Wealth & Risk Management Blog

William Byrnes (Texas A&M) tax & compliance articles

Posts Tagged ‘TurboTax’

SEC comments muddy the waters in fiduciary standard debate

Posted by William Byrnes on July 29, 2013


The debate over the fiduciary standard that will become applicable to many financial professionals may be coming to a head as the looming deadline for comments on SEC proposals has motivated some advisors to express disapproval over a perceived weakening of the potential standard. Because a heightened fiduciary standard could increase advisors’ compliance costs, while simultaneously increasing consumer confidence in the quality of their advice, it is critical that advisors know the rules of the game.

Recent indications that the SEC may deviate from its previously expressed intent to expand the traditional standard applicable to investment advisors, however, represent a curveball for advisors who are not currently subject to a strict fiduciary standard; the outcome once again seems up for grabs.

Today’s bifurcated approach to fiduciary regulation

read the full analysis at LifeHealthPro – http://www.lifehealthpro.com/2013/07/01/sec-comments-muddy-the-waters-in-fiduciary-standar

 

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IRS High Net Worth Initiative: Fearsome Beast or Paper Tiger?

Posted by William Byrnes on August 16, 2011


The IRS commenced the Large Business and International Division’s high-wealth industry group (“HNW Initiative”) in October 2009 with the aim of examining high-net worth individuals for income tax compliance. But the Service may be “using more rhetoric than resources,” according to Syracuse University’s Transactional Records Access Clearinghouse (TRAC). TRAC’s April 14 report, based on information compiled from public records, accuses the IRS of having “very skimpy” audit goals for the HNW initiative.

TRAC’s orginal goal was to audit a mere 122 returns for the 2011 fiscal year. However, according to reports, TRAC will fall far short of this modest benchmark, and instead only audit 19% of the projected returns for the first six months of the year.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber)

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Aggressive IRS Gift Tax Audit Initiative: John Does Summons

Posted by William Byrnes on July 29, 2011


In recent years, the IRS has increased  its search for taxpayers who fail to disclose a gift tax return for reportable transactions. Now, the Justice Department’s Tax Division is getting in on the action, initiating an unprecedented fishing expedition and scouring state government records for information that may lead to taxpayers who have failed to file a gift tax return.

The Justice Department hopes to collect the identities of taxpayers who have gifted real property to relatives without reporting the transaction to the IRS. Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

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Tax Court Revives Partnership Self Employment Tax Debate

Posted by William Byrnes on July 21, 2011


The Tax Court has reopened the question of whether status as a limited partner entitles them to an exemption from self-employment taxes—an issue that’s been idle for over 13 years.  The Tax Court recently declared that status as a limited partner does not necessarily exempt a partner from self-employment taxes. Instead, the exemption is derivative on how substantial of a role the partner played in the partnership business. Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of small businesses in Advisor’s Journal, see IRS Announces Lenient Lien Program for Small Business (CC 11-48)

For in-depth analysis of partnership taxation, see Advisor’s Main Library: H–Partnership Taxation

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IRS Announces Lenient Lien Program for Small Businesses

Posted by William Byrnes on July 11, 2011


If you have small business clients who are struggling with back taxes and/or tax liens, you can tell them help is on the way. The IRS is offering assistance for both individuals and small businesses that are struggling to “meet their tax obligations, without adding unnecessary burden to [the] taxpayers.”  The new program includes a number of features discussed in today’s Advanced Markets Journal.   Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

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Pound Wise and Penny Foolish: The IRS Rebuts Unsound Tax Positions

Posted by William Byrnes on April 28, 2011


In the midst of the tax filing season, the Internal Revenue Service released the 2011 version of its discussion of many of the more common “frivolous” tax arguments made by individuals and groups that oppose compliance with federal tax laws.

The Service suggested that “anyone who contemplates arguing on legal grounds against paying their fair share of taxes should first read their 84-page document, The Truth About Frivolous Tax Arguments.”  At AdvisorFYI, we are not contemplating any particular legal grounds for not paying a “fair share of taxes”, whatever that may be, but rather are interested in presenting some of the frivolous positions argued and how the Government generally responds. We’ve presented a few select ones below.

The 2011 IRS document explains many of the common “frivolous” arguments made in recent years and it presents a legal position that attempts to refute these claims.  The IRS claims, the document “will help taxpayers avoid wasting their time and money with frivolous arguments and incurring penalties.”

Congress in 2006 increased the amount of the penalty for frivolous tax returns from $500 to $5,000.  The increased penalty amount applies when a person submits a tax return or other specified submission, and any portion of the submission is based on a position the IRS identifies as frivolous.

Here are some of positions we found to be commonly marketed to the public, and how the IRS responds to the positions:  Read the analysis at AdvisorFYI

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The Perils of Not Re-Visiting a Client’s Plan—a $3MM Tax Bill

Posted by William Byrnes on March 24, 2011


In a recent case, the IRS denied an estate a fractional interest discount on the family ranch, resulting in a seven digit tax bill and the likely liquidation of the family homestead.  The father had numerous options for securing a valuation discount on, or excluding the value of, a significant tract of property from his gross estate, but hadn’t done any planning since 1965, resulting in total denial of a discount.  When he died in 2004, the property was worth $6,390,000.  Don’t let this be your client.

The dispute between the IRS and the father’s estate centered on whether the property’s value in the gross estate was: (1) the undiscounted value of a fee simple interest in the property or (2) the aggregated value of the children’s fractional interests in the property—valued separately with fractional interest discounts.  Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of valuation discounts in Advisor’s Journal, see IRS Rebuffed by Federal Court of Appeals in Valuation Discount Case (CC 11-21) and Valuation Discounts: Only for a Bona Fide Business (CC 10-60).

For in-depth analysis of valuation discounts, see Advisor’s Main Library: A—Family Limited Partnerships and Estate & Gift Tax Valuation Discounting.

 

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Deductibility of Welfare Benefit Plan Contributions (Section 419)

Posted by William Byrnes on March 18, 2011


Company is an accrual basis fiscal year taxpayer.  Company pays severance benefits in its discretion on an ad hoc basis, and vacation benefits pursuant to its established policy.

Historically, Company has paid both severance and vacation pay from its general assets.  Due to a decline in the Market over the past few years, Company has paid significant severance and expects to continue to pay additional severance over the next few years.  Effective Jan 1, 2009 Company established Trust to pay this anticipated severance and vacation pay.  Trust intends to submit an application for recognition of exempt status in 2010.  On 1/1/2009 Company contributed over $1,000,000 to the Trust and deducted that amount on its tax return for 2009.  Company indicates that beginning in 2010, Company will make payments for vacation and severance and will seek reimbursement from the Trust.

Company computed the amount deducted based on the limitation set forth in the Code.

Company has not provided any information documenting any severance claims incurred in 2009 that it expects to pay in 2010.  Company indicates that because the Trust was established “to pay severance that they anticipate they will have to pay over the next few years …”, and because the amount deducted is within the limit set forth in the Code that the deduction is proper.  Read the analysis at AdvisorFYI

 

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Some Clarity Brought to Uncertain Tax Positions

Posted by William Byrnes on February 11, 2011


Recently, in a series of Announcements the Internal Revenue Service stated that it was developing a schedule requiring certain business taxpayers to report uncertain tax positions on their tax returns.

Now the new requirements have been finalized, businesses and wealth managers have a better idea of the direction of Uncertain Tax Position reporting.

Reported under Schedule UTP for Form 1120 series, the Uncertain Tax Position reporting currently applies to a select number of corporations (however phase-in provisions will change this by 2012 and 2014).

Who must file a Schedule UTP?

The class of organizations that must file is limited (for now).   Generally, for 2010 tax year returns most small businesses will not be included in the reporting, but that will probably change.    Nevertheless, a corporation must file Schedule UTP with its 2010 income tax return if:  To read this article excerpted above, please access AdvisorFYI

 

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Congress Extends Wage Credit for Employees Who Are Active Duty Members of the Military

Posted by William Byrnes on February 10, 2011


A member of the U.S. military who takes a leave of absence from his private sector job in order to go on active duty will often face a pay cut—the differential between his military and private sector pay.   Some employers make up this differential by paying employees who are on active duty a partial salary.  Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of the Tax Relief Act of 2010 in Advisor�s Journal, see Obama Tax Compromise Provides 100 Percent Bonus Depreciation of Business Assets Through 2011 (CC 11-01)Obama’s Social Security Tax Holiday: Penny Wise and Pound Foolish? (CC 10-119)Does the New Estate Tax Make the Bypass Trust Obsolete? (CC-10-122), and 2010 Estates: To Elect or Not to Elect (CC 10-124).

 

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When may a taxpayer deduct as business expenses the costs related to the use of his residence? Part 2

Posted by William Byrnes on December 29, 2010


Seal of the Internal Revenue Service

Image via Wikipedia

Why is this Topic Important to Wealth Managers? We examine the IRS requirements set out in its Publication 587 for determining when a “part” of a home is used and whether that use qualifies as “exclusively and regularly as your principal place of business”.

Yesterday we opened the discussion by what authority of the Code a taxpayer may be allowed to deduct a business expense for use of part of his home in the pursuit of a trade or business.  Today we turn to the following questions: What type of residence qualifies for this deduction? And the requirements for determining when a “part” of a home is used and whether that use qualifies as “exclusively and regularly as your principal place of business”.

What type of residence qualifies for this deduction? Many taxpayers narrowly consider that the “home office” deduction only applies for the traditional house with the white picket fence.  But the Code’s section does not use the word “home”.  Yesterday we noted that Congress chose the phrase “dwelling unit”.  So what is a dwelling unit?  The Section toward its end contains this definition: “The term ”dwelling unit” includes a house, apartment, condominium, mobile home, boat, or similar property ….”  Thus, taxpayers who are homeowners, condo-owners, renters of apartments, even a boat owner or renter, may potentially leverage this deduction.

What constitutes a “portion” of the dwelling unit? To read this article excerpted above, please access www.AdvisorFX.com

 

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