Tax Warrior Chronicles

Opportunities to Increase Cash Flow from 2018–2020 Business Losses

Posted on Wed, Apr 22, 2020

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) provides relief to taxpayers with net operating losses (“NOLs”) and excess business losses (“EBLs”) arising in taxable years 2018 to 2020.  The IRS recently issued guidance related to the new NOLs rules under the CARES Act, which are favorable to taxpayers seeking such relief.

 

Background – Net Operating Losses

Generally, NOLs for businesses and individuals can offset income in future or prior tax years when the company or individuals have income.  The 2017 Tax Cuts and Jobs Act (“TCJA”) changed the NOL carryback and carryforward rules by disallowing all carrybacks NOLs arising in taxable years beginning after December

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CARES Act Offers Relief for TCJA Interest Expense Limitations

Posted on Thu, Apr 09, 2020

As part of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), Congress provided temporary relief for individuals and businesses by adjusting interest expense limitations under Internal Revenue Code 163(j).  Today, we summarize those changes.

 

Background - The Tax Cuts and Jobs Act

The Tax Cuts and Jobs Act (“TCJA”) added several complicated tax provisions in December 2017.  Arguably one of the most difficult areas for taxpayers to navigate was IRC §163(j).

Because of its complexity, we urge you to read about the details of 163(j) in our previous blogs, “Business Interest Limitation Under TCJA Part I, Part II, and Part III.

 

What Has Changed - CARES Act

For taxable years

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Depreciation Changes Under CARES Act - Qualified Improvement Property

Posted on Tue, Mar 31, 2020

Taxpayers and practitioners nationwide have been waiting over 2 years for a technical correction to fix an error in the 2017 Tax Cuts & Jobs Act (TCJA) related to depreciation of Qualified Improvement Property (QIP).  The error was finally fixed in the recently enacted Coronavirus Aid, Relief and Economic Security Act (CARES Act), and the change has created significant tax-reduction opportunities for some taxpayers.

 

Background

Prior to the TCJA, non-residential improvements were classified as either Qualified Leasehold Improvements, Qualified Restaurant Property, or Qualified Retail Improvement Property.  The TCJA replaced these three types with one “Qualified Improvement Property”

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Rogue One: A Single Tax on Foundation Investment Income Story

Posted on Wed, Jan 22, 2020

By: Keisha Price, CPA, MST

 

A Long Time Ago in a Tax System Far, Far, Away…Private Foundations were subject to a 2% tax on net investment income generated from the Foundation’s charitable assets. This 2% tax could be reduced to 1% if the foundation’s current year charitable distributions exceeded its average charitable distributions over the prior five years…until now!

 

Makes Sense Right?

Well yes! It makes sense for a foundation with a clear charitable purpose, effective directorship, and meaningful assets to give more for the greater good of the galaxy each year and that deserves a tax break.

 

Constructing the Death Star

Let’s say the good and benevolent founder of the foundation

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Deductions for Qualified Transportation Benefits - Another Casualty of TCJA

Posted on Fri, Sep 06, 2019

By: Robert N. Polans, CPA, MT, PFS, and Stefanie Ostrich, CPA

 

The Tax Cuts and Jobs Act of 2017 (TCJA) contained hundreds of changes to our tax law including Qualified Business Income Deductions, limits on business interest expense, limits on excess business losses, and major changes to the U.S. taxation of profits earned overseas.  While much of the noise about the new tax law revolved around these items and others, less noise surrounded the part of the law which eliminates the deduction for Qualified Transportation Benefits.

 

The Internal Revenue Code (IRC) allows employers to offer certain non-taxable Qualified Transportation Fringe (QTF) benefits to their employees.  These can

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Your Kids in the Family Business Post-Trump Tax Reform

Posted on Mon, Aug 12, 2019

By: Melissa Boyce, CPA

 

The Tax Cuts and Jobs Act of 2017 (TCJA) changed many areas of the tax code, including when family business hires their child(ren). While there was a similar pre-TCJA benefit to hiring one’s child(ren), the new law increased several tax savings and warrants another look at hiring children into the family business.

 

Income Shifting

The largest benefit of hiring a child into a family-owned business is the ability to convert the parents’ high-taxed income into tax-free or low-taxed income. There are rules that must be followed; specifically, the children’s work must be legitimate, and the amount the enterprise pays them must be reasonable for the wages to be

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Divorce on Schedule 1 – Alimony

Posted on Thu, Aug 08, 2019

By: Sherri Sorbello, CPA

 

The tax treatment of alimony was one of the many items modified by the Tax Cuts and Jobs Act of 2017 (“TCJA”).  Alimony received is no longer taxable income to the recipient spouse and alimony paid is no longer deductible by the payer spouse for divorce or separation agreements executed after 2018, unless...

 

This change does not apply to divorce or separation agreements executed prior to 2019. For those agreements, the prior rules apply in which the alimony recipient reports the alimony received as taxable income and the payer of the alimony can deduct the alimony paid as an “above-the-line” deduction. An “above-the-line deduction” adjusts gross income, which

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Tax Considerations for Pass-Through Entities: §§ 199A and 163(j)

Posted on Tue, Jul 30, 2019

By: Jeremy Ferman, CPA, MA

 

The Tax Cuts and Jobs Act (“TCJA”) added several complicated tax laws to the books, adding a level of complexity for even the smallest pass-through entity returns.  As we enter the home-stretch of the extended filing season, we will examine arguably the two most difficult areas for pass-throughs to navigate: §§ 199A and 163(j). 

Section 199A: The 20% Pass-Through Deduction

Written to help lessen the gap between the corporate tax rate and the individual tax rates for pass-through income, § 199A allows a deduction of up to 20% of qualified business income reported by a pass-through entity.  While simple at face-value, the application of § 199A is far from it. 

 

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TCJA: What it Said vs. What it Did

Posted on Mon, Jul 22, 2019

By: Joe Brunell, CPA

 

The Tax Cuts and Jobs Act of 2017 (TCJA) is the most significant tax code overhaul since the Tax Reform Act of 1986.  The TCJA had four goals; tax relief for middle-income families, simplification for individuals, economic growth and repatriation of oversea income.   It cut individual income tax rates, doubled the standard deduction, eliminated personal exemptions and capped state and local itemized deductions.  While on the surface tax compliance now sounds simpler, as you will see, this isn’t the case.

 

Individuals

First and foremost, the new 1040 tax form is now postcard sized.  However, smaller is not always simpler; the new tax forms have become more

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Tax Warrior Vlog - Let's Pick on Congress: Drafting Errors in TCJA

Posted on Wed, Jun 12, 2019

 

Remember the Tax Cuts and Jobs Act drafting errors Chris Catarino talked about in the last vlog? Now he goes into a little more detail.

 

CJC - Drafting Errors in TCJA
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