Video 148 (6.15.21)
15m
Talking with TaxSpeaker (Video 148)
1. Is there anywhere in the tax return we can justify a deduction for advisory fees for stock accounts?
None I am aware of
2. If a cash basis employer is amending 2020 form 941 for employee retention credit does the business return(Partnership) also have to be amended?
Because wages must be reduced by the credit, yes the return must be amended.
3. I have an S Corp client who has had multiple ownership changes during 2021. For the first 3 months there were four equal owners. On 4/1/2021 one owner exited. On 5/31/21, two other owners exited. So from 1/1/2021 – 4/1/2021 the S Corp had 4 equal owners, from 4/1/2021 to 5/31/2021 it had 3 equal owners and from 6/1/2021 to the end of the year, the S Corp had one owner. Question: I understand that shareholders can consent to treat the 2021 tax year as if it consisted of two separate taxable years under IRC 1377(a)(1). Is there a way to elect to treat the 2021 S Corp tax return as if it consisted of three separate tax years – one ending 4/1/2021, one for the period 4/1/2021-5/31/2021, and one for the period 6/1/2021-12/31/2021? None of the owners want to be allocated income or loss for the period of time when they were not owners. What would you recommend?
Reg. 1.1377-1(b) provides the guidance. First, everyone must agree. Second, yes I believe that income may be allocated over more than 2 periods in 1 year. 1377-1 says to treat it as 2 years “for the affected shareholders”-not for the affected company. So your 1st shareholder will be 1/1-4/1, your 2nd & 3rd shareholders from 1/1-5/31, etc. Because it is two years per shareholder and not per company, each shareholder will have allocated income for 2 periods-1 in which they owned stock, and 1 in which they did not.
4. I have a big problem and I don't know how to solve it. I need to get hold of a real person at IRS who has the authority to remove a lien from a house so that it can be sold. The client wants to settle with the IRS for an amount of money less that the lien....and needs to settle by 6/20. We have been trying for over a month to get someon on the phone that can make a call on this issue. The Advocates office is closed. There are no offices (IRS) where we can go and talk to anyone
I’m sorry I do not have this solution. Have you looked at Form 12277?
5. When a S corporation shareholder takes a distribution in excess of his basis, he has to recognize the excess distribution as capital gain. Does the amount recognized as capital gain increase his basis in the S Corporation?
Yes, but only back to zero. The distribution lowers basis to less than zero, which is not allowed, so basis is increased back to zero by treating it as a contribution back to the entity of the same amount at the individual level, but not at the corporate level.
6. I am hoping you can help me answer a question- I greatly admire your seminars and trust that your advice will be helpful to me if it’s ok for me to ask…New client in 2020 and saw that they incorrectly filed 2019. They paid kid’s tax on Form 8814 but kid had cap gain income and a few cap losses. So I am amended parent return and prepared kid’s 2019 return using Form 8615. Here is the question- since kid never filed 2019 this new return is not really amended so do I just file it as a new (but late) return and file parents as amended with the explanation? Or prepare a kid amended return too but with 0’s in column A just so that I can include the explanation on page 2 along with the actual new kid return as a supplementary schedule? Do I file both parent and kid returns together as one package with a cover letter?
File the kid as a late 1st return. File the parent as an amended return with attached explanation that child was required to file own return because of capital gains.
7. I am considering other tax software. May I ask what tax software is used by Bob Jennings and others at Tax Speaker? I understand if you do not want to answer this question.
I use Ultra Tax as I believe do all of our speakers.
8. When an Individual is employing care givers to provide care in the home of the person being cared for, not through an agency: Is Form 1040, Schedule H still required when an Individual is using a payroll service like Home Pay to collect and remit ALL payroll taxes including Federal and State withholding, Federal and State Unemployment as well as FICA and Medicare for the employee and employer?
Yes-but Home Pay completes it for the client and provides the completed form to them for filing.
9. How are legal fees treated associated with Ponzi Investment Losses?
I believe (see rev rul 2009-09) if I remember correctly they are considered part of the basis in the asset and deducted as part of the theft loss under Code Sec 165 as described in Rev Proc 2009-20
10. Have any of your clients received IRS notice of outstanding amount due (with interest and penalties) for 2020 filing (on or before May 17,2021) even though entire balance was timely paid at point of e-file by EFT? Just received one for return filing and tax payment on May 13. The on-line IRS account shows the payment received with an outstanding balance of zero. Notice (dated May 31 and received May 29) is for the amount that was paid with the filing (plus interest and penalty).
Yes, and sadly, I would still respond with proof and a copy of the report from the IRS’ own transcript.
11. One of my clients filed an S-Election for their LLC in 2020. In 2019 they had a Home-Office deduction. I had the Home-Office on a depreciation schedule. Do they continue to get the depreciation deduction for Home-Office on their S-Corp? Or should I continue deducting the Home-Office on their individual tax return against the K1? What would you recommend?
The home office deduction is no longer available when they become an S corporation and that includes depreciation, which stops.
12. I have a client who claimed a college-aged daughter as a dependent on the 2019 tax returns. The daughter claimed herself on the 2020 tax returns and received the third EIP. The parents filed their 2020 return later and received the EIP which also included the amount for the daughter before the return was filed. What is the best way to correct this? Should the extra payment for the daughter be returned to the IRS now? Will it be reconciled on the 2021 return?
This is reconciled when we file the 2021 return, but it will not have to be repaid by the parents-there is no provision for repayment.
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