Tuesday, October 3, 2017
On September 29, President Trump signed into law H.R. 3823, the “Disaster Tax Relief and Airport and Airway Extension Act of 2017,” which reauthorizes the Federal Aviation Administration (FAA) for six months and delivers temporary tax relief to the victims of Hurricanes Harvey, Irma, and Maria. One day earlier, on September 28, the House had passed the measure by a vote of 264 to 155; the Senate had then passed the bill by voice vote, with an amendment striking a provision on the development of a private flood insurance market; and the House, by voice vote, had again passed the bill, as amended.
Tax provisions in the bill make it easier for people with hurricane losses to write them off on their taxes, eliminating a requirement that personal losses must exceed 10% of adjusted gross income to qualify for a deduction. It also gives hurricane victims penalty-free access to retirement funds and temporarily suspends limitations on the deduction for charitable contributions made before year-end for hurricane relief.
Friday, September 1, 2017
Collier County’s tourist development tax, also known as the bed tax, increases from 4 to 5 percent effective today, according to a news release from the Naples, Marco Island, Everglades Convention and Visitors Bureau. The formula for how those funds are allocated now shifts to accommodate payments for the county’s planned amateur sports complex along with increased funds for beach renourishment, funding county museums up to a fixed amount, and maintaining the current level of funding for tourism marketing and promotion. That brings the total tax paid on hotel rooms, campgrounds and short-term vacation rentals to 11 percent when combined with the existing six percent sales tax. A room rate of $200 per night would increase from $220 to $222 with both the tourist and sales taxes applied. It is the responsibility of owners and rental agents to collect a tourist tax on all accommodations that are rented for six months or less. Any property owner or agent with questions should call (239) 252-TTAX (8829), or email firstname.lastname@example.org.
Friday, July 21, 2017
The following is a summary of important tax developments that have occurred in the past three months that may affect you, your family, your investments, and your livelihood. Please call us for more information about any of these developments and what steps you should implement to take advantage of favorable developments and to minimize the impact of those that are unfavorable.
Healthcare bill moves through Congress. On May 4, the House of Representatives passed along party lines the American Health Care Act (AHCA), the Republican plan to repeal and replace the Affordable Care Act (ACA, also known as Obamacare), as amended. The House-passed bill would need to be reconciled with the Senate's version of health reform legislation.
The AHCA would repeal virtually all of the ACA tax provisions, including the following. (Except as otherwise provided, the repeal would go into effect in 2017).
. . . The penalty on individuals who don't carry adequate insurance, retroactively effective beginning in 2016.
. . . The employer shared responsibility penalty (i.e., the penalty that applies to certain employers who don't offer health care coverage for its full-time employees, or offers minimum essential coverage that is unaffordable or does not provide minimum value). The repeal would be retroactively effective beginning in 2016.
. . . The premium tax credit that makes health insurance premiums more affordable for certain low-income taxpayers. The repeal would be effective in 2020 (and a modified, age-based tax credit would be provided pending its repeal).
. . . The 3.8% net investment income tax (NIIT) on certain higher income individuals.
. . . The 0.9% additional Medicare tax on certain higher income individuals, effective 2023.
. . . The higher floor beneath medical expense deductions. Under current law, the floor is 10% (effective in 2013 for taxpayers under age 65 and in 2017 for taxpayers 65 and older). The AHCA would reduce the floor to 5.8% for all taxpayers beginning in 2017.
. . . The small employer health insurance credit, effective 2020.
. . . The dollar limitation (currently $2,700) on health Flexible Spending Account (FSA) contributions.
. . . The disallowance of any deduction for compensation in excess of $500,000 for certain health insurance executives.
The 40% excise tax (the so-called "Cadillac" tax) on high cost employer-sponsored health plans, would be delayed until 2026, but would not be repealed.
On July 13, the Senate leadership released its healthcare draft bill, the Better Care Reconciliation Act of 2017 (BCRA), as amended, for consideration. It left many of the provisions of the House-passed bill intact, but notably retained the ACA's premium tax credit, albeit in modified form. and did not call for the repeal of the ACA's 3.8% NIIT, the 0.9% additional Medicare tax, or the disallowance of any deduction for compensation in excess of $500,000 for certain health insurance executives.
Still time to make expensing election on amended returns. The tax law's expensing rules allow a business to elect to currently deduct the cost of business machinery and equipment-up to a dollar limit-instead of recovering its cost via depreciation over a number of years. The Protecting Americans from Tax Hikes Act of 2015 (the PATH Act) made a number of important improvements to the expensing break. The main changes were that the $500,000 annual expensing limitation and $2 million investment ceiling amount were retroactively extended and made permanent (they were to have expired after 2014). Additionally, the PATH Act made the following changes to the expensing break, effective after 2015: the $500,000 annual expensing limitation and $2 million investment ceiling amount was made subject to inflation indexing; expensing of qualified real property was made permanent without a complex carryover limitation that applied under prior law; the $250,000 expensing limitation that applied to qualifying real property under prior law was eliminated; and certain air conditioning and heating units became newly eligible for expensing.
Noting that there has been taxpayer confusion about making an expensing election for tax years that begin after 2014, the IRS announced that, for any tax year that begins after 2014, a taxpayer may make an expensing election for any expensing-eligible property without the IRS's consent on an amended Federal tax return for the tax year in which the taxpayer places in service the expensing-eligible property.
IRS releases next year's inflation adjustments for health savings accounts (HSAs). Eligible individuals may, subject to statutory limits, make deductible contributions to an HSA. Employers, as well as other persons (e.g., family members), also may contribute on behalf of an eligible individual. A person is an "eligible individual" if he is covered under a high deductible health plan (HDHP) and is not covered under any other health plan that is not a HDHP, unless the other coverage is permitted insurance (e.g., for worker's compensation, a specified disease or illness, or providing a fixed payment for hospitalization).
The IRS has released the annual inflation-adjusted contribution, deductible, and out-of-pocket expense limits for 2018 for HSAs. For calendar year 2018, the limitation on deductions is $3,450 (up from $3,400 for 2017) for an individual with self-only coverage. It's $6,900 (up from $6,750 for 2017) for an individual with family coverage under a HDHP. Each of these amounts is increased by $1,000 if the eligible individual is age 55 or older. For calendar year 2018, an HDHP is a health plan with an annual deductible that is not less than $1,350 (up from $1,300 for 2017) for self-only coverage or $2,700 (up from $2,600 for 2017) for family coverage, and with respect to which the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $6,650 (up from $6,550 for 2017) for self-only coverage or $13,300 for family coverage (up from $13,100 for 2017).
IRS's private debt collection program kicks off. IRS announced that beginning in April, 2017, it would start sending letters to notify "a relatively small group of individuals" with overdue federal tax that their accounts had been assigned to one of four private collection agencies (PCAs). The assignments were authorized by legislation enacted in 2014. PCAs are authorized to discuss payment options, including setting up payment agreements with taxpayers. But, as with cases assigned to IRS employees, any tax payment must be made, either electronically or by check, to the IRS. The IRS also warned taxpayers to be wary of scammers posing as PCAs and to keep in mind that a legitimate PCA will only be calling about a tax debt that the person has had-and has been aware of-for years and had been contacted about previously in the past by IRS.
Reissued proposed regulations explain new partnership uniform audit rules. A law enacted in 2015 (The Bipartisan Budget Act of 2015, signed into law on Nov. 2, 2015) eliminated the TEFRA unified partnership audit rules (so-called because they were introduced in the Tax Equity And Fiscal Responsibility Act of '82) and the electing large partnership rules, and replaced them with streamlined partnership audit rules. Under the new centralized partnership audit regime, any adjustment to items of income, gain, loss, deduction, or credit of a partnership for a partnership tax year (and any partner's distributive share thereof) generally is determined, and any tax attributable thereto is assessed and collected, at the partnership level. The applicability of any penalty, addition to tax, or additional amount which relates to an adjustment to any such item or share is also be determined at the partnership level. The new rules generally are effective for returns filed for partnership tax years beginning after Dec. 31, 2017, but taxpayers can elect to apply them earlier. Additionally, certain small partnerships can elect out of the new partnership regime.
Proposed regulations on the new partnership uniform audit rules were issued in January of this year, but were withdrawn by the IRS for further review and approval after President Trump instituted a "regulatory freeze." Now the IRS has reissued the proposed regulations explaining the new partnership uniform audit rules. These regulations would have a substantial impact on affected partnerships.
Monday, July 3, 2017
Beginning July 1, 2017, commercial rents billed and paid after July 1, 2017 for commercial properties located in Florida, will be taxed at a rate of 5.8%. Any billed but not received rents, including billings for occupancy prior to June 30, 2017 must collect and remit at 6% rate. Taxpayers must file a return to qualify for the reduced tax rate.
Wednesday, June 21, 2017
The IRS warns of a new scam linked to the Electronic Federal Tax Payment System (EFTPS), in which fraudsters call to claim that certified letters were sent but undeliverable and to demand an immediate tax payment through a prepaid debit card. The scam is being reported across the country. The IRS reminds taxpayers that it never demands immediate payment of taxes due with one specified method. Generally, the IRS will first mail a bill to any taxpayer who owes taxes.
Friday, April 14, 2017
The taxpayer and his same-sex partner attempted to have a child through an IVF process with an unrelated gestational surrogate. The taxpayer paid approximately $57,000 for the IVF process, which he sought to deduct as medical expenses on his tax return. After the IRS disallowed the claimed deduction, the taxpayer pursued an internal IRS appeal and, upon receiving an adverse ruling, filed a lawsuit. The district court agreed with the IRS that the IVF costs were not deductible medical expenses under IRC Sec. 213 because they were not incurred for the medical care of the taxpayer, his spouse, or a dependent. Furthermore, the IVF costs didn't qualify as medical care under IRC Sec. 213 because they were neither for diagnosis, cure, mitigation, treatment, prevention of disease, nor to affect any bodily structure or function of the taxpayer. Joseph F. Morrissey, 119 AFTR 2d 2017-401 (D.C. FL).
The taxpayer owned 50% of an S corporation that developed and sold residential and commercial real estate. The business relied heavily on debt financing, and virtually all of the loans were guaranteed by the taxpayer. When the corporation defaulted on the loans, the lenders sued the taxpayer on her guarantee, which resulted in liens against her property. To take advantage of S corporation losses, the taxpayer increased her stock basis by her prorata share of the unpaid judgment amounts. The taxpayer argued that a basis increase was justified because the judgment against her demonstrated an actual economic outlay. The Tax Court disagreed, concluding that the lenders initially didn't look to her as a source of repayment. A basis increase would have been appropriate only if the taxpayer had made payments on the guaranties or judgment. Rupert and Sandra Phillips , TC Memo 2017-61 (Tax Ct.).