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Final regulations dealing with the 100 percent bonus depreciation allowance for qualified property acquired and placed in service after September 27, 2017, allow property which is constructed under a pre-September 28, 2017 binding contract to qualify for the 100 percent rate. The final regulations adopt proposed regulations ( REG-104397-18) with certain modifications, including a revised constructed property rule. In addition, the IRS has issued a new set of proposed regulations dealing with issues it is not ready to finalize.



The IRS has issued final regulations that amend the rules relating to hardship distributions from Code Sec. 401(k) plans. The final regulations are substantially similar to the proposed regulations. Further, plans that complied with the proposed regulations satisfy the final regulations as well. The regulations are effective on September 23, 2019.


For a taxpayer using an accrual method of accounting, the all events test is not met for item of gross income any later than when is included in revenue on an applicable financial statement (AFS) or other financial statement specified by the Treasury Secretary. How the AFS income inclusion rule applies to accrual method taxpayers with an AFS is described and clarified by Proposed Reg. §1.451-3.



Taxpayers may use the automatic consent procedures to change accounting methods to comply with the recent proposed regulations described above. Rev. Proc. 2018-31, I.R.B. 2018-22, 637, is modified.


Amendments to have been proposed to update the information reporting regulations under Code Sec. 6033, which generally apply to organizations exempt from tax under Code Sec. 501(a). The proposed regulations reflect statutory amendments and certain grants of reporting relief announced through guidance that has been made since the current regulations were adopted. The amendments and grants of relief apply particularly with respect to tax-exempt organizations required to file an annual Form 990, Return of Organization Exempt from Income Tax, or a Form 990-EZ information return.


Employers generally have to pay employment taxes on the wages they pay to their employees. A fine point under this rule, however, is missed by many who themselves have full time jobs and don’t think of themselves as employers: a nanny who takes care of a child is considered a household employee, and the parent or other responsible person is his or her household employer. Housekeepers, maids, babysitters, and others who work in or around the residence are employees. Repairmen and other business people who provide services as independent contractors are not employees. An individual who is under age 18 or who is a student is not an employee.


It is never too early to begin planning for the 2016 filing season, the IRS has advised in seven new planning tips published on its website. Although the current filing season has just ended, there are steps that taxpayers can take now to avoid a tax bill when April 2016 rolls around. For example, the IRS stated that taxpayers can adjust their withholding, take stock of any changes in income or family circumstances, maintain accurate tax records, and more, in order to reduce the probability of a surprise tax bill when the next filing season arrives.


The IRS expects to receive more than 150 million individual income tax returns this year and issue billions of dollars in refunds. That huge pool of refunds drives scam artists and criminals to steal taxpayer identities and claim fraudulent refunds. The IRS has many protections in place to discover false returns and refund claims, but taxpayers still need to be proactive.


The IRS requires that taxpayers substantiate their donations to charity. Whatever the donation is, whether money or a household item or clothing, the substantiation rules must be followed. The rules are complex and frequently tripped up taxpayers who had good intentions but failed to satisfy the IRS's requirements.


An employer must withhold income taxes from compensation paid to common-law employees (but not from compensation paid to independent contractors). The amount withheld from an employee's wages is determined in part by the number of withholding exemptions and allowances the employee claims. Note that although the Tax Code and regulations distinguish between withholding exemptions and withholding allowances, the terms are interchangeable. The amount of reduction attributable to one withholding allowance is the same as that attributable to one withholding exemption. Form W-4 and most informal IRS publications refer to both as withholding allowances, probably to avoid confusion with the complete exemption from withholding for employees with no tax liability.


Beginning January 1, 2014, the Affordable Care Act (ACA) required individuals to carry minimum essential health coverage or make a shared responsibility payment, unless exempt. Individuals will report on their 2014 federal income tax return if they had minimum essential health coverage for all or part of the year. Individuals who file Form 1040, U.S. Individual Income Tax Return, will indicate on Line 61 if they were covered by minimum essential health coverage for 2014, if they are exempt from the requirement to carry minimum essential health coverage or if they are making an individual shared responsibility payment.


The IRS has announced an increase in the optional business standard mileage reimbursement rate for 2015. The business standard mileage rate increased by one and a half cents, to 57.5 cents (up from 56 cents for 2014). The 2015 standard mileage rate for medical and moving expenses decreased slightly to 23 cents (down from 23.5 cents for 2014). The charitable mileage rate, however, is set by statute at a flat 14 cents per mile without inflation adjustment each year. The revised rates apply to deductible transportation expenses paid or incurred for business or medical/moving expenditures, or qualified charitable miles driven, on or after January 1, 2015.


The upcoming filing season is expected to be challenging for taxpayers and the IRS as new requirements under the Patient Protection and Affordable Care Act kick-in. Taxpayers, for the first time, must make a shared responsibility payment if they fail to carry minimum essential health care coverage or qualify for an exemption. At the same time, there is growing uncertainty over one of the key elements of the Affordable Care Act: the Code Sec. 36B premium assistance tax credit as litigation makes its way to the U.S. Supreme Court.


As most people know, a taxpayer can take a distribution from an IRA without being taxed if the taxpayer rolls over (contributes) the amount received into an IRA within 60 days. This tax-free treatment does not apply if the individual rolled over another distribution from an IRA within the one-year period ending on the day of the second distribution.


Some gifts to employees are too insignificant for the IRS to care about. The IRS calls these gifts de minimis fringe benefits. A de minimis fringe benefit is any gift or service with a value so small that accounting for it is unreasonable or administratively impracticable. The value must be nominal or very low. Turkeys given to employees at Thanksgiving are a good example.

The IRS has some good news for you. Under new rules, you may be able to gain a partial tax break on the full $250,000 capital gain exclusion ($500,000 if you file jointly with your spouse), even if you haven't satisfied the normal "two out of five year test" necessary to gain that tax benefit. You may qualify for an exception.


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