and continue to qualify for loan forgiveness (extended from prior law, which set the deadline at June 30)). Read More

U.S. Supreme Court: DB Participants Lack Standing to Sue Fiduciaries When Payments are Unaffected

The U.S. Supreme Court has now ruled that ERISA-governed defined benefit plan participants lack standing to sue plan fiduciaries in situations where the participants’ own payments were not impacted. In this case, the plaintiffs sued alleging mismanagement of plan funds and self-dealing. However, the plaintiffs’ own fixed pension payments continued to be paid (the plan in this case was overfunded). The Court held that because the plaintiffs would not be impacted financially by the outcome of the case, they lacked standing to sue under Article III of the U.S. constitution. For more information on DB plan funding requirements, visit Tax Facts Online. Read More

New Foreign Earned Income Exclusion Rules

The bona fide residence test and physical presence test generally provide specific time requirements that apply to individuals claiming a tax exclusion for foreign-earned income. An otherwise qualified individual may still exclude foreign earned income for the period in which the individual was actually present in the foreign country even if the individual fails to meet the time requirements. For more information, visit Tax Facts Online. Read More

IRS Waives Physical Presence Requirement for Spousal Consent to Participant Benefit Elections

IRC Section 417 generally requires spousal consent to a waiver of a qualified joint and survivor annuity (QJSA), which includes the waiver of a QJSA as part of a participant’s request for a plan distribution or a plan loan (the availability of which were expanded under the CARES Act). The spousal consent must generally be witnessed by a plan representative or a notary public in person (the physical presence requirement). Notice 2020-42 provides relief in permitting remote electronic notarization executed via live auto-video technology that satisfies any state-level requirements that apply to a notary public. For more information on spousal consent requirements, visit Tax Facts Online. Read More

 

Byrnes & Bloink’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.

  • all Tax Facts books
  • Tax Facts Intelligence weekly newsletters
  • weekly strategy articles for client advisory
  • weekly transcribed debate discussion for client soft-skill discussion
  • among other weekly client advisory critical updates

Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

Posted in Retirement Planning, Taxation, Wealth Management | Tagged: , , , | Leave a Comment »

Tax Facts’ COVID Weekly by William Byrnes and Robert Bloink (June 15, 2020)

Posted by William Byrnes on June 17, 2020


Texas A&M University School of Law has launched its online wealth management, risk management, and international tax risk management graduate curricula for industry professionals.

Apply now for fall courses that begin in August: Enterprise Risk Analytics; Information Security Risk Management; Terrorism Risk Management; International Tax Risk Management, Data, and Analytics II; International Tax & Tax Treaties I and II; Securities Regulation; Investment & Portfolio Management; Financial Innovation (and Risk)

Texas A&M University is a public university and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018).

 

Prof. William H. Byrnes
        Robert Bloink, J.D., LL.M.

This week’s updates are primarily focused on employee benefits issues that have taken a turn during the COVID 19 era. First, dependent care FSAs can play an increasingly important role for employees who are facing dependent care costs that may be drastically different than what they had anticipated when they were considering their benefit elections in late 2019. New rules allow for mid-year changes to those elections. Also, employers who continue to pay for healthcare coverage for furloughed employees may be able to take advantage of certain tax credits. All this and more and your weekly Tax Facts Online updates!

New PPP Guidance

The Treasury has updated its guidance related to the CARES Act Paycheck Protection Program (PPP) loan forgiveness requirements. The Treasury now notes that most companies with adequate sources of alternative liquidity are likely not eligible for the program. In order to qualify for the loans, PPP borrowers are now required to provide a good faith certification stating that current economic conditions and uncertainty make the loan necessary to support ongoing operations. PPP borrowers who find they cannot make the certification in good faith are permitted to return the funds. For more information on the PPP loan rules, visit Tax Facts Online. Read More

Required Business Expense Reimbursement in the Age of COVID-19

Some employers are now permitting employees to work from home–while others are requiring it. In some jurisdictions (California and Illinois, for example) employers are required to reimburse employees for employment expenses. This may create the need for employers to reimburse employees for the cost of maintaining a home office. Further, the FLSA does not permit an employer to require an employee to pay for business expenses if doing so would reduce the employee’s earnings to below the minimum wage. For more information on the impact of reimbursing business expenses, visit Tax Facts Online. Read More

New Proposed Regs on UBTI Calculations for VEBAs and SUBs

The IRS proposed regulations address the treatment of unrelated business taxable income (UBTI) for certain tax-exempt entities, including VEBAs and SUBs. UBTI is income generated from an activity unrelated to the tax-exempt purpose of the entity. For more information, visit Tax Facts Online. Read More

 

Byrnes & Bloink’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.

  • all Tax Facts books
  • Tax Facts Intelligence weekly newsletters
  • weekly strategy articles for client advisory
  • weekly transcribed debate discussion for client soft-skill discussion
  • among other weekly client advisory critical updates

Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

 

Posted in Retirement Planning, Taxation, Wealth Management | Tagged: , , | Leave a Comment »

Tax Facts’ COVID Weekly by William Byrnes and Robert Bloink (June 8, 2020)

Posted by William Byrnes on June 8, 2020


Texas A&M University School of Law has launched its online wealth management, risk management, and international tax risk management graduate curricula for industry professionals.

Apply now for fall courses that begin in August: Enterprise Risk Analytics; Information Security Risk Management; Terrorism Risk Management; International Tax Risk Management, Data, and Analytics II; International Tax & Tax Treaties I and II; Securities Regulation; Investment & Portfolio Management; Financial Innovation (and Risk)

Texas A&M University is a public university and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018).

 

 Prof. William H. Byrnes
        Robert Bloink, J.D., LL.M.
This week we have new Treasury Guidance on the PPP loan forgiveness requirements. This guidance seems to be primarily aimed at the issue of the “necessity” of the loan, which continues to be somewhat murky. We also have updates on business expense reimbursement, which is an issue that has become more important with employees working from home and changing the pattern of their business expenditures.
New PPP Guidance

The Treasury has updated its guidance related to the CARES Act Paycheck Protection Program (PPP) loan forgiveness requirements. The Treasury now notes that most companies with adequate sources of alternative liquidity are likely not eligible for the program. In order to qualify for the loans, PPP borrowers are now required to provide a good faith certification stating that current economic conditions and uncertainty make the loan necessary to support ongoing operations. PPP borrowers who find they cannot make the certification in good faith are permitted to return the funds. For more information on the PPP loan rules, visit Tax Facts Online. Read More

Required Business Expense Reimbursement in the Age of COVID-19

Some employers are now permitting employees to work from home–while others are requiring it. In some jurisdictions (California and Illinois, for example) employers are required to reimburse employees for employment expenses. This may create the need for employers to reimburse employees for the cost of maintaining a home office. Further, the FLSA does not permit an employer to require an employee to pay for business expenses if doing so would reduce the employee’s earnings to below the minimum wage. For more information on the impact of reimbursing business expenses, visit Tax Facts Online. Read More

New Proposed Regs on UBTI Calculations for VEBAs and SUBs

The IRS proposed regulations address the treatment of unrelated business taxable income (UBTI) for certain tax-exempt entities, including VEBAs and SUBs. UBTI is income generated from an activity unrelated to the tax-exempt purpose of the entity. For more information, visit Tax Facts Online. Read More

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

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COVID Weekly by William Byrnes and Robert Bloink (Friday May 29, 2020)

Posted by William Byrnes on May 28, 2020


Texas A&M University School of Law has launched its online wealth management, risk management, and international tax risk management graduate curricula for industry professionals.

Apply now for fall courses that begin in August: Enterprise Risk Analytics; Information Security Risk Management; Terrorism Risk Management; International Tax Risk Management, Data, and Analytics II; International Tax & Tax Treaties I and II; Securities Regulation; Investment & Portfolio Management; Financial Innovation (and Risk)

Texas A&M University is a public university and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018).

 

 

 

 Prof. William H. Byrnes
        Robert Bloink, J.D., LL.M.
This week we have more information about the CARES Act, including details on qualified plan loans and health expenses paid by employers for furloughed workers. We also have the annual updates to the HSA numbers that will be in effect for 2021. How was your Memorial Day?
Calculating CARES Act Qualified Plan Loans & The One-Year Look-back Rule

The CARES Act allows plan sponsors to double the qualified plan loan limit for qualified individuals. Plan loans made between March 27, 2020 and September 23, 2020 are limited to the lesser of (1) $100,000 or (2) 100% of the participant’s vested account balance. Despite this, even if the individual is qualified, plan sponsors must remain aware of the one-year look-back rule For more information on the qualified plan loan rules, visit Tax Facts Online. Read More

2021 HSA Inflation-Adjustments

The IRS has released Revenue Procedure 2020-32 with the 2021 inflation adjusted amounts for taxpayers who contribute to health savings accounts (HSAs). For more information on the contribution limits that apply to HSAs, visit Tax Facts Online. Read More

Treasury Allows Tax Credit for Health Expenses of Furloughed Workers

Clearing up confusion (and revising initial guidance), the Treasury has announced that if an employer continues to pay an employee’s health insurance costs during a furlough period, the employer is entitled to claim a tax credit with respect to those expenses. This is the case even if the employer is not currently paying the employee’s wages. For more information on the employee retention tax credit, visit Tax Facts Online. Read More

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-087
4

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TaxFacts Covid-19 Weekly by William Byrnes and Robert Bloink (Friday May 22, 2020)

Posted by William Byrnes on May 22, 2020


Texas A&M University School of Law has launched its online wealth management, risk management, and international tax risk management graduate curricula for industry professionals. Apply now for fall courses that begin in August: Enterprise Risk Analytics; Information Security Risk Management; Terrorism Risk Management; International Tax Risk Management, Data, and Analytics II; International Tax & Tax Treaties I and II; Securities Regulation; Investment & Portfolio Management; Financial Innovation (and Risk) Texas A&M University is a public university and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018).

 

 Prof. William H. Byrnes
        Robert Bloink, J.D., LL.M.
This week brings two updates that may affect employee benefits. The first is that mid-year changes to cafeteria plan elections are permissible. This includes FSA and dependent care accounts, which may be important as both healthcare and childcare expenditures for many people are wildly different than what they had anticipated at the end of 2019. The IRS also made some temporary FSA changes permanent. Finally in some non-COVID updates (yes there is some!), the IRS released proposed rules that change how some administrative expenses incurred by trusts and estates can be deducted.
IRS Provides Relief for Cafeteria Plan Participants in Response to COVID-19

Under normal circumstances, cafeteria plans are not permitted to allow participants to make mid-year election changes except in limited situations. Notice 2020-29 permits employees to allow certain mid-year elections made during calendar year 2020 that would otherwise be impermissible, including changes to salary reduction contribution elections. For more information on the mid-year election rules for cafeteria plans, visit Tax Facts Online. Read More

IRS Makes Temporary & Permanent Changes to the FSA Grace Period Rules

IRS Notice 2020-33 and Notice 2020-29, released concurrently, provides relief with respect to unused funds in a flexible spending account. Under Notice 2020-29, if an employee has unused amounts remaining in a health FSA or a dependent care assistance program at the end of a grace period (or plan year) ending in 2020, a cafeteria plan may permit employees to apply those unused amounts to pay or reimburse medical care expenses or dependent care expenses incurred through December 31, 2020. Notice 2020-33 makes a change to the carryover rules that apply to health FSAs, so that the amount that can be carried over to the following year will equal 20 percent of the maximum inflation-indexed salary reduction amount under Section 125 (increasing the carryover amount from $500 to $550 for 2020). For more information on the rules governing health FSAs, visit Tax Facts Online. Read More

IRS Proposes Rules Allowing Deduction of Administrative Fees for Trusts & Estates

The IRS has released proposed regulations that would permit the deduction for certain administrative fees incurred by trusts and estates (including the S portion of an ESBT). The guidance addresses the treatment of these expenses in light of the suspension of all miscellaneous itemized deductions for 2018-2025 under the 2017 tax reform legislation. For more information on the tax treatment of trusts and estates, visit Tax Facts Online. Read More

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

Posted in Retirement Planning, Tax Policy, Taxation, Wealth Management | Tagged: , , | Leave a Comment »

TaxFacts Covid-19 Intelligence Weekly by William Byrnes and Robert Bloink (May 18, 2020)

Posted by William Byrnes on May 18, 2020


Texas A&M University School of Law has launched its online wealth management, risk management, and international tax risk management graduate curricula for industry professionals. Apply now for Summer courses that begin May: Legal Risk Management; Intro to Risk Management; FATCA & CRS Risk Management; International Tax Risk Management, Data, and Analytics I  Texas A&M University is a public university and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018).

 

 

 Prof. William H. Byrnes
        Robert Bloink, J.D., LL.M.

The devil is in the details, but where exactly? This week we are starting to see how the broad changes in the recent spate of COVID-19 legislation will be administered. We have new notices on loan forgiveness procedures (did you get your PPP loan yet?), COBRA and Medicare, and FFCRA paid leave issues.

The Finer Points of PPP Loan Forgiveness

Loan forgiveness offers powerful assistance to those small businesses who were actually able to receive Paycheck Protection Program loan funds. However, loan forgiveness is not without its costs. While amounts forgiven will not be included in income under the usual cancellation of indebtedness rules, business owners may not be entitled to their typical business deductions either. Notice 2020-32 clarifies that otherwise allowable deductions are disallowed if the payment of the expense (1) results in loan forgiveness under the PPP loan program and (2) the income associated with the loan forgiveness is excluded from income under CARES Act Section 1106(i). For more information on implications of loan forgiveness, visit Tax Facts Online. Read More

New Q&A on CARES Act Qualified Plan Loans & Distributions

The IRS released the first Q&A in what is likely to be a series of guidance on the CARES Act retirement-related provisions. One overarching issue is the IRS confirmation that plan sponsors can rely upon past guidance issued in response to Hurricane Katrina in 2005 and the RMD waiver in 2009 for help implementing the CARES Act provisions. Under initial guidance, individuals are only eligible for COVID-19 related distributions or loans if they themselves are impacted (qualification cannot currently be based on a spouse or dependent’s job loss). The Q&A also clarifies that increased loan limits are currently available between March 27, 2020 and September 22, 2020. Further, the guidance confirms that the loan and distribution relief is optional for plan sponsors–and sponsors can elect to adopt one provision and not another (including the loan repayment option). For more information on the CARES Act loan provisions, visit Tax Facts Online. Read More

New COBRA Notice in Light of Growing Employment Litigation

The DOL released a revised COBRA general notice and election notice on May 1, 2020, in response to increasing furloughs and layoffs in the wake of COVID-19–and a growing risk of employment litigation. Employers are not required to post the new notices, but may wish to in light of the evolving situation. These new notices add information about how Medicare eligibility impacts COBRA eligibility (highlighting the fact that COBRA coverage is usually secondary to Medicare). Employers who use the model notices are deemed to comply with COBRA notice requirements. For more information on COBRA coverage election requirements and COVID-19, visit Tax Facts Online. Read More

Moving to Reopen, Employers Begin Evaluating FFCRA Leave Provisions

Now that many more employers are beginning to evaluate whether to reopen as governments relax restrictions, those who have been closed for upwards of two months will have to evaluate whether they must provide paid leave under the FFCRA as COVID-19 continues to spread. The FFCRA paid sick leave and expanded FMLA provisions only applied to employers who continued to operate in the wake of the pandemic–employees who were simply laid off or furloughed were required to seek unemployment benefits. Upon first glance, the new paid leave requirements under the FFCRA seem to provide 12 weeks of paid time off for most small business employees. However, the benefit triggers differ depending on whether the employee is claiming (1) 80 hours paid sick leave or (2) expanded relief under the FMLA. For more information on the benefit triggers, visit Tax Facts Online. Read More

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

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Byrnes & Bloink’s Covid-19 TaxFacts Intelligence Weekly for May 7, 2020

Posted by William Byrnes on May 7, 2020


Texas A&M University School of Law has launched its online wealth management, risk management, and international tax risk management graduate curricula for industry professionals. Apply now for Summer courses that begin May: Legal Risk Management; Intro to Risk Management; FATCA & CRS Risk Management; International Tax Risk Management, Data, and Analytics I  Texas A&M University is a public university and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018).

 

 

 Prof. William H. Byrnes
        Robert Bloink, J.D., LL.M.

Some interesting updates this week. We already knew that NOLs could be applied retroactively under the CARES Act, but now it seems that corporate AMT credits (remember those?) can be, as well.

Also, the last item on extending the COBRA election period might end up being a big deal. Importantly, the election period (the period that you have to decide whether to take the COBRA benefits) has been extended for an unknown amount of time. There has always been a risk of “moral hazard” with the election period since you can wait to see if you need the coverage before making the decision to commit to paying the premiums. However, that risk seemed low when the election period had a hard cut-off at sixty days. Now the election period is extended to sixty days after the end of the COVID-19 national emergency, which doesn’t seem to be likely to occur anytime soon. It will be interesting to see how group health carriers react to this change.

CARES Act Provides NOL Relief for Struggling Businesses

The CARES Act allows corporations to carry back net operating losses (NOLs) incurred in 2018, 2019, and 2020 for five years (excluding offset to untaxed foreign earnings transition tax). Post-tax reform, these NOLs could only be carried forward. For tax years beginning prior to January 1, 2021, businesses can offset 100% of taxable income with NOL carryovers and carrybacks (the 80% taxable income limitation was lifted). With respect to partnerships and pass-through entities, the CARES Act amended the effective date for the new excess business loss rules created by the 2017 tax reform legislation. The new rules will only apply beginning in 2021 (rather than 2018). Pass-through taxpayers who have filed a return reflecting excess business losses will presumably be entitled to refund by filing an amended return, absent guidance to the contrary. For more information, visit Tax Facts Online. Read More

CARES Act Permits Penalty-Free Payroll Tax Deferral for Employers

The CARES Act allows both employers and independent contractors to defer payment of employer payroll taxes without penalty. Importantly, employers with fewer than 500 employees are entitled to withhold payroll taxes as an advance repayment of the tax credit for paid sick leave and expanded FMLA leave under the FFCRA. Under the CARES Act payroll tax deferral, employers are permitted to defer the employer portion of the payroll tax on wages paid through December 31, 2020 for up to two years. Payroll taxes are generally due in two installments under CARES: 50% by December 31, 2021 and the remaining 50% by December 31, 2022. Economic hardship is presumed, meaning the employer does not have to produce documentation establishing that COVID-19 impacted the business. Payroll tax deferral options apparently apply to all employers, regardless of size. However, employers who have loans forgiven under the CARES Act Payroll Protection Loan program are not eligible for the deferral. For more information, visit Tax Facts Online. Read More

CARES Act Employee Retention Tax Credit

The CARES Act creates a new refundable tax credit designed to help employers who retain employees during the COVID-19 health crisis. The credit is taken against employment taxes and is equal to 50% of the first $10,000 of qualified wages paid to the employee. The credit is available for calendar quarters where either (1) operations were either fully or partially suspended because of a government-issued order relating to COVID-19 or (2) the business’ gross receipts declined by more than 50% when compared to the same calendar quarter in 2019. For more information, visit Tax Facts Online. Read More

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

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Covid-19 Stimulus: Are Tax Credits or SBA Loan Forgiveness Better for a Small Business After IRS Denies Tax Deductions If Loan Forgiven (Notice 2020-32)?

Posted by William Byrnes on May 3, 2020


 

Professor William Byrnes of Texas A&M’s School of Law discusses the IRS’ Notice 2020-32 (issued April 30, 2020) denying tax deductions for payroll and other operational expenses for small business owners that take advantage of the tax-free loan forgiveness program (PPP) of the SBA. William Byrnes then presents an example when a small business may be better off using the combined Employee Retention Tax Credit (CARES Act), the Families First Act Tax Credit, and the deferral of payment of payroll tax instead of the SBA loan forgiveness.

See my article below this post for additional analysis: The IRS Just Issued Notice Denying Deductions for PPP Loan Forgiveness and Its Dead Wrong

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Byrnes & Bloink’s Covid-19 TaxFacts Weekly of April 24, 2020

Posted by William Byrnes on April 23, 2020


           Prof. William H. Byrnes
        Robert Bloink, J.D., LL.M.
More significant information about two of the most important changes to come out of the new legislation related to COVID-19.

The first update is an FAQ from the Department of Labor about the exemption from the expanded FMLA paid leave requirements for staff who are out of work for reasons related to a corona virus infection. The new law only applies to businesses with under 500 employees, but contains a vaguely-worded exemption for very small businesses with less than 50 employees and for whom the paid leave requirement would pose a hardship. While some commentators have thought that the exemption might be loosely interpreted to the point of being nearly automatic, the new FAQs require very small businesses to show particular kinds of challenges before the exemption applies.

We also have an update on the definition of “payroll costs” for small businesses applying for PPP loans. This definition is important because the calculation of those costs determine how large of a loan (which is potentially forgivable if certain requirements are met) the business is eligible for.

FFCRA Exemption for Very Small Business Clients

Generally, business owners with fewer than 50 employees can claim an exemption from the paid sick leave and expanded FMLA law if they can show that payment would jeopardize their business as a going concern. DOL FAQ have provided new details, which substantially narrow the availability of the exemption. For more information on the FFCRA paid leave requirements, visit Tax Facts Online. Read More

Telehealth Coverage and HDHP/HSA Eligibility

In response to the evolving COVID-19 pandemic, the CARES Act further expands the pre-deductible services high deductible health plans (HDHPs) may offer. HDHPs are now permitted to cover the cost of telehealth services without cost to participants before the HDHP deductible has been satisfied. For more information on the HDHP qualification rules, visit Tax Facts Online. Read More

Defining “Payroll Costs” for PPP

Taxpayers with fewer than 500 employees are eligible for new “payroll protection loans” administered via the Small Business Administration. In general, the loans may be forgiven (and amounts excluded from income for tax purposes) if used to cover payroll costs. For more information about how “payroll costs” are defined and calculated, visit Tax Facts Online. Read More

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Byrnes & Bloink’s Covid-19 TaxFacts Special Edition of April 20, 2020

Posted by William Byrnes on April 20, 2020


           Prof. William H. Byrnes
        Robert Bloink, J.D., LL.M.
Over the past few weeks Tax Facts has seen a tremendous number of updates that cover the new COVID-19 legislation and related administrative developments. Undoubtedly we will continue to see more of these updates in the weeks and months to come, but we thought now was good time to help our readers catch their breath a little bit by providing a summary of the changes that have been made. This special Tax Facts newsletter is intended to help you navigate through the entirety of the changes that have been made so that you can understand the full breadth of the new tax landscape.

These updates cover (1) the Families First Coronavirus Response Act, (2) the CARES Act, (3) IRS Notices related to the new legislation, and (4) newly released IRS and DOL FAQs that help taxpayers understand how the new rules will be implemented.
Take a look, and as always, check in with Tax Facts the absolute latest in the tax issues affecting insurance, investments, and employee benefits.

Families First Coronavirus Response Act: Paid Sick Leave Benefits for Small Business Employees

The Families First Coronavirus Response Act applies to private employers with fewer than 500 employees (and government employers), and makes several key changes to paid time off laws. The bill: (1) provides eighty hours’ additional paid sick leave for employees (pro-rated for part-time workers) and (2) expands FMLA protections. The additional paid sick leave is capped at $511 per day (total of $5,110) for employees who cannot go to work or telecommute because they (1) are experiencing COVID-19 symptoms and seeking a diagnosis, or (2) are subject to government-mandated quarantine or a recommendation to self-quarantine. The additional paid sick leave is capped at 2/3 of the employee’s pay rate, subject to a maximum of $200 per day or $2,000 total if the employee (1) is caring for or assisting someone subject to quarantine, (2) caring for a child whose school or care provider is unavailable or (3) experiencing “substantially similar conditions” specified by HHS. For more information on the family and medical leave tax credit available for business owners, visit Tax Facts Online. Read More

Families First Coronavirus Response Act: Tax Relief for Small Business Owners

The law contains a tax credit to help small business owners subject to the new paid sick leave and expanded FMLA requirements. The tax credit is computed each quarter, and allows as a credit (1) the amount of qualified paid sick leave wages paid in weeks 1-2, and (2) qualified FMLA wages paid (in the remaining ten weeks) during the quarter. The credit is taken against the employer portion of the Social Security tax. Amounts in excess of the employer Social Security taxes due will be refunded as a credit (in the same manner as though the employer had overpaid Social Security taxes during the quarter). The Act also provides a tax credit for qualified health plan expenses that are allocable to periods when the paid sick leave or family leave wages are paid. For more information on refundable tax credits, visit Tax Facts Online. Read More

CARES Act: RMDs Suspended for 2020, Penalty Waived for Coronavirus Distributions

The CARES Act suspended the required minimum distribution (RMD) rules for 2020–a suspension that applies to all 401(k), 403(b), and certain 457(b) deferred compensation plans maintained by the government, as well as IRAs. The law also contains a provision waiving the 10 percent early distribution penalty that applies to retirement account withdrawals. The relief generally mirrors the relief commonly granted in more localized natural disaster situations. The Act allows employees to take up to $100,000 in distributions from an employer-sponsored retirement plan (401(k), 403(b) or defined benefit plan) or an IRA without becoming subject to the penalty. Unless the participant elects otherwise, inclusion of the distribution in income is spread over three years, beginning with the tax year of distribution. The Act also provides a repayment option, where the participant has the option of repaying the distribution over the three-taxable year period beginning with the tax year of distribution. In this case, the distribution will be treated as an eligible rollover made in a trustee-to-trustee transfer within the sixty-day window. For more information on expanded access to retirement funds, visit Tax Facts Online. Read More

CARES Act: NOL Relief for Struggling Businesses

The CARES Act allows corporations to carry back net operating losses (NOLs) incurred in 2018, 2019, and 2020 for five years (excluding offset to untaxed foreign earnings transition tax). Post-tax reform, these NOLs could only be carried forward. For tax years beginning prior to January 1, 2021, businesses can offset 100% of taxable income with NOL carryovers and carrybacks (the 80 percent taxable income limitation was lifted). With respect to partnerships and pass-through entities, the CARES Act amended the effective date for the new excess business loss rules created by the 2017 tax reform legislation. The new rules will only apply beginning in 2021 (rather than 2018). Pass-through taxpayers who have filed a return reflecting excess business losses will presumably be entitled to refund by filing an amended return, absent guidance to the contrary. For more information, visit Tax Facts Online. Read More

CARES Act: Penalty-Free Payroll Tax Deferral for Employers

The CARES Act allows both employers and independent contractors to defer payment of employer payroll taxes without penalty. Importantly, employers with fewer than 500 employees are entitled to withhold payroll taxes as an advance repayment of the tax credit for paid sick leave and expanded FMLA leave under the FFCRA. Under the CARES Act payroll tax deferral, employers are permitted to defer the employer portion of the payroll tax on wages paid through December 31, 2020 for up to two years. Payroll taxes are generally due in two installments under CARES: 50 percent by December 31, 2021 and the remaining 50 percent by December 31, 2022. Economic hardship is presumed, meaning the employer does not have to produce documentation establishing that COVID-19 impacted the business. Payroll tax deferral options apparently apply to all employers, regardless of size. However, employers who have loans forgiven under the CARES Act Payroll Protection Loan program are not eligible for the deferral. For more information, visit Tax Facts Online. Read More

CARES Act: Employee Retention Tax Credit

The CARES Act creates a new refundable tax credit designed to help employers who retain employees during the COVID-19 health crisis. The credit is taken against employment taxes and is equal to 50 percent of the first $10,000 of qualified wages paid to the employee. The credit is available for calendar quarters where either (1) operations were either fully or partially suspended because of a government-issued order relating to COVID-19 or (2) the business’ gross receipts declined by more than 50 percent when compared to the same calendar quarter in 2019. For more information, visit Tax Facts Online. Read More

IRS Notice 2020-15: HDHPs Can Pay Coronavirus Costs

The IRS announced that high deductible health plans are permitted to cover the costs associated with the coronavirus. HDHPs can cover coronavirus-related testing and equipment needed to treat the virus. Generally, HDHPs are prohibited from covering certain non-specified expenses before the covered individual’s deductible has been met. Certain preventative care expenses are excepted from this rule. HDHPs will not jeopardize their status if they pay coronavirus-related expenses before the insured has met the deductible, and the insured will remain HSA-eligible. The guidance applies only to HSA-eligible HDHPs. For more information on the rules governing HDHPs, visit Tax Facts Online. Read More

IRS Notice 2020-18: 90-Day Extension of the Federal Tax Payment Deadline

In response to the coronavirus pandemic, the IRS has announced that it will extend the tax payment deadline from April 15, 2020 to July 15, 2020. Interest and penalties during this period will also be waived. The April 15 filing deadline was also extended to July 15, although in separate guidance. Individuals and pass-through business entities owing up to $1 million in federal tax are eligible for the relief, as are corporations owing up to $10 million in federal tax. Individuals who do not anticipate being able to file by July 15 should be aware of their option for requesting a six-month filing extension to October 15. The extension is available by filing Form 4868. For more information on federal tax filing requirements, visit Tax Facts Online. Read More

IRS Notice 2020-23: IRS Expands COVID-19 Extensions

Notice 2020-23 provides expanded relief for taxpayers with a filing or payment obligation arising after April 1, 2020 and before July 15, 2020. Specifically, deadlines are extended to July 15, 2020 for actions required with respect to (1) estate and trust income tax payments and return filings, (2) estate and generation-skipping transfer tax payments and return filings on Form 706 and related forms, (3) gift and generation-skipping transfer tax payments and return filings on Form 709 and related forms, (4) estate tax payments of principal or interest due as a result of an election made under IRC sections 6166, 6161, or 6163 and annual recertification requirements under section 6166. Similarly, taxpayers who faced deadlines with respect to Tax Court actions between April 1 and July 15 have their deadlines postponed until July 15. For more information, visit Tax Facts Online. Read More

IRS FAQ: COVID-19 Filing, Payment Extensions

The IRS FAQ clarifies that the filing and payment extensions (from April 15 to July 15) apply regardless of whether the taxpayer is actually sick or quarantined because of COVID-19. For fiscal year taxpayers with 2019 returns due April 15, the deadline is extended to July 15 regardless of whether April 15 is an original or extended filing deadline. Taxpayers facing filing or payment deadlines that are not April 15 must note that their deadlines have not generally been extended. The relief also does not apply to payroll or excise tax payments (deposit dates remain unchanged, but employers may be eligible for the new paid sick leave tax credit, see Tax Facts Q8550). Taxpayers do not have to do anything to take advantage of the extension—they simply file their returns and make required payments by the new July 15 deadline. Taxpayers who filed and schedule a payment for April 15 must, however, take action to reschedule their payment for July 15 if they wish (by contacting the credit or debit card company if the payment was scheduled directly with the card issuer). For more information, visit Tax Facts Online. Read More

DOL FAQ: Counting Employees for COVID-19 Paid Sick Leave & FMLA Expansion Purposes

A new DOL FAQ provides that an employer is subject to the expanded paid sick leave and FMLA rules if the employer has fewer than 500 full-time and part-time employees. Employees on leave and temporary employees should be included, while independent contractors are not included in the count. Each corporation is usually a single employer. When a corporation has an ownership interest in another corporation, the two are separate employers unless they are joint employers for Fair Labor Standards Act purposes. Joint employer status is based on a facts and circumstances analysis, and is generally the case when (1) one employer employs the employee, but another benefits from the work or (2) one employer employs an employee for one set of hours in a workweek, and another employer employs the same employee for a separate set of hours in the same workweek. For more information on the details provided by current DOL guidance, visit Tax Facts Online. Read More

DOL FAQ: Calculating Sick Pay for Part-Time and Variable Hour Workers Under the Families First Coronavirus Response Act

With respect to the FMLA extension, the rate of pay for part-time employees is based upon the number of hours they would normally be scheduled to work. For employees with variable schedules, pay is based upon a number equal to the average number of hours that the employee was scheduled per day over the 6-month period ending on the date on which the employee takes such leave, including hours for which the employee took leave of any type or (2) if the employee did not work over such period, the reasonable expectation of the employee at the time of hiring of the average number of hours per day that the employee would normally be scheduled to work. As of now, the law provides that leave may not be carried over into 2021. For more information on the law’s requirements, visit Tax Facts Online. Read More

2020’s Weekly Updated Tax Facts Offers a Complete Web, App-Based, and Print Experience for Financial Advisors and Tax Professionals

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

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Byrnes & Bloink’s Covid-19 TaxFacts Weekly for April 17, 2020

Posted by William Byrnes on April 16, 2020


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           Prof. William H. Byrnes
        Robert Bloink, J.D., LL.M.
More on the COVID-19 legislation and related administrative guidance from the DOL. This week we have updates on business interest deductions, student loan payment info, and DOL guidance on the PTO that was mandated by the new legislation. Are you keeping up?

 

CARES Act: Business Interest Deduction Relief

The CARES Act increases the 30% of adjusted taxable income (ATI) limit on the business interest deduction (as imposed under the 2017 tax reform law) to 50% for corporations in 2019 and 2020. All entities (corporations and pass-throughs) can elect to use 2019 ATI instead of 2020 ATI in determining the 2020 business interest expense deduction, which could increase the business interest deduction for businesses who are likely to see reduced income levels in 2020. For more information, visit Tax Facts Online. Read More

CARES Act Offers Tax-Preferred Student Loan Repayment Assistance Option

The CARES Act includes a provision that gives employers a way to offer tax-preferred student loan repayment assistance to employees. The Act changes the definition of “educational assistance” in IRC Section 127 to also include employer payments to employees of student loan principal or interest. The payments must currently be made before January 1, 2021. The maximum benefit permitted is a $5,250 payment in 2020 (tax-free). For more information on the requirements for establishing a tax-preferred education assistance program, visit Tax Facts Online. Read More

DOL Guidance on Notice Requirements Related to Expanded COVID-19 Paid Time Off

The DOL has released a notice that all employers must conspicuously post to give employees information about federal relief efforts related to COVID-19. The DOL FAQ notes that when employees are working remotely, employers can email or mail the relevant notices. The notice must be provided to all current employees, but only must be provided in English absent future guidance (a Spanish language notice is available on the DOL website). For more information on the COVID-19 relief efforts, visit Tax Facts Online. Read More

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

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SBA Information on How Much Money, To Whom, to Which States

Posted by William Byrnes on April 14, 2020


Byrnes and Bloink analyze the SBA loans, Tax Credit, and Retirement Planning Impact for Small Business because of Covid-19 economic stimulus (Families First, CARES Acts, IRS Notices) on Thursday, April 16th (Register now webinar)

Texas A&M University School of Law has launched a Covid-19 expert response team.  Listen to Professor Neal Newman and William discussing the Covid-19 SBA forgiveness loans, deferral on paying the employer’s Social Security tax, and the Employee Retention Tax Credit (YouTube). Find the response team members from all disciplines here: Download Texas A&M Coronavirus_Experts

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

Posted in Retirement Planning, Taxation, Uncategorized | Tagged: , , | Leave a Comment »

Byrnes & Bloink’s Covid-19 TaxFacts Intelligence Weekly for April 10, 2020

Posted by William Byrnes on April 10, 2020


Texas A&M University School of Law has launched its online wealth management, risk management, and international tax risk management graduate curricula for industry professionals. Apply now for Summer courses that begin May: Legal Risk Management; Intro to Risk Management; FATCA & CRS Risk Management; International Tax Risk Management, Data, and Analytics I  Texas A&M University is a public university and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018).

 

 

           Prof. William H. Byrnes
        Robert Bloink, J.D., LL.M.
Today we have three big updates from the newly-passed CARES Act. The first allows NOLs for tax years 2018 through 2020 to be carried back five years. This give business who had NOLs and were waiting to carry them forward to future tax years to apply them to past years, potentially resulting in additional tax refunds. The other two updates relate to deferrals and tax credits for payroll taxes in 2020.
CARES Act Provides NOL Relief for Struggling Businesses

The CARES Act allows corporations to carry back net operating losses (NOLs) incurred in 2018, 2019, and 2020 for five years (excluding offset to untaxed foreign earnings transition tax). Post-tax reform, these NOLs could only be carried forward. For tax years beginning prior to January 1, 2021, businesses can offset 100% of taxable income with NOL carryovers and carrybacks (the 80% taxable income limitation was lifted). With respect to partnerships and pass-through entities, the CARES Act amended the effective date for the new excess business loss rules created by the 2017 tax reform legislation. The new rules will only apply beginning in 2021 (rather than 2018). Pass-through taxpayers who have filed a return reflecting excess business losses will presumably be entitled to refund by filing an amended return, absent guidance to the contrary. For more information, visit Tax Facts Online. Read More

CARES Act Permits Penalty-Free Payroll Tax Deferral for Employers

The CARES Act allows both employers and independent contractors to defer payment of employer payroll taxes without penalty. Importantly, employers with fewer than 500 employees are entitled to withhold payroll taxes as an advance repayment of the tax credit for paid sick leave and expanded FMLA leave under the FFCRA. Under the CARES Act payroll tax deferral, employers are permitted to defer the employer portion of the payroll tax on wages paid through December 31, 2020 for up to two years. Payroll taxes are generally due in two installments under CARES: 50% by December 31, 2021 and the remaining 50% by December 31, 2022. Economic hardship is presumed, meaning the employer does not have to produce documentation establishing that COVID-19 impacted the business. Payroll tax deferral options apparently apply to all employers, regardless of size. However, employers who have loans forgiven under the CARES Act Payroll Protection Loan program are not eligible for the deferral. For more information, visit Tax Facts Online. Read More

CARES Act Employee Retention Tax Credit

The CARES Act creates a new refundable tax credit designed to help employers who retain employees during the COVID-19 health crisis. The credit is taken against employment taxes and is equal to 50% of the first $10,000 of qualified wages paid to the employee. The credit is available for calendar quarters where either (1) operations were either fully or partially suspended because of a government-issued order relating to COVID-19 or (2) the business’ gross receipts declined by more than 50% when compared to the same calendar quarter in 2019. For more information, visit Tax Facts Online. Read More

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text of final Covid-19 Senate Bill “Coronavirus Aid, Relief, and Economic Security Act’’ or the ‘‘CARES Act’’.

Posted by William Byrnes on March 25, 2020


2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Professor William Byrnes and Robert Bloink provide for subscribers weekly analysis of tax issues that impact wealth managers and financial planners. Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

 

Final Covid-19 Text of Bill for Senate Vote [PDF Link] Coronavirus Aid, Relief, and Economic Security Act’’ or the ‘‘CARES Act’’.

Tax and Benefits sections of Final Bill described below by Senate Finance Committee (March 25, 2020)

DIVISION A – KEEPING WORKERS PAID AND EMPLOYED, HEALTH CARE SYSTEM ENHANCEMENTS, AND ECONOMIC STABILIZATION

TITLE II—ASSISTANCE FOR AMERICAN WORKERS, FAMILIES, AND BUSINESSES

Subtitle A—Unemployment Insurance Provisions

Section 2101. Short Title
This title is called the Relief for Workers Affected by Coronavirus Act

Section 2102. Pandemic Unemployment Assistance
This section creates a temporary Pandemic Unemployment Assistance program through December 31, 2020 to provide payment to those not traditionally eligible for
unemployment benefits (self-employed, independent contractors, those with limited work history, and others) who are unable to work as a direct result of the coronavirus public health emergency.

Section 2103. Emergency Unemployment Relief for Governmental Entities and Nonprofit Organizations
This section provides payment to states to reimburse nonprofits, government agencies, and Indian tribes for half of the costs they incur through December 31, 2020 to pay
unemployment benefits.

Section 2104. Emergency Increase in Unemployment Compensation Benefits
This section provides an additional $600 per week payment to each recipient of unemployment insurance or Pandemic Unemployment Assistance for up to four months.

Section 2105. Temporary Full Federal Funding of the First Week of Compensable Regular Unemployment for States with No Waiting Week
This section provides funding to pay the cost of the first week of unemployment benefits through December 31, 2020 for states that choose to pay recipients as soon as they become unemployed instead of waiting one week before the individual is eligible to receive benefits.

Section 2106. Emergency State Staffing Flexibility
This section provides states with temporary, limited flexibility to hire temporary staff, rehire former staff, or take other steps to quickly process unemployment claims.

Section 2107. Pandemic Emergency Unemployment Compensation
This section provides an additional 13 weeks of unemployment benefits through December 31, 2020 to help those who remain unemployed after weeks of state unemployment benefits are no longer available.

Section 2108. Temporary Financing of Short-Time Compensation Payments in States with Programs in Law
This section provides funding to support “short-time compensation” programs, where employers reduce employee hours instead of laying off workers and the employees with reduced hours receive a pro-rated unemployment benefit. This provision would pay 100 percent of the costs they incur in providing this short-time compensation through December 31, 2020.

Section 2109. Temporary Financing of Short-Time Compensation Agreements
This section provides funding to support states which begin “short-time compensation” programs. This provision would pay 50 percent of the costs that a state incurs in providing short-time compensation through December 31, 2020.

Section 2110. Grants for Short-Time Compensation Programs
This section provides $100 million in grants to states that enact “short-time compensation” programs to help them implement and administer these programs.

Section 2111. Assistance and Guidance in Implementing Programs
This section requires the Department of Labor to disseminate model legislative language for states, provide technical assistance, and establish reporting requirements related to “shorttime compensation” programs.

Section 2112. Waiver of the 7-day Waiting Period for Benefits under the Railroad Unemployment Insurance Act
This section temporarily eliminates the 7-day waiting period for railroad unemployment insurance benefits through December 31, 2020 (to make this program consistent with the change made in unemployment benefits for states through the same period in an earlier section of this subtitle).

Section 2113. Enhanced Benefits under the Railroad Unemployment Insurance Act
This section provides an additional $600 per week payment to each recipient of railroad unemployment insurance or Pandemic Unemployment Assistance for up to four months (to make this program consistent with the change made in unemployment benefits for states in an earlier section of this subtitle).

Section 2114. Extended Unemployment under the Railroad Unemployment Insurance Act
This section provides an additional 13 weeks of unemployment benefits through December 31, 2020 to help those who remain unemployed after weeks of regular unemployment benefits are no longer available (to make this program consistent with the change made in unemployment benefits for states in an earlier section of this subtitle).

Section 2115. Funding for the Department of Labor Office of Inspector General for Oversight of Unemployment Provisions
This section provides the Department of Labor’s Inspector General with $25 million to carry out audits, investigations, and other oversight of the provisions of this subtitle.

Section 2116. Implementation
This section gives the Secretary of Labor the ability to issue operating instructions or other guidance as necessary in order to implement this subtitle, as well as allows the Department of Labor to waive Paperwork Reduction Act requirements, speeding up their ability to gather necessary information from states.

Subtitle B – Rebates and Other Individual Provisions

Section 2201. 2020 recovery rebates for individuals
All U.S. residents with adjusted gross income up to $75,000 ($150,000 married), who are not a dependent of another taxpayer and have a work eligible social security number, are eligible for the full $1,200 ($2,400 married) rebate. In addition, they are eligible for an additional $500 per child. This is true even for those who have no income, as well as those whose income comes entirely from non-taxable means-tested benefit programs, such as SSI benefits.

For the vast majority of Americans, no action on their part will be required in order to receive a rebate check as IRS will use a taxpayer’s 2019 tax return if filed, or in the
alternative their 2018 return. This includes many low-income individuals who file a tax return in order to take advantage of the refundable Earned Income Tax Credit and Child Tax Credit. The rebate amount is reduced by $5 for each $100 that a taxpayer’s income exceeds the phase-out threshold. The amount is completely phased-out for single filers with incomes exceeding $99,000, $146,500 for head of household filers with one child, and $198,000 for joint filers with no children.

Section 2202. Special rules for use of retirement funds
Consistent with previous disaster-related relief, the provision waives the 10-percent early withdrawal penalty for distributions up to $100,000 from qualified retirement accounts for coronavirus-related purposes made on or after January 1, 2020. In addition, income attributable to such distributions would be subject to tax over three years, and the taxpayer may recontribute the funds to an eligible retirement plan within three years without regard to that year’s cap on contributions. Further, the provision provides flexibility for loans from certain retirement plans for coronavirus-related relief.

A coronavirus-related distribution is a one made to an individual: (1) who is diagnosed with COVID-19, (2) whose spouse or dependent is diagnosed with COVID-19, or (3) who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, having work hours reduced, being unable to work due to lack of child care due to COVID-19, closing or reducing hours of a business owned or operated by the individual due to COVID-19, or other factors as determined by the Treasury Secretary.

Section 2203. Temporary waiver of required minimum distribution rules for certain retirement plans and accounts
The provision waives the required minimum distribution rules for certain defined contribution plans and IRAs for calendar year 2020. This provision provides relief to
individuals who would otherwise be required to withdraw funds from such retirement accounts during the economic slowdown due to COVID-19.

Section 2204. Allowance of partial above the line deduction for charitable contributions
The provision encourages Americans to contribute to churches and charitable organizations in 2020 by permitting them to deduct up to $300 of cash contributions, whether they itemize their deductions or not.

Section 2205. Modification of limitations on charitable contributions during 2020
The provision increases the limitations on deductions for charitable contributions by individuals who itemize, as well as corporations. For individuals, the 50-percent of
adjusted gross income limitation is suspended for 2020. For corporations, the 10-percent limitation is increased to 25 percent of taxable income. This provision also increases the limitation on deductions for contributions of food inventory from 15 percent to 25 percent. Section 2206. Exclusion for certain employer payments of student loans The provision enables employers to provide a student loan repayment benefit to employees on a tax-free basis. Under the provision, an employer may contribute up to $5,250 annually toward an employee’s student loans, and such payment would be excluded from the employee’s income. The $5,250 cap applies to both the new student loan repayment benefit as well as other educational assistance (e.g., tuition, fees, books) provided by the employer under current law. The provision applies to any student loan payments made by an employer on behalf of an employee after date of enactment and before January 1, 2021.

Subtitle C – Business Provisions

Section 2301. Employee retention credit for employers subject to closure due to COVID-19
The provision provides a refundable payroll tax credit for 50 percent of wages paid by employers to employees during the COVID-19 crisis. The credit is available to employers whose (1) operations were fully or partially suspended, due to a COVID-19-related shutdown order, or (2) gross receipts declined by more than 50 percent when compared to the same quarter in the prior year.

The credit is based on qualified wages paid to the employee. For employers with greater than 100 full-time employees, qualified wages are wages paid to employees when they are not providing services due to the COVID-19-related circumstances described above. For eligible employers with 100 or fewer full-time employees, all employee wages qualify for the credit, whether the employer is open for business or subject to a shut-down order. The credit is provided for the first $10,000 of compensation, including health benefits, paid to an eligible employee. The credit is provided for wages paid or incurred from March 13, 2020 through December 31, 2020.

Section 2302. Delay of payment of employer payroll taxes
The provision allows employers and self-employed individuals to defer payment of the employer share of the Social Security tax they otherwise are responsible for paying to the federal government with respect to their employees. Employers generally are responsible for paying a 6.2-percent Social Security tax on employee wages. The provision requires that the deferred employment tax be paid over the following two years, with half of the amount required to be paid by December 31, 2021 and the other half by December 31, 2022. The Social Security Trust Funds will be held harmless under this provision.

Section 2303. Modifications for net operating losses
The provision relaxes the limitations on a company’s use of losses. Net operating losses (NOL) are currently subject to a taxable-income limitation, and they cannot be carried back to reduce income in a prior tax year. The provision provides that an NOL arising in a tax year beginning in 2018, 2019, or 2020 can be carried back five years. The provision also temporarily removes the taxable income limitation to allow an NOL to fully offset income. These changes will allow companies to utilize losses and amend prior year returns, which will provide critical cash flow and liquidity during the COVID-19 emergency.

Section 2304. Modification of limitation on losses for taxpayers other than corporations
The provision modifies the loss limitation applicable to pass-through businesses and sole proprietors, so they can utilize excess business losses and access critical cash flow to maintain operations and payroll for their employees.

Section 2305. Modification of credit for prior year minimum tax liability of corporations
The corporate alternative minimum tax (AMT) was repealed as part of the Tax Cuts and Jobs Act, but corporate AMT credits were made available as refundable credits over several years, ending in 2021. The provision accelerates the ability of companies to recover those AMT credits, permitting companies to claim a refund now and obtain additional cash flow during the COVID-19 emergency.

Section 2306. Modification of limitation on business interest
The provision temporarily increases the amount of interest expense businesses are allowed to deduct on their tax returns, by increasing the 30-percent limitation to 50 percent of taxable income (with adjustments) for 2019 and 2020. As businesses look to weather the storm of the current crisis, this provision will allow them to increase liquidity with a reduced cost of capital, so that they are able to continue operations and keep employees on payroll.

Section 2307. Technical amendment regarding qualified improvement property
The provision enables businesses, especially in the hospitality industry, to write off immediately costs associated with improving facilities instead of having to depreciate those improvements over the 39-year life of the building. The provision, which corrects an error in the Tax Cuts and Jobs Act, not only increases companies’ access to cash flow by allowing them to amend a prior year return, but also incentivizes them to continue to invest in improvements as the country recovers from the COVID-19 emergency.

Section 2308. Temporary exception from excise tax for alcohol used to produce hand sanitizer
The provision waives the federal excise tax on any distilled spirits used for or contained in hand sanitizer that is produced and distributed in a manner consistent with guidance issued by the Food and Drug Administration and is effective for calendar year 2020

 

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Byrnes & Bloink’s TaxFacts Intelligence Weekly for March 19, 2020

Posted by William Byrnes on March 20, 2020


2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

 

Editor’s Note: New rulings from the IRS help clarify that COVID-19 expenses can be paid by HDHPs (before the deductible has been met) and FSAs can pay for genetic testing when the information is intended to be provided to a medical professional for treatment purposes. Note that the decision on genetic testing comes in the form of a PLR that addresses some rather unique facts, so it may not be very broadly applicable. We also have a new (and regrettably timely) ruling on worthless securities.
IRS Announces HDHPs Can Pay Coronavirus Costs

The IRS announced that high deductible health plans are permitted to cover the costs associated with the coronavirus. HDHPs can cover coronavirus-related testing and equipment needed to treat the virus. Generally, HDHPs are prohibited from covering certain non-specified expenses before the covered individual’s deductible has been met. Certain preventative care expenses are excepted from this rule. HDHPs will not jeopardize their status if they pay coronavirus-related expenses before the insured has met the deductible, and the insured will remain HSA-eligible. The guidance applies only to HSA-eligible HDHPs. For more information on the rules governing HDHPs, visit Tax Facts Online. Read More

Tax Court Rules on Deduction

The Tax Court held that a worthless securities deduction may be permitted even if the entity that issued the securities still held some value. In a complex case involving a number of rounds of financing over several years, the court found it was reasonable to believe that a junior interest may be worthless if there are not funds to pay currently, or anticipated in the future, the senior interests. For more information on the worthless securities deduction, visit Tax Facts Online. Read More

IRS Finds Health FSA Can Reimburse a Portion of Ancestry Genetic Testing

In a private letter ruling (applicable only to the taxpayer requesting the ruling), the IRS found that a portion of the ancestry genetic test could be reimbursed by the health FSA. In the redacted PLR, the IRS discussed whether the genetic testing service could be classified as medical care. The taxpayer’s goal was to provide genetic information to their healthcare provider, but it was impossible to purchase the genetic information without also purchasing the ancestry services. The IRS found that portions of the testing may be considered medical care, although ancestry reports could not be classified as reimbursable medical care. The IRS directed the taxpayer to use a “reasonable method” to allocate between medical and non-medical services. For more information on health FSAs, visit Tax Facts Online. Read More

Texas A&M University School of Law has launched its online wealth management, risk management, and international tax risk management graduate curricula for industry professionals. Apply now for Summer courses that begin May: FATCA & CRS Risk Management; International Tax Risk Management, Data, and Analytics I  Texas A&M University is a public university and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018). To apply for Summer, call or fill in the form https://law.tamu.edu/distance-education/

 

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Byrnes & Bloink’s TaxFacts Intelligence Weekly for Financial Advisors (March 16, 2020)

Posted by William Byrnes on March 16, 2020


Texas A&M University School of Law has launched its online wealth management, risk management, and international tax risk management graduate curricula for industry professionals. Apply now for Summer courses that begin May: FATCA & CRS Risk Management; International Tax Risk Management, Data, and Analytics I  Texas A&M University is a public university and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018). To apply for Summer, call or fill in the form https://law.tamu.edu/distance-education/

Editor’s Note: Reconciliation abounds! You need to reconcile your advance premium tax credit payments, the Supreme Court needs to reconcile the ACA without the individual mandate, and employers need to reconcile employee withholdings with the new regs.
Do you (or your clients) receive advance premium tax credit payments? If you haven’t squared them away with 2019 income levels that might delay the return. Also, with new withholding regs it’s a good idea for employers to take a second look at employee allowances.
Finally, the Supreme Court will (again) look at the constitutionality of the ACA. Recall that the last time this happened constitutionality hinged on Congress’ ability to tax, with Chief justice Roberts noting that the Aca was clearly tax legislation since the individual mandate penalty was implemented through the tax code. Now that the individual mandate has been repealed, how will the ACA fare under additional scrutiny? Tune in next year to find out!
And wash your hands!
Tax Season Tip: Failure to Reconcile Advance Premium Tax Credit Payments May Delay Returns

The IRS has released guidance reminding taxpayers who received advance payments of their premium tax credit throughout the year of their obligation to reconcile those payments with respect to their actual household income levels for 2019. Taxpayers have the option of choosing to have premium tax credits applied directly to their monthly insurance premiums. For more information on the premium tax credit, visit Tax Facts Online. Read More

Supreme Court to Once Again Consider ACA Viability

The U.S. Supreme Court has agreed to hear arguments and rule on the continued constitutionality of the Affordable Care Act. The Court may decide whether the remainder of the ACA is constitutional absent the individual mandate. Arguments in the case are set to be heard in October, after the election, and a decision is unlikely before 2021. For more information on the individual mandate, visit Tax Facts Online. Read More
Determining the Employer’s Obligations Under the New Proposed Withholding Regulations

The regulations are clear that the employer is not required to ascertain whether the withholding allowance claimed by the employee is greater than those to which the employee is actually entitled. However, the IRS (or published guidance) may direct an employer to submit employees’ withholding certificates (or the certificates relating to groups of employees) to the IRS. Further, the IRS may notify the employer that an employee is not entitled to claim more than a certain withholding allowance. For more information on the new withholding regulations, visit Tax Facts Online. Read More

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

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What will be the impact of the 2017 Tax Cuts Act, Covid-19 (coronavirus), a Zombie Apocalypse, on Estimated Tax due by April 15?

Posted by William Byrnes on March 15, 2020


If a zombie apocalypse does not emanate from the illness known as Covid-19 caused by the coronavirus, then we still need to plan for our 2020 tax payments.  It is likely that taxpayers with business or investment income will be able to reduce the 2020 quarterly estimated tax payments that will be due April 15 this year, June 15, September 15, and January 15 of 2021.  Why?

2019 was a good income year for most taxpayers earning investment and business income.  But 2020 will likely be a depressed income year, maybe even a recession (for those not eaten by zombies). Thus, estimated tax payments to avoid a penalty, generally, 90% of the tax that is estimated to be due for 2020, should be much reduced from the 2019 level paid. (Contrarian investor taxpayers that shorted the market may actually need to make higher estimated taxpayers because the contrarians are likely to have a great capital gain year).

What are the changes enacted in the Tax Cuts and Jobs Act of 2017 that, because of the coronavirus, impact 2020’s estimated tax payments?

  • A taxpayer’s ability to reduce tax because of a net operating loss (“NOL”) in 2020 has been reduced by the TCJA. An NOL resulting in 2020 cannot be applied to taxes paid in the previous two-years of 2019 and 2018 to claw those taxes back.  Before the TCJA, the NOL “carry-back” of two-years was allowed.  NOLs may still be carried forward.  Excess NOL in 2020 may be used to reduce 2021’s income and thus tax due.

However, the TCJA even modifies how much NOL may be used to reduce 2020’s taxable income.  Starting in 2018, the TCJA modified the tax law on “excess business losses” by limiting losses from all types of business for noncorporate taxpayers. An “excess business loss” is the amount of a taxpayer’s total deductions from business income that exceeds a taxpayer’s “total gross income and capital gains from business plus $250,000 for an individual taxpayer or $500,000 for married taxpayers filing a joint return.”  Said another way, the business loss in 2020 is limited to a maximum of $250,000 for an individual taxpayer. Yet, the remainder does not evaporate like a vampire stabbed with a stake in the heart.  The remainder may be carried forward to 2021.  The remainder is called a “net operating loss” or NOL.

But the TCJA has another limitation for the carry forward of an NOL.  The NOL may only be used in 2021 to reduce the taxpayer’s taxable income by 80%.  The remainder NOL in 2021, if any, that resulted from 2020’s original loss and 2021’s limitation to just 80% of taxable income may again be carried forward, to 2022, yet again subject to the 80% of taxable income limitation.  The NOL may keep rolling forward indefinitely, subject to the 80% limitation until it is all used.

  • High net wealth taxpayers that generate gross receipts greater than $26 million may be subject to the TCJA’s limitation of interest expense for 2020. The TCJA included a rule that limits the amount of interest associated with a taxpayer’s business income when the taxpayer has on average annual gross receipts of more than $26 million since 2018.  The limitation does not apply to a taxpayer whose business income is generated from providing services as an employee, and a taxpayer that generates business income from real estate may elect not to have the limitation apply.

The amount of deductible business interest expense that is above a taxpayer’s business interest income is limited to 30% of the taxpayer’s adjusted taxable income (called “ATI”).  For 2020, ATI will probably be significantly lower than in 2019 and 2018. A taxpayer calculated ATI taking the year’s taxable income then reducing it by the business interest expense as if the limitation did not apply. The remaining amount is then further reduced by any net operating loss deduction; the 20% deemed deduction for qualified business income, any depreciation, amortization, or depletion deduction, and finally, any capital loss.  The business interest expense allowable for 2020 is 30% of that remainder.  The lost business income resulting from the coronavirus in 2020 may lead the remainder to be zero, and 30% of zero is zero.  Like the NOL above, the business interest expense if not usable in 2020 does not vanish. It carries forward to 2021 and each year thereafter, applying the same limitation rules each year.

  • Many taxpayers may end 2020 in a capital loss position if the stock market does not fully recover by December.  If a taxpayer’s capital losses are more than the year’s capital gains, then $3,000 of that loss may be deducted from the taxpayer’s 2020 regular income.  Remaining capital loss above the $3,000 may be carried forward to apply against 2021 income, and so on until used up.
  • The IRS may offer taxpayers more time beyond the April 15th deadline to file and pay 2019’s tax in 2020.  The filing and payment for 2019, and estimated tax for 2020, is due on or before April 15. But the IRS has indicated that it may extend that deadline.  A taxpayer may, regardless, file a request for a six-month extension on or before April 15, 2020, that is automatically granted if filed on time. But any tax owing for 2019 will still be due April 15, 2020, after which interest begins to be charged by the IRS to the taxpayer’s tax debt.   Check the IRS website here for whether, because of the coronavirus, it has extended the payment deadline beyond April 15, 2020.  Can the IRS extend the deadline, legally? Yes. Because Congress enacted a section of the Internal Revenue Code (our tax law) “§ 7508A” which is aptly named “Authority to postpone certain deadlines by reason of Presidentially declared disaster or terroristic or military actions”.  The President declared an official national emergency (see here).
  • Taxpayers are not required to exhaust the deductible required by a high-deductible health plan (called “HDHP”) before using the HDHP to pay for COVID-19 related testing and treatment.

I have four tax policy suggestions for Congress that it can include in a taxpayer coronavirus relief bill. I welcome acronym suggestions for this proposed bill’s name, especially a creative bill name whose acronym is “Zombie” or “Eat Brains”. The four tax relief suggestions that will mitigate damage caused by Covid-19 are:

Proposal 1 (stop medical bankruptcy): In 2020 the itemized deduction for medical expenses is reduced by 7.5% of a taxpayer’s AGI.  For 2020, I propose eliminating the 7.5% reduction of medical expenses attributed to the coronavirus or any 2020 flu (or zombie bite), such as hospitalization.  Medical diagnosis should suffice. Not going to be used by many people.  But the people who do use will really need it – those that do not awake as zombies that is.

Proposal 2 (stop restaurant bankruptcy): The administration proposes the suspension of the Social Security and Medicare payroll tax to jump-start consumer spending, presumably after the removal of quarantine orders to stay indoors or at least six feet away from each other. Not very targeted.  Someone like me may just shift the payroll tax relief and use it instead to upward adjust my 403(b) retirement savings for 2020, taking advantage of my full $19,500 contribution allowance for 2020 (and because I am 50 years old or older – add another $6,000 retirement ‘catchup’ to that $19,500 for a full $25,500),  Not only have I not spent the money to help the economy rebound, I have reduced my tax due for 2020 because my retirement contributions reduce my taxable income.  I have saved tax twice!! While I quite like that idea personally, I feel empathy for all the local restaurant owners who may go bankrupt unless I go out to eat at more local restaurants once I assured that 2020 was not the year of the zombie apocalypse.

A better-targeted proposal to save our nation’s local restaurants and the local farmers that supply them is to allow taxpayers an itemized deduction up to $1,000 for an individual and $2,000 for a married filing jointly 2020, beyond the standard deduction, of 100% of restaurant meals expense between June 1 and October 31, at U.S. restaurants with the last three years gross annual receipts averaging less than [$5 million – whatever is reasonable so that big chains are not included, Small Business Administration uses a maximum of $8 million for full-service restaurants (NAICS 722511)- I’m OK with that].  I know – many reasons not to do this, such as Americans will become hooked on eating out at local restaurants. Wait, why is that a bad thing?  And we will need to address the tax abusers who will order one slice of pizza and 20 bottles of wine, to go. So maybe the maximum meal receipt must be set at $100 per meal receipt per adult. That should allow plenty of food for a couple, and alcohol, and leave enough for the children to still have mac & cheese. Plus it requires ten different restaurant trips. Local restauranteurs and the local farmers can hold out hope that 2020 will not require filing for bankruptcy protection.  November is Thanksgiving when people eat out anyway, at least in the restaurants that have remained open.  By the way, I am purposely leaving business out of this.  Business has a 50% business meal deduction anyway. And my policy suggestion is about Americans being social and not talking business at the dinner table (and perhaps not politics either).

Proposal 3 (stop hotel bankruptcy): And let’s not forget about locally-owned hotels with average gross receipts below $8 million (SBA uses $35 million for hotels and $8 million for B&B Inns so maybe I am way off base with just $8 million – see NAICS subsector 721 Accomodation). A $500 itemized deduction for 2020 for a U.S. hotel stay (not Air BnB homes or apartments, actually licensed hotels/BnB Inns) for an individual or couple between June 1 and October 31. Might not buy a weekend at the Ritz but the Ritz probably exceeds the small business amount of revenue a year.  Is it sound tax policy? Huey Long (I’m from Louisiana) promised a chicken in every pot and a car in every yard.  I promise a get-a-way weekend at a small(ish) hotel.

Proposal 4 (keep employees employed): A tax credit (I am not sure the right amount, let the Labor Secretary decide, something around $5,000 an employee) to employers of less than 500 employees who do not reduce the monthly payroll of the employees, or fire any employees, between June 1 and September 30. October 1 employers start thinking about Christmas hiring for the shopping season.  I can imagine some mathematically-inclined employees thinking “I am going to walk into my boss’ office and projectile vomit because the cost of losing the tax credits for firing me is too high.” OK, so firing ‘for cause including projectile Zombie vomiting on the boss ‘ will be allowed without loss of the tax credit.  Now if a business wants to expand and hire a lot of employees up to 500 that’s great.  I propose that all employees employed and start fulltime work before June 1st qualify for a reduced $4,000 tax credit (basically $1,000 a month of employment for June through September).

These four proposals are enough to keep the economy, restaurants, hotels, and employees out of recession and bankruptcy.  But I have more proposals not currently part of the current bill, but common sense dictates should be (well, maybe not).  Why have we heard nothing from the House to encourage donations of toilet paper rolls to local shelters?   And why hotels and restaurants, but not spas?  I’ll leave it to the politicians (and lobbyists) to argue about.  Meanwhile, I look forward to receiving your comments while I set up my anti-zombie chicken wire barricade around the yard.

I’ll be covering these and related issues in my weekly Tax Facts Intelligence Newsletter.

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

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Byrnes & Bloink’s TaxFacts Intelligence Weekly for Financial Advisors (March 5, 2020)

Posted by William Byrnes on March 5, 2020


Texas A&M University School of Law has launched its online wealth management, risk management, and international tax risk management graduate curricula for industry professionals. Apply now for Summer courses that begin May: FATCA & CRS Risk Management; International Tax Risk Management, Data, and Analytics I  Texas A&M University is a public university and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018). To apply for Summer, contact Jeff Green, Graduate Programs Coordinator, T: +1 (817) 212-3866, E: jeffgreen@law.tamu.edu or contact David Dye, Assistant Dean of Graduate Programs, T (817) 212-3954, E: ddye@law.tamu.edu. Texas A&M Admissions website: https://law.tamu.edu/distance-education/

Editor’s Note: Litigation on breaches of fiduciary duties in qualified plans has increased dramatically in the past few years, and this week sees an interesting decision from the Supreme Court reducing the statute of limitations where the employee has actual knowledge of the breach. In contrast, the IRS indicates that there is no statute of limitations for employer ACA violations. For more on these topics and many others, log in to Tax Facts for the latest.
U.S. Supreme Court Rules on Statute of Limitations for Fiduciary Breach

The U.S. Supreme Court, in the widely watched Intel case, agreed with former employees that an employer cannot shorten the time period over which plan participants can sue by simply posting relevant information online or sending information in the mail. In most cases, plan participants have six years to bring a lawsuit for fiduciary breach. However, that window is shortened to three years from the date the participant had “actual knowledge” of the fiduciary violation. For more information on investment diversification requirements for 401(k)s, visit Tax Facts Online. Read More

IRS Releases Regs on Post-Reform Deduction for Business Meals and Entertainment

The IRS released regulations governing the post-tax reform treatment of the deduction for business meals and entertainment expenses. The regulations generally mirror guidance release in 2018 and 2019 on the deduction. As such, taxpayers may continue to deduct 50 percent of their business-related food and beverage expenses that are not lavish or extravagant. For more information on the post-reform deduction, visit Tax Facts Online. Read More

IRS: No Statute of Limitations on ACA Penalties for Large Employers

In usual scenarios, when a taxpayer files a return reporting certain information to the IRS, that filing triggers the start of a limitations period after which the IRS can no longer challenge the information in that return (generally, three years). However, the IRS has recently clarified that this rule does not apply with respect to ACA penalty taxes owed by applicable large employers—because there is no actual return that they file in order to report those taxes. This is the case despite the fact that ALEs have certain reporting obligations via annual Forms 1094-C and 1095-C. For more information on how penalties are assessed, visit Tax Facts Online. Read More

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

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Byrnes & Bloink’s TaxFacts Intelligence Weekly for Financial Advisors (Jan 31, 2020)

Posted by William Byrnes on January 31, 2020


Texas A&M University School of Law has launched its online wealth management, risk management, and international tax risk management graduate curricula for industry professionals. Apply now for Summer courses that begin late May  Texas A&M University is a public university and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018). To apply for Summer, contact Jeff Green, Graduate Programs Coordinator, T: +1 (817) 212-3866, E: jeffgreen@law.tamu.edu or contact David Dye, Assistant Dean of Graduate Programs, T (817) 212-3954, E: ddye@law.tamu.edu. Texas A&M Admissions website: https://law.tamu.edu/distance-education/

SECURE Act and Extenders Bill

As a part of the year-end budget package, Congress passed the long-awaited SECURE Act and also addressed the recently neglected extenders provisions. The SECURE Act contains a number of provisions that will impact nearly every American. Some of the highlights include:

·  Pushing the age when required minimum distributions (RMDs) from retirement accounts must begin from 70 1/2 to 72.
·  Permitting contributions to traditional retirement accounts at any age (previously, taxpayers were not permitted to contribute after age 71).
·  Limiting the value of inherited IRAs, so that most accounts inherited by non-spouse beneficiaries must now be distributed within 10 years (rather than over the lifetime of the beneficiary).
·  Increasing the retirement plan start-up credit for small businesses who offer a retirement savings option (to $5,000 per year or $5,500 if auto-enrollment provisions are included).
·  Expanding multiple employer plan (MEP) options so that unrelated employers can join together to offer retirement savings options to employees.
·  Requiring plans to provide annual lifetime income estimates to certain retirement plan participants.

The bill signed into law also extends many tax provisions, known as “extenders”, through the 2020 tax year. Some of those provisions include the Work Opportunity Credit, the new Family and Medical Leave Credit created by the 2017 tax reform legislation and the ability to treat mortgage insurance premiums as qualified residence interest for tax deduction purposes. Additionally, the bill lowers the medical expense threshold back to 7.5% through 2020. We will provide more information on the individual provisions of the SECURE Act and how the law will impact planning for clients as we move into 2020. For more information on the credits extended by the year-end spending bill, visit Tax Facts Online. Read More

Appeals Court Finds ACA Individual Mandate Unconstitutional

The Fifth Circuit Appeals Court ruled that the ACA individual mandate is unconstitutional. However, it declined to invalidate the entire law. Instead, the case was remanded back to the lower court for more detail on other aspects of the law, including the employer mandate that continues in effect. For more information on the individual mandate, visit Tax Facts Online. Read More

IRS Releases Proposed Regulations on TCJA Executive Compensation Deduction Limits

As a follow up to interim guidance released in August, 2018, the IRS has released proposed regulations that clarify the definitions of covered employee, publicly held corporation and applicable employee remuneration. For more information on the new limits that apply, visit Tax Facts Online. Read More

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

Posted in Retirement Planning, Taxation | Tagged: | Leave a Comment »

Byrnes & Bloink’s TaxFacts Intelligence Weekly for Financial Advisors (Jan 30, 2020)

Posted by William Byrnes on January 30, 2020


Texas A&M University School of Law has launched its online wealth management, risk management, and international tax risk management graduate curricula for industry professionals. Apply now for Summer courses that begin late May  Texas A&M University is a public university and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018). To apply for Summer, contact Jeff Green, Graduate Programs Coordinator, T: +1 (817) 212-3866, E: jeffgreen@law.tamu.edu or contact David Dye, Assistant Dean of Graduate Programs, T (817) 212-3954, E: ddye@law.tamu.edu. Texas A&M Admissions website: https://law.tamu.edu/distance-education/

Editor’s Note:
A couple of interesting developments this week. The NAIC action towards creating a best interest standard for annuity sales follows moves by several states (most notably New York with its new Regulation 187) to create similar rules. While the NAIC has not yet taken any definitive action in this area, in the words of Bob Dylan “you don’t need a weatherman to know which way the wind blows.”

We also have more SECURE Act updates. The Act upped the penalties for anyone filing a Form 5500, and it has also expanded (again, following the 2017 tax reform law) the possible uses for 529 pans, making them an even more valuable planning tool.

NAIC Committee Votes to Pass Best Interest Standard for Annuity Sales

The Life Insurance and Annuities Committee of the National Association of Insurance Commissioners (NAIC) voted to pass a “best interest” standard that would apply to annuity sales. The NAIC standard would be contained in a model that could be passed by states to create a more uniform approach nationwide. The model law would focus on four key concepts: (1) duty of care, (2) disclosure obligations, (3) conflicts of interest and (4) documentation requirements. For more information on the factors that are important to determining whether an annuity is in a client’s best interest, visit Tax Facts Online. Read More

SECURE Act Increases Cost of Failing to File Form 5500

Form 5500 is a form that must be filed by most employers that offer an employee benefit plan subject to ERISA (exceptions do apply). The SECURE Act has significantly increased the penalties that the IRS may assess for failure to file (note that the DOL may also assess penalties. For more information on when a Form 5500 may be required, visit Tax Facts Online. Read More

SECURE Act Increases 529 Plan Value

The SECURE Act, which primarily impacts retirement-related provisions, also expands upon the permissible uses of Section 529 plan dollars to include apprenticeships and student loan payments. For more information on the use of 529 plan funds, visit Tax Facts Online. Read More

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

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Byrnes & Bloink’s TaxFacts Intelligence Weekly for Financial Advisors (Jan 29, 2020)

Posted by William Byrnes on January 29, 2020


Texas A&M University School of Law has launched its online wealth management, risk management, and international tax risk management graduate curricula for industry professionals. Apply now for Summer courses that begin late May  Texas A&M University is a public university and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018). To apply for Summer, contact Jeff Green, Graduate Programs Coordinator, T: +1 (817) 212-3866, E: jeffgreen@law.tamu.edu or contact David Dye, Assistant Dean of Graduate Programs, T (817) 212-3954, E: ddye@law.tamu.edu. Texas A&M Admissions website: https://law.tamu.edu/distance-education/

Editor’s Note:

Several interesting updates this week, including New Jersey’s unique approach to SALT taxes, which allows optional entity-level taxation for pass-throughs in exchange for individual tax credits to be distributed to the members. We also see a new IRS Gig Economy Tax Center and the elimination of the “one bad apple” rule for MEPs with the SECURE Act.

Did we see you at the Heckerling estate planning conference last week? It was a week of warm sunshine and hot (well, OK, at least interesting) tax and estate planning developments. Happy planning!

Latest in the SALT Cap Saga: New Jersey Passes Pass-through Entity Tax Workaround

In the latest in the ongoing SALT cap debate, New Jersey has passed a new law creating an optional entity-level tax for pass-through entities. The New Jersey law allows pass-through entities to elect taxation at the entity level. In exchange, the members are given a refundable gross income tax credit. For more information on the SALT cap, visit Tax Facts Online. Read More

IRS Announces New “Gig Economy” Tax Center

More workers than ever are working in the gig, or freelance, economy–whether full-time or simply to supplement regular income. To keep up with the growing gig industry, the IRS has developed a new tool to help gig workers better understand and comply with their tax obligations. Taxpayers can access the site through irs.gov. For more information on the self-employment tax, visit Tax Facts Online. Read More

SECURE Act Eliminates the “One Bad Apple” Rule for MEPs—With Conditions

The one bad apple rule presented one of the primary roadblocks for small business owners interested in the multiple employer plan (MEP) structure. The SECURE Act provides that if one employer’s actions would disqualify the plan, only that employer’s portion of the MEP will be disqualified. For more information, visit Tax Facts Online. Read More

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

 

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Byrnes & Bloink’s TaxFacts Intelligence Weekly for Financial Advisors (Jan 28, 2020)

Posted by William Byrnes on January 28, 2020


Texas A&M University School of Law has launched its International Tax online graduate curriculum for tax professionals. Apply now for Jan 13 – April 19 transfer pricing courses.  Texas A&M University is a public university and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018). To apply for the inaugural cohort opportunity, contact Jeff Green, Graduate Programs Coordinator, T: +1 (817) 212-3866, E: jeffgreen@law.tamu.edu or contact David Dye, Assistant Dean of Graduate Programs, T (817) 212-3954, E: ddye@law.tamu.edu. Texas A&M Admissions website: https://law.tamu.edu/distance-education/international-tax

 

TAXFACTS

TaxFacts Intelligence Weekly

William H. Byrnes, J.D., LL.M. and Robert Bloink, J.D., LL.M.
Jan 09, 2020

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Editor’s Note: Mileage rates, UBTI for VEBAs, and 401(K)s for part-time employees under the SECURE Act

Vehicle-related reimbursement and deductions can be a big deal. Anyone who tracks mileage for work, medical, or charitable purposes is impacted by the changes in the IRS mileage rates, which have just been updated for 2020. We also have new UBTI rules for VEBAs, which were adopted in light of recent litigation. Finally, the SECURE Act mandates access to employer-sponsored 401(k)s to many part-time workers who could previously be excluded from participation. Learn what the new rules are, including how they impact nondiscrimination testing, with Tax Facts Online.

2020 IRS Business Standard Mileage Rates

In 2020, the optional standard mileage rate for using a car for business purposes will be 57.5 cents per mile driven for business purposes (the 2019 rate was 58 cents per mile). For more information on deducting business-related travel expenses, including medical and charitable mileage rates visit Tax Facts Online. Read More

IRS Regs Clarify UBTI Calculation for VEBAs and SUBs

The IRS has released regulations clarifying how voluntary employees’ beneficiary associations (VEBAs) and supplemental unemployment benefit trusts (SUBs) calculate unrelated business taxable income (UBTI) in light of recent litigation. For more information on the new rules and the related litigation, visit Tax Facts Online. Read More

SECURE Act Expands 401(k) Access for Long-Term, Part-Time Employees

Under the SECURE Act, employees who perform at least 500 hours of service for at least three consecutive years (and are at least 21 years old) must be allowed to participate in the employer-sponsored 401(k). These long-term, part-time employees may, however, be excluded from coverage and nondiscrimination testing requirements. For more information on 401(k) requirements, including detailed descriptions of the nondiscrimination testing requirements, visit Tax Facts Online. Read More

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

Posted in Retirement Planning, Taxation | Tagged: | Leave a Comment »

 
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