Previous month:
November 2019
Next month:
January 2020

December 2019

Partnership Reporting Requirements Delayed for One Year

IRS Notice 2019-66, issued on Dec. 9, delays for one year the requirement that partnerships report their partners’ capital accounts on the tax basis method.

Also delayed one year is the requirement that partnerships report each partner’s at-risk information for each separate activity.

However, 2019 partnership returns must report each partner’s net unrecognized gain or loss under Section 704(c) and, as in 2018, negative tax basis capital accounts.  

It is important to note that the two “delays” mentioned above were not reflected in the draft Forms 1065 and K-1 and instructions issued in September and October. Partnerships can rely on the Forms 1065 and K-1 released by the IRS on Dec. 9 that now reflect the delays.  

https://www.irs.gov/pub/irs-drop/n-19-66.pdf


Expedite CAF Requests by Avoiding These Mistakes

The IRS is implementing initiatives to improve the Centralized Authorization File (CAF) process. 

They have noticed a significant increase in duplicate requests (when the same exact request for access to a taxpayer’s account was received more than once). Tax professionals should be aware that submitting duplicate Forms 2848 (Power of Attorney) and 8821 (Tax Information Authorization) will result in processing delays since both requests must be researched and reviewed.

Here is what the IRS recommends:

  1. Fax a request once. Faxing forms to the same or multiple numbers will delay processing.
  2. Double check forms for accuracy. Missing information delays requests.

Reducing the number of duplicates and increasing the accuracy of forms will help the IRS process requests faster and help with overall system improvements.

 


Tax Professionals Should Review Their Safeguards

TXCPA's Federal Tax Policy Committee supports the IRS and the Summit partners in urging tax professionals to review the Taxes-Security-Together Checklist, including:

  • Deploy basic security measures.
  • Create a written data security plan as required by law.
  • Know about phishing and phone scams.
  • Recognize the signs of client data theft.
  • Create a data theft recovery plan.

Taxes-Security-Together Checklist Video: https://www.youtube.com/watch?v=mCOJbsQ0b88

 


Bonus Depreciation for Passenger Automobiles

The Tax Cuts and Jobs Act (TCJA) increased the first-year deduction for luxury automobiles (nearly all automobiles) used primarily for business rather than personal use and placed in service after Sept. 27, 2017, from $10,000 to $18,000. However, if the depreciable basis exceeds $18,000, Rev. Proc. 2018-25 requires that the remainder begins to be deductible only after the end of the recovery period, generally five years.

 

Rev. Proc. 2019-13 provides relief from the “delayed” depreciation deduction. The initial year deduction is also $18,000, but rather than delaying any additional deductions for five years, the Rev. Proc. allows the remaining depreciable basis to be deducted beginning the year after the initial year.

 

The amount that can be deducted in the subsequent years is the lesser of the percentages provided in Rev. Proc. 2019-13 Example 1 (below) or the limitations under IRC Section 280F(a)(1)(A). The 280F limitations would generally only apply to very expensive automobiles.

 

Taxable year

Depreciation limitations under Table 2 of Rev. Proc. 2018-25

Depreciation deduction under the safe harbor

2018

$18,000

$18,000

2019

$16,000

$13,440 ($42,000 x .32)

2020

$9,600

$8,064 ($42,000 x .1920)

2021

$5,760

$4,838 ($42,000 x .1152)

2022

$5,760

$4,838 ($42,000 x .1152)

2023

$5,760

$2,419 ($42,000 x .0576)

TOTAL

 

$51,599

The remainder is deductible in the seventh and subsequent years but cannot exceed $5,760 for any year in accordance with Section 280F.

 

To qualify for this significant acceleration of the depreciation deduction, it is important that the taxpayer not elect IRC Section 179 to apply to the automobile and not elect out of bonus depreciation for any assets in the same property class as the automobile.

 

https://www.irs.gov/pub/irs-drop/rp-19-13.pdf

 

 


Recognize Clues of Identity Theft

TXCPA's Federal Tax Policy Committee supports the IRS and Security Summit initiative to remind individuals to take these basic steps to protect personal data:

A business taxpayer may be an identity theft victim if:

  • An efiled return is rejected because a duplicate is already on file with the IRS.
  • Routine extensions to file requests are rejected.
  • An unexpected receipt of a tax transcript or an IRS notice is received.
  • Failure to receive expected and routine correspondence from the IRS, which can be an indicator an identity thief has changed the address.

Create Strong Passwords to Protect Online Accounts

TXCPA's Federal Tax Policy Committee supports the IRS and Security Summit initiative to remind individuals to take these basic steps to protect personal data:

The password standards have changed. Here are some simple guidelines:

  • Use long phrases combined with characters and numbers; for example: SomethingOneCanRemember@30.
  • Use a different password for each account; do not use an email address if that is an option and use a password manager.
  • Use two-factor authentication whenever it is offered; for example on email accounts, financial accounts and social media accounts.

Practice Unit for Partial Disposition Election

On Nov. 8, 2019, the IRS issued a Large Business & International “Practice Unit” for partial asset dispositions (PADs). The treatment of PADs under IRC Section 263(a) is a taxpayer-beneficial aspect of the so-called “repair regs.” The PAD rules allow a taxpayer, under certain circumstances, to deduct the remaining basis of that part of a building which has been replaced, such as a roof replacement. If the original cost of the replaced property is not known, the rules allow for a producer price index (PPI) rollback to determine the original cost of the replaced item. The Practice Unit is a guideline for the IRS to use in the examination of PADs and includes a discussion of the appropriate methodology to calculate the PAD.  

https://www.irs.gov/pub/irs-utl/dce_p_252_04_03.pdf

 


Learn to Recognize Phishing Emails and Phone Scams

TXCPA's Federal Tax Policy Committee supports the IRS and Security Summit initiative to remind individuals to take these basic steps to protect personal data:

Know that email scams often:

  • Pose as companies people know and trust, and
  • Tell an urgent story to trick victims into opening a link or attachment.

Watch out for scam phone calls, too. Remember:

  • The IRS does not call demanding payment with threats of jail or lawsuit.
  • The IRS does not demand payment via gift or debit cards; the IRS does not accept tax payments by iTunes cards.
  • The IRS does not send unsolicited emails about refunds or payments, or requesting login credentials, Social Security numbers or other sensitive information.

IRS Announces Program of Face-to-Face Meetings with Taxpayers to Ensure Compliance

Last month, the IRS issued Fact Sheet (FS) 2019-15 to announce a program in which revenue officers will visit taxpayers with ongoing tax issues to gather financial information and to potentially request payment.

The FS states: “The IRS routinely conducts these face-to-face visits. The primary factors of these visits are to make contact with taxpayers who have a previously known tax issue that wasn't resolved through mail contact. The first face-to-face contact from a revenue officer is almost always unannounced.”

CPAs with clients who have filing and payment issues should ensure that the taxpayers have current Powers of Attorney (POAs) on file to include all forms and years that might be of concern. These clients should be notified of the possibility that they may be visited unannounced by IRS personnel. If they are contacted by the IRS, the taxpayers should inform the IRS officer that they do have a POA on file and the officer must contact the taxpayer’s representative.

https://www.irs.gov/newsroom/special-irs-efforts-to-focus-on-tax-compliance-education-begin

 

 


Protect Personal and Financial Information Online

TXCPA's Federal Tax Policy Committee supports the IRS and Security Summit initiative to remind individuals to take these basic steps to protect personal data:

  • Use security software for computers and mobile phones – and keep it updated.
  • Protect personal information; don’t hand it out to just anyone.
  • Use strong and unique passwords for all accounts.
  • Use two-factor authentication whenever possible.
  • Shop only secure websites; look for the “https” in web addresses; avoid shopping on unsecured and public Wi-Fi in places like shopping malls.
  • Routinely back up files on computers and mobile phones.