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During the course of the live seminar season we often provide useful websites that provide information, products or services that we then get later requests to provide again. At one of this week’s classes someone suggested that we provide all of them in this week’s newsletter, and we thought that was an excellent idea. So here they are, with an explanation of what they do. Some are useful, some sell products, some provide information, but we use them all. We also have two minor manual corrections to mention.
Civil Rights Lawsuits
IRC Section 62(a) allow a deduction for attorneys fees in civil rights & whistle blower cases as a write-in deduction on Line 36 of Form 1040, before AGI. For other individual lawsuits, attorney fees are generally no longer deductible.
Electronic File Cabinet and PDF Software
Just in time for tax season, after months of negotiation, we have finally obtained a 20% discount for our customers from our favorite electronic file cabinet/PDF software from FileCenter. Call Kevin Anderson (Director of Business Sales) at 801-722-7095.
Energy Improvement Credits
The website for state information on credits, deductions and rebates for energy improvement property is www.dsireusa.org
Estate Exemption Equivalent-MANUAL CORRECTION
On page 14 of your 1040 manual the estate equivalent should read 11.18 million instead of 11.8 million.
Farm information, particularly QBI
We recommend Paul Neffer’s www.farmcpatoday.com for the best information.
Inventory and the Cash Method
We are getting dozens of questions regarding the ability to potentially “expense” inventory when using the cash method under the new rules at IRC 471. We can see technically where someone would come to that conclusion. However, as a rare veteran of the 25 year old wars on inventory fought back in the day where IRS clarified that inventory was not deductible, we believe such a choice is short-sighted, causes major cash flow/matching issues, bank loan issues, major artificial income increases in times of inventory reductions, and most importantly, we think it will be clarified by ITS in about 18 months (like back 20 years ago),that no, inventory still may not be written off.
Meals & Entertainment
IRS Notice 2018-76 once again allows a 50% deduction for meals expenses in client business settings, as long as they are separately stated or invoiced from any entertainment costs. Entertainment of any type remains non-deductible
Passport Renewal because of Tax Debt
A large tax debt (>$51,000) will cause the US state department to refuse renewal or issuance of a US Passport. Here is the link to the IRS website for further information: https://www.irs.gov/businesses/small-businesses-self-employed/revocation-or-denial-of-passport-in-case-of-certain-unpaid-taxes
Sales Tax
I am planning on recording a YouTube video before Christmas for you, your clients, and most importantly for the general public to illustrate how devastating this court case was on small business, and to emphasize its negative effects. In the meantime, the software we have installed at Taxspeaker to comply with these new rules is www.Avalara.com and no, we do not get a commission! The website for current state-by-state sales tax information is https://www.salestaxinstitute.com/resources/remote-seller-nexus-chart
Section 179 and Trade Ins
IRS Reg. 1.179-4(b) clearly allows Section 179 on the full new purchase price of an asset bought in 2018 via a trade in. Because the trade in is treated as sold, the entire gross invoice price of the new asset qualifies for Section 179. IRS Pub. 946 (which is a non-authoritative guide) has an old example which incorrectly shows only the cash difference paid as qualifying, but the example is clearly incorrect.
Section 179 and Qualified Improvement Property-MANUAL CORRECTION
Qualified commercial building interior improvements are currently 39-year, non-bonus qualified expenses in 2018 unless Congress passes a technical correction. As one of our sharp-eyed readers pointed out however, I made a mistake in the manual, and this property DOES still qualify for Section 179. Page 13 & 577.
Tax Extenders for 2018
Although several “tax extender” bills have been proposed, at December 1, 2018, the passage of any extender bill appears slim.
Tax Research
Our tax manuals are still hyperlinked to www.thetaxbook.com/taxspeaker Use Code 770 for the discount and the working hyperlinks.
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INTRODUCING TWO NEW CLASSES AND AN ADDITIONAL BUSINESS TAX IN DEPTH WEBINAR!
On December 27, we will be offering live and live streaming versions of Payroll – Year end Compliance: W-2’s and 1099’s and Payroll – Hiring, Compliance, & Reporting. These courses will also be offered as self-study and rebroadcast.
By popular demand, on January 3 & 4, we will be offering another Business Tax in Depth webinar. Click here to sign up today!
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Elections, Checklists, & Letters USB -- Available Now!
Jam-packed with immediately useful information and organized in an easy to use manner, the desktop reference will prove to be an invaluable source for the operation of your office. To view all of the contents, click here. To purchase yours today, head over to our website.
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Talking with TaxSpeaker Series
This week's video is on S Corps, C Corps, and LLCs-- questions submitted by you! To subscribe to the series, please visit
www.taxspeakerquestionspro.vhx.tv. If you aren't sure how it works, we answer 10-15 questions every week or two that have been submitted by you, our members. To see how the series works, click here to watch one of the videos free of charge! It's $20/month or $200/year. (A yearly subscription saves you 17%!) A subscription will give you access to all previously released videos as well as any future videos for the duration of your subscription. If you have questions you'd like to have answered, please email them to raelync@taxspeaker.com.
See the questions for last week's video below:
1. If you have a single shareholder or member LLC taxed as an S corp, that for this example has $100K in pass through income, which includes $70K of salary to the sole shareholder/member, is QBI the $100k or is it $170k (adding back the salary to the shareholder)?
2. I have an LLC that has no wages. Their wages are paid thru a management company - s corporation ( owned by same owners of LLC). Management company pays the wages and then charges a fee to the LLC. Can I allocate the wages from the s corporation for purposes of 199A? I believe I can aggregate them but would prefer not to make that permanent election.
3. Can a person participate fully in one Simple plan and also in another? A 50/50 owner of an S-Corporation is maxing his contribution to their Simple plan. He is 100% owner of another S-Corporation and wants to participate in their Simple plan as well. His investment advisor has told him he can contribute $12.5k to the first plan and $6k to the other. (He is under 50 years old).
4. S corp owner, salary from S corp is $30K, S corp net profit is $40K…. S corp owner wants to do Solo 401K, can you please explain how you calculate the contributions and how you report them on W-2?
5. In your seminars you mention the new regulation allow you to take 100% bonus depreciation on a qualified vehicle assuming it was 100% business use. Then the next year you convert to personal use by giving the vehicle to your spouse and not have to pay tax on the depreciation recapture. My question is do you still report the conversion as a sale (FMV) with 0 Basis so it will be 100% short term capital gain assuming it is short term? Or is there no sale involved on the conversion? My client is an S-Corp.
6. Can you explain how to calculate QBI deduction for a Taxpayer that is 50% of the shares of an LLC taxed as a partnership that own shares in another LLC-Partnership?
7. Regarding the QBI deduction since C-Corps can’t use it is it fair to say at a certain income threshold you would be better off to change to an S-Corp. What if anything can you claim on a C-Corp return that you can’t on an S? And with this example gross income would be approx 150k
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