Talking with TaxSpeaker Video 115
1. My client is an S corp/employee who uses his personal vehicle for S corp business. He gets reimbursed for the business portion of his actual expenses (instead of the standard mileage rate). Can he also get reimbursed from his S corp for depreciation of the vehicle? My research says employees CAN get reimbursed for depreciation…but I can’t find the support that says this is not allowed for owners. Also, if the S corp owner/employee sells the vehicle, is the business portion of the gain/loss reported on Form 1040?
2. Several members of our firm recently attended your webinar on 2020 Preparations, Compilations & Review. We now have a question that we are unable to answer. What is the proper format and wording to use in a Review report to reflect a scope limitation? Specifically, we are preparing a Review for a private school. The school records do not include the transactions of their Booster Club, After School Care Program, etc. It is a cash basis statement, with no other exceptions.
3. I have a client that received a $200,000 PPP loan and a $10,000 EIDL grant. We know that IRS said the PPP loan is taxable income. Is the EIDL grant also taxable income?
4. In the rental properties/Schedule webinar they spend time talking about transient guest being an average rental period less than 7 days. If this is the case, does this mean that the activity is now reported on Sch C and therefore no passive loss limitation in loss years and subject to SE tax in profit years?
5. So a question popped up on a different tax group that I have not been able to find a direct answer too, and in fact seem to be finding Q&A's that have differing opinions. A cash basis client (this one is 1065 filer, but I would like to know for 1040 and 1120-S) pays payroll. His 4th quarter payroll taxes are not due, nor paid till January the following year, what year would he deduct them? Also, I have a client who could have been late paying 3rd quarter, so would the answer also apply to that scenario. (taxes accrued in one year, paid in the following). I have had answers from the basic, which was my previous understanding, that it depends on the accounting method. I.e., cash basis reports only those paid out in current year. Then another opinion, that payroll taxes are considered a 'trust' and thus paid when incurred/accrued. And somewhere in between, that the withholding and employee share of taxes are the 'trust' and the employers FICA, FUTA, SUTA are only deducted when paid. Any clarification would be appreciated!
6. In preparing a new client’s 2019 tax return, I noticed that he has not depreciated his rental property since 2014. The client DID NOT file an extension for 2019 tax return. To correct this depreciation error I was going to attach Form 3115. However, per your business and 1040 seminars, this form should be filed with a timely filed tax return (incl extensions). What do I do in this instance? Do I complete the 2019 tax return without properly calculated depreciation for 2019, then complete and send Form 3115 to the IRS with a timely filed 2020 return? I don’t feel comfortable preparing the 2019 return without depreciation calcs. Is there a different approach to this situation?
7. My client is a materially participating member in a 2 member LLC taxed as an S-Corp. He received a K1 with over $550K ordinary income and over $600K cash distributions. It’s a manufacturing business, so they tend to hold onto the money in the business during the year in case working capital fluctuates. When completing the Form 2210-AI ,to try to reduce the underpayment penalty, what is the proper way to allocate Ordinary Business Income (Line 1 on the K1) to the appropriate periods? Is it allocated (a) based on when cash distributions were received, or (b) based on when net profits were earned? If the answer is (b) is there an exception available to use distribution date since client received one large lumpsum distribution at the end of the year while profits (you guessed it) were mostly earned during the first quarter.
8. What expenses are deductible for a client who is moving into a continuing care facility and what documentation do you require from your clients in those situations?
9. If an estate is closed out in the middle of 2020(not necessarily a full year) and all info is known, can you file an estate return on the 2019 form and show a fiscal year so its one less you have to worry about during tax season??
10. Are employers required to defer the withholding and payment of employee social security? Many of my clients don’t want to defer the withholding or payment. And if required, what happens if an employee leaves during the deferral period – how is the employer going to collect the deferred social security tax from the employee?
11. I know that you recommend masking social security numbers, our PTINS and Efin numbers; however some banks say they will not accept the returns if masked. What has been your experience on this?
12. I have a client that easily qualifies for 3508EZ but their bank is requesting the full application. They are Schedule C with no employees and received the 2.5 of their net Schedule C for 2019. Would you wait to see if the bank changes the application process? Seems like they will pay an excessive amount to me to complete all the schedules they need. Even though most of them will be NA or zero.
13. A client is going to sell their vacation home. Over the years they have accumulated $100 k of depreciation that they have not used due to the deduction limits of a vacation home. Ie rental income was less than expenses not including depreciation. When they sell do they add this unused depreciation back to basis? Thanks for your help!
14. Under the qualified real property rules for HVAC, roofs, security systems, alarms that can take section 179 depreciation….. is the life 39 years or 15 year (qualified improvement property).
15. If you are going to go by the 24 weeks and have already calculated using the payroll so far this year and it has used up all of your PPP loan, can you go ahead and file the paper work or do you have to wait for the end of the 24 weeks?
16. In as bipartisan way as you can, please give us a clue as to where both candidates stand with regard to tax policy. Our small business clients could really use this information to plan for the upcoming year and they rely on us as their tax advisor to at least give them a clue. If you don’t believe it is appropriate, please direct us as to where to find the information.