Robert A. DeLellis, CPA

03/19/2024

Here is an excellent article on the Charles Schwab website about IRS audits.

A number of tax audits result from preventable mistakes. Here are the five most common audit red flags—and what to do to avoid them.

05/03/2021

For those confused about the Economic Impact Payments (EIP) vs the Recovery Rebate Credit (RREC) please watch this short IRS video. The EIPs were an advance of the RRC. If you got both EIPs then you are done. If you didn't get them, maybe because your 2019 was too high and then your 2020 income was lower we can claim the amount you did NOT get as the RRC on the 2020 tax return. I've seen this happen a few times for various reasons (retirement in 2020, unusual one-time income in 2019, etc).

You can claim the Recovery Rebate Credit if you didn’t get your Economic Impact Payments. For more information: https://www.irs.gov/rrc. ...

03/30/2021

The Journal of Accountancy has shared info from the IRS that the postponed April 15th due date also postpones the date to make both traditional AND ROTH IRA contributions as well as other contributions that usually must be made by the regular April 15th due date.

The IRS issued a notice providing more details and clarification of its previously announced postponement of the April 15 tax deadline for individuals. The notice extends the date for making 2020 IRA contributions; however, it does not extend the date for estimated tax payments.

03/28/2020

The IRS has announced that some collections activities are suspended until July 5th. Highlights include:
-Those with existing installment agreements payments will be suspended between April 1 and July 15, 2020.
-"New automatic, systemic liens and levies will be suspended during this period."
-"Liens and levies (including any seizures of a personal residence) initiated by field revenue officers will be suspended during this period."
-If you have prior year unfiled returns(2018 or earlier) you should still file your returns ASAP.

Although the IRS is backing off a little, it's not a good idea to ignore them if you have unfiled returns or balances due. If you fall into this category I recommend you call them or contact your CPA or me for guidance in this situation.

See the full article on the IRS website below.

IR-2020-59, March 25, 2020 — To help people facing the challenges of COVID-19 issues, the Internal Revenue Service announced today a sweeping series of steps to assist taxpayers by providing relief on a variety of issues ranging from easing payment guidelines to postponing compliance actions.

03/21/2020

UPDATED INFO ON THE TAX DUE DATE. Important points below:
-Postponement covers the filing of 2019 tax returns (see which forms below), making payments of balances due on those returns and the 1st quarter 2020 estimated tax payments that are normally due by April 15th.
-No extension forms (4868 individual or7004 business) need to be filed to get this postponed due date. Personally, I'm going to file an extension anyway and will do so for most of my clients that aren't going to file by April 15th.
-Other taxes have NOT been postponed, so to avoid penalties and interest, make your payroll deposits if you have employees or any tax due not covered by IRS Notice 2020-18 below.
____________________________________
IRS Extends Both Filing and Payment Deadline to July 15 and Eliminates the Balance Due Limits

Post Date: 3/21/2020
Last Updated: 3/21/2020

Summary
Cross References
- Notice 2020-18

The IRS has now extended the deadline for filing and paying federal income tax. The due date for any taxpayer with a federal income tax payment or a federal income tax return due April 15, 2020 is automatically postponed to July 15, 2020. Taxpayers do not have to file Forms 4868 or 7004. There is no limitation on the amount of the payment that may be postponed.

Any taxpayer refers to an individual, a trust, estate, partnership, association, company, or corporation.

The relief provided for in this notice is available solely with respect to federal income tax payments (including payments of tax on self-employment income) and federal income tax returns due on April 15, 2020, in respect of a taxpayer's 2019 tax year, and federal estimated income tax payments (including payments of tax on self-employment income) due on April 15, 2020, for a taxpayer's 2020 tax year.

No extension is provided for the payment or deposit of any other type of federal tax, or for the filing of any federal information return.

As a result of extending the deadline for filing and paying federal income taxes, the period beginning on April 15, 2020, and ending on July 15, 2020, will be disregarded in the calculation of any interest, penalty, or addition to tax for failure to file the federal income tax returns or to pay the federal income taxes postponed by this notice.

Notice 2020-18 supersedes Notice 2020-17, which had previously limited the amount of federal income tax payments that could be extended. Notice 2020-18 has no limit on the amount of federal income tax payments that may be postponed until July 15, 2020.

03/19/2020

Hi Everyone. There's still nothing on the IRS website about changing the due date or even suspending penalties and interest on balances due for 90 days. I'm sure part is coming.

Beware the Motley Fool website has posted some info that is either wrong or misleading:

#1 To my knowledge, there has been NO official announcement that the payment due date of 04.15.20 or suspension of penalties and Interest has officially been moved by 90 days. What is a more accurate statement is they have proposed suspending the accrual of penalties and interest for a 90-day period starting 04.15.20.
#2 and MORE misleading, the Motley Fool said Federal extensions are "automatic" implying you can do nothing and your return is automatically extended. That's how it works for CA state income tax returns, but NOT the federal. That MAY happen, but what IS "automatic" is acceptance of the extension you MUST file to extend the due date to 10.15.20. Don't get confused that you can do nothing.

FYI, What they have always meant by "automatic" is you don't have to give a reason why you want/need an extension. In the old days, you first filed an "automatic" 4-month extension and then you had to file a 2-month extension and give a reason which the IRS would approve or deny. Quite a few years ago, the IRS dropped the 2nd extension and just made the "automatic" first extension filed with form 4868 a 6-month extension. The IRS realized they approve virtually ALL of the 2nd extensions, and it was a waste of time and manpower to have TWO extensions, so they changed it. Bottom line...if you aren't going to file by 04.15.20, assume you should file an extension until/unless we hear otherwise.

03/17/2020

Sec Mnuchin just announced that the due date of April 15th will NOT be extended, BUT IF YOU OWE, they will automatically NOT be charged penalties and interest for a period of 90 days. So, you either need to file your returns OR file an extension by Wednesday, April 15, 2020. What they did NOT say is they will forgive penalties for not paying enough in for the tax year 2019 (known as an Underpayment Penalty). The bottom line is, IF YOU OWE, you can delay paying that balance due for 90 days.

If you are expecting a refund file ASAP and get your money back. The IRS does NOT pay interest on what they owe you in MOST circumstances.

I will post again if additional information or further clarification becomes available.

12/23/2019

Here is info on some year-end tax laws extended by Congress. This article is from the CPA Tax Advisor:

New Law Extends Key Tax Breaks into 2020
BY KEN BERRY, J.D. - CPA PRACTICE ADVISOR TAX CORRESPONDENTDECEMBER 18, 2019

Just when it looked like Congress was too distracted by impeachment proceedings to worry about taxes, it managed to cobble together new legislation in a year-end appropriations measure, including extensions of numerous tax provisions that had expired or were about to expire. Most of the “extenders” in the new Taxpayer Certainty and Disaster Relief Act will remain in effect through the end of 2020.

The new legislation is expected to be signed by President Trump soon after it hits his desk. Keeping that in mind, here are some of the key extensions granted by Congress right before Christmas.

-Mortgage debt forgiveness: Under a unique tax law provision, a discharge of qualified mortgage debt may be excluded from federal income tax, up to a limit of $2 million. The tax exclusion is only available for debt on a principal residence.

-Mortgage insurance premiums: This provision allows taxpayers to deduct mortgage insurance premiums, subject to a phase-out beginning at $100,000 of adjusted gross income (AGI). The deduction is available for payments for a principal residence and one other home, like a vacation home.

-Medical deduction: The recent massive tax legislation, the Tax Cuts and Jobs Act (TCJA), reduced the threshold for deducting medical expenses from 10% of AGI to 7.5%, but only for 2017 and 2018. The new law restores the lower 7.5%-of-AGI threshold through 2020.

-Tuition-and-fees deduction: The tuition-and-fees deduction, which may be claimed above-the-line in lieu of a higher education credit, is subject to a phase-out based on modified adjusted gross income (MAGI). The credit could be either $4,000 or $2,000, depending on MAGI, until the phase-out is complete.

-Work Opportunity Tax Credit: A business may be able to claim a Work Opportunity Tax Credit (WOTC) for hiring workers from certain disadvantaged groups. The basic WOTC equals 40% of the worker’s first-year wages up to $6,000, for a maximum credit of $2,400 per worker, but the credit may reach as high as $9,600 for a disabled veteran.

-Family and medical leave credit: The TCJA authorized a tax credit for employers providing paid family and medical leave to employees. This credit, which initially was created to last only through 2019, is based on wages paid for a maximum leave of 12 weeks. It ranges from 12.5% to 25% of the paid wages.

-Empowerment zones: Businesses and individual residents within designated empowerment zones are eligible for special tax incentives such as a 20% wage credit, liberalized Section 179 expensing, tax-exempt bond financing and deferral of capital gains tax on the sale of qualified assets sold and replaced.

-Plug-in vehicles: The new law provides a 10% credit, capped at $2,500, for highway-capable, two-wheeled plug-in electric vehicles. To qualify, battery capacity within the vehicles must be greater than or equal to 2.5 kilowatt-hours.

Finally, the new law also includes several provisions allowing tax relief for individuals and businesses in federally-designated disaster areas. In addition, the combined year-end spending measure features significant changes for retirement-savers and a repeal of three taxes imposed by the Affordable Care Act (ACA), among other provisions.

This is just the tip of the iceberg. We will have more to report in the near future...

02/12/2018

I'm working on another tax return today for a couple D***s (dual income no kids). Married couple with AGI of $251,597. Total taxes on Schedule A of $21,983 and subject to Alternative Minimum Tax of $575. Using 2018 Tax Cuts & Jobs Act laws they would pay $2,811 LESS, even with the Schedule A tax deduction limited to $10K and the loss of personal exemptions of $8,100. AMT goes away on this return and there is LESS tax, even though the taxable income is $14,691 HIGHER.

Not everyone will be better, but most will. You MUST do the total calc and not assume you're going to pay more, due to the loss of the Schedule A tax deduction. This couple did not have out-of-pocket Employee Business Expenses. Higher income employees that used to write-off expenses is that category of taxpayer that will likely pay more.

01/06/2018

Do you properly track your mileage to substantiate your auto expense deduction? I use MileIQ and I recommend you use it to get the most out of your mileage deductions next year.

The 2018 mileage rates are:
54.5 cents per business mile, up 1 cent from 201718 cents per mile for medical or moving reasons, up 1 cent from 201714 cents per charity drive

MileIQ not only makes it easy to automatically track your mileage, it makes it easy to create an accurate contemporaneous mileage report that fulfills the IRS mileage requirements.

As a MileIQ Tax Pro, my clients get a 20% discount on a MileIQ premium annual account with your promo code RDEL340A.

If you need help applying the promo code follow the instructions at the link below to use your promo code. You will not be able to add promo codes through iTunes or Google Play.
https://support.mileiq.com/hc/en-us/articles/204480785-How-to-Redeem-a-Promo-Code

01/04/2018

Probably the biggest deduction of the "Tax Cuts and Jobs Act" is the inclusion of a 20% deduction from income from sole proprietorships, S Corps and partnerships. Unfortunately, there is some ambiguity in the language that is going to require some clarification from congress or by interpretation by the IRS. This is NOT a cut for the wealthy, although the limitation starts at AGI of $315K on a married joint return or $157,500 on single or married separate returns. Once income exceeds the applicable threshold, a limitation of 50% of employee's wages kicks in, so that is a BIG incentive for businesses to hire more people and, thus, create more jobs. Read this article if you want your head to explode as it compares different scenarios. Until this portion of the bill is clarified, it's not clear what the best form of business entity will be to best take advantage of this provision in the law. Stay tuned.

The new "20% of qualified business income" deduction was intended to benefit owners of sole propietorships, S corporations and partnerships. But a straightforward reading of new Section 199A reveals that all three business types will not be treated equally under the law. Can this be correct?