Short-term Funding Bill Delays Several ACA Taxes

On 1/22/18, President Trump signed into law H.R. 195, which funds the federal government through February 8. Among other things, the bill delays the 40% excise tax on high cost employer-sponsored health coverage under IRC Sec. 4980I (commonly referred to as the "Cadillac" tax) for an additional two years. The Cadillac tax is now scheduled to apply for tax years beginning after 12/31/21. In addition, the bill further delays the 2.3% medical device excise tax under IRC Sec. 4191. The delay, which is retroactive to the beginning of 2018, is for an additional two years, meaning that the tax is scheduled to apply to sales after 12/31/19. The annual fee on health insurance providers has been suspended for one year; it is effective for 2018, but suspended for 2019. H.R. 195.

New Guidance on Passports of Taxpayers with Delinquent Debt

IRC Sec. 7345 authorizes the IRS to certify “seriously delinquent tax debt” and notify the State Department of such certification. A seriously delinquent tax debt is generally an assessed tax debt that exceeds $50,000 (adjusted for inflation) and for which a notice of lien has been filed. The State Department generally will not issue or renew a passport to, and may revoke or limit a previously issued passport of, a delinquent taxpayer after receiving the certification from the IRS. Under new guidance issued in a Notice, the State Department generally will provide 90 days to a certified taxpayer who applies for a passport to resolve their tax delinquency by allowing them to: (1) resolve any erroneous certification issues, (2) make full payment of the tax debt, or (3) enter into a payment alternative with the IRS. If a taxpayer needs to travel within those 90 days, the taxpayer must contact the IRS and resolve the matter within 45 days from the date of passport application. Notice 2018-1, 2018-3 IRB 299.

Taxpayer was liable for million dollar FBAR penalty

The Ninth Circuit found that a taxpayer willfully failed to file a Report of Foreign Bank and Foreign Accounts (FBAR) where IRS assessed a penalty of approximately $1.2 million penalty against the taxpayer for failing to disclose her financial interests in an overseas account. The Court rejected a variety of the taxpayer's arguments, ranging from the contention that the imposition of the penalty violated the U.S. Constitution's excessive fines, due process, and ex post facto clauses, to assertions that it was barred by statute of limitations or treaty provisions.
U. S. v. Bussell, (CA 9 10/25/2017)

IRS Releases Updated 2018 Withholding Tables

The IRS has released updated withholding tables for 2018. The tables reflect major changes made by the Tax Cuts and Jobs Act (TCJA), including an increase in the standard deduction, elimination of personal exemptions, and modification of tax rates and brackets. Employers should begin using the updated tables as soon as possible, but no later than 2/15/18. 

In addition, the IRS is now revising, for a late February release, the “withholding tax calculator” on IRS.gov . IRS has not published a 2018 Form W-4, which notifies an employer of an employee’s withholding requirement. 

Employees are not required to do anything at this time. However, employees are encouraged to use 2017 Form W-4 to update Payroll records on file with their employer, check their actual withholding against the IRS.gov withholding tax calculator when available,  and adjustment withholding early this year to avoid any surprises when filing their 2018 income tax returns.

2018 Tax Filing Season to Begin January 29

In a recent News Release, the IRS announced that the 2018 tax filing season will begin on Monday, 1/29/18, which means that electronic and paper returns will be accepted beginning on that day. However, the IRS will begin processing paper returns in mid-February as its systems continue to update. Also, by operation of law, refunds on returns claiming the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC) cannot be issued before mid-February [ IRC Sec. 6402(m) ]. The IRS expects the earliest EITC/ACTC related refunds to be available starting on 2/27/18 (if direct deposit is chosen and there are no other issues with the return). Tax returns are due on April 17 because of a weekend and the Emancipation Day holiday. News Release IR 2018-1.

Masters Degree Expenses Determined Not Deductible

The taxpayer was an uncredentialed speech pathologist who was hired by the school district under a temporary waiver. As a condition of the waiver, she was required to complete her master's degree within seven years to be qualified as a medical speech pathologist. The taxpayer enrolled in a master's degree program and claimed deductions for her tuition, books, and supplies as unreimbursed employee business expenses that were disallowed by the IRS. The Tax Court agreed, concluding that the expenses were not deductible because they qualified the taxpayer to meet the minimum education requirement for employment and also qualified her for a new trade or business. Under IRC Sec. 162(a) , education expenses are deductible by the taxpayer when incurred to maintain or improve skills required in business or employment, or to meet the requirements of the employer or the law. However, they are not deductible if incurred to meet the minimum requirements for the taxpayer's present employment. Mary A. Colliver, TC Summ. Op. 2017-93 (Tax Ct.)