2024 and 2025 by the Numbers
Many numbers we use in our profession are indexed for inflation. The effective date for many of these inflation calculations is August 31st. This chart contains the amounts for 2024 and 2025 for many items we deal with on a regular basis. These amo... Compiled by David L. Mellem, EA
Tax Appointment Worksheet
The tax appointment worksheet is a tool to help you gather the needed information for new and returning clients for the 2024 tax year. This year’s worksheet has been enhanced to reflect the changes i... Compiled by Mary Mellem, EA
Digital Asset Final Regulations: What Tax Professionals Need to Know
In 2021, Public Law 117-58, the Infrastructure Investment and Jobs Act, §80603, required brokers to report transactions involving digital assets similar to stocks. This includes information on sale pr... Tynisa (Ty) Gaines, EA (She/Her)
When Submitting a Tax Return Is Good Enough Versus When It Is Not
In recent years, taxpayers have had a dizzying array of court cases which define when a tax return is filed versus when it is not. Last year, on March 10, 2023, the full panel of the US Court of Appea... David Woods, EA, USTCP
Decoding IRS Transcripts: Navigating the Maze for Better Tax Resolution and Audit Preparedness
Aspect-Based Sentiment Analysis: Insights from r/IRS Subreddit I analyzed tax community sentiments regarding Internal Revenue Service (IRS) transcripts from 927 “hot” posts from the r/IRS (Internal Revenue Service News, and Taxpayer Disputes) subreddit, which is one of the largest online forums comprising tax professionals with more than 79,000 members. This subreddit serves as a hub for discussions, queries, and experiences... Dr. Desai, EA
Navigating Tax Relief: Understanding Injured Spouse vs. Innocent Spouse Relief
Tax professionals often encounter complex situations where marital obligations intersect with tax liabilities, especially when dealing with joint returns. In such cases, both spouses assume ... Desmond Hudson, EA
To Acquiesce or Not: The IRS’s Actions on Decisions
Despite their importance in tax administration, there has been very little written about the Internal Revenue Service’s (IRS) Action on Decisions (AODs) processes, as well as its inclination to focus on certain Internal Revenue Code (IRC) sections. An understanding of... Joel M. DiCicco, CPA, Philippe Dubois, and Richard S. Gendler, JD
Will Your Client’s LLC Operating Agreement Make an Election Under Subchapter S Invalid?
Organization of a business enterprise as a limited liability company (LLC) has a number of advantages. In addition to ease of formation, state LLC acts dispense with many of the formalities required for corporations and wide latitude is given to... Patrick D. Dimmitt
Avoiding the Perils and Pitfalls of Fee Predicaments
Rules on fees can be found in numerous sections of Circular 230i as well as the Internal Revenue Code (IRC) and various other regulations, so it is no surprise that the tangle of rules is full of inherent... Jennifer MacMillan, EA
Caught ‘Tween the Devil and the Deep Blue Sea
“The devil and the deep blue sea…” The idiom harkens back to an era when wooden sailing vessels had a seam below the deck called the devil, which needed to be caulked regularly. Tasked with the job of sealing the devil, some unl... Jennifer MacMillan, EA
The Two Biggest Conflicts of Interest Overlooked by Tax Professionals
Election years always serve as a reminder to avoid conflicts of interest. They also serve as a reminder that it is often easier to identify someone else’s conflict of interest than one... Amber Gray-Fenner, EA, USTCP
What Enrolled Agents Need to Know About Form 8300 and Digital Assets
Businesses who accept cryptocurrency (crypto) as payment and many tax practitioners who provide compliance services for those businesses were relieved to hear that the Internal Revenue Service (IRS) has delayed the require... Amber Gray-Fenner, EA, USTCP
The Advertising and Solicitation Restrictions in Circular 230
One of the last press releases from the Office of Professional Responsibility (OPR) announced a disciplinary settlement with an enrolled agent (EA) for violations ... Karen L. Hawkins
The Creditability of Contemporaneously Paid Foreign Taxes
Taxpayers earning foreign source income can satisfy their foreign tax liabilities in one of several different ways depending on the character of the income earned, the taxpayer’s level of foreign activity... Anthony (“Tony”) Malick, EA
Tax Compliance for Refugees
“Give me your tired, your poor, your huddled masses yearning to breathe free…” – Emma Lazarus All... Mary Beth Lougen, EA, USTCP
The Best (and Worst) Countries for Crypto Taxes in 2023
Cryptocurrency (crypto) has taken the world by storm, revolutionizing the way we perceive and use money. With this digital and financial revolution, the issue of crypto taxes has become a major concern for... Zac McClure and Tynisa (Ty) Gaines, EA (She/Her)
Are You Prepared for the Corporate Transparency Act?
As the clock strikes midnight on January 1, 2024, the Corporate Transparency Act (CTA) will come into full effect. In simple terms, the CTA requires that every company organized in the United States identifies its beneficial owne... Fernando Juarez Hernandez, EA
2023 Energy Credits Updates and Planning
Changes made in the Inflation Reduction Act (IRA) of 2022 have created new planning opportunities for tax professionals and their clients. As enrolled agents (EAs), we need to be aware of these changes in order to better s... Patrick Knightly, EA
Small Business Inventory Rules Under the Tax Cuts and Jobs Act
The Tax Cuts and Jobs Act (TCJA) made a significant change to the rules for eligible small business taxpayers that were previously required to maintain inventories and utilize the accrual method of account... Patrick D. Dimmitt
2023 and 2024 By the Numbers
Many numbers we use in our profession are indexed for inflation. The effective date for many of these inflation calculations is August 31st. This chart contains the amounts for 2023 and 2024 for many items we deal with on a regular basis. T... Compiled by David L. Mellem, EA
Tax Appointment Worksheet
The tax appointment worksheet is a tool to help you gather the needed information for new and returning clients for the 2023 tax year. This year’s worksheet has been enhanced to reflect the changes in tax law. The energy credits will be... Compiled by Mary Mellem, EA
IRS Procedures for Bypassing Authorized Representatives
The Right of Taxpayers to be Represented in their dealings with the Internal Revenue Service (IRS) is enshrined in the Taxpayer Bill of Rights.i The Internal Revenue Code (IRC) requires the issuance of... Patrick D. Dimmitt
Lessons from a Rogue Revenue Officer
I do not have scientific data to back this up, but my 30 years’ experience has led me to believe that something along the lines of 98 percent of the folks at the Internal Revenue Service (IRS) are ha... John A. Mitchell, EA
The Practitioner’s Duty to Help Business Owners with Recordkeeping
As the nation’s tax experts, enrolled agents (EAs) crucially influence taxpayers’ financial well-being and compliance with tax laws and regulations. A critical aspect of this role includes confirmin... Jeremy Wells, EA, CPA
NAEA Ethics and Professional Conduct Committee – How Can We Help You?
We wish we were writing this article more from a theoretical perspective than a practical one (i.e., few or no complaints about National Association of Enrolled Agents (NAEA) members). Sadly, over the past year, we have seen a m... The National Association of Enrolled Agents (NAEA) Ethics and Professional Conduct Committee
Your Ethics Footprint
A footprint leaves an impression. You can visualize your footprint on a sandy beach or the snow. At times, your footprint is not easy to see. Sometimes, you do not even realize you left your footprint as you do your walking in life. Over the years, we have h... Ruth Ann Michnay, EA, CPA, USTCP
Defending Against an OPR Investigation and Beyond
I was able to observe first-hand for six years the mystery that constitutes the investigation and prosecution of a disciplinary case under Circular 230. And I must admit, I was a lot smarter about the process at the end of my tenure than at its begin... Karen L. Hawkins
Story of a Worker Classification Case
A potential new client strolled into our office in July 2019 dropping an inch-thick packet of letters from our good friends at the Internal Revenue Service (IRS) onto our conference room table. The resulting dull t... John A. Mitchell, EA
The $80 Billion Question
On November 10, 2022, President Joe Biden nominated Danny Werfel to succeed Chuck Rettig as Commissioner of Internal Revenue.i Danny—or more formally, Daniel I.—Werfel testified on February 15, 2023, before the Senate Finance Committee, led by C... Robert Kerr, EA
Five Ways to Provide Peace of Mind to Your Clients with IRS Problems: Exploring Tax Resolution Options
There is no arguing the fact that the Internal Revenue Service (IRS) wants the money that is owed and heavily punishes delinquent taxpayers. Sometimes it feels as if the IRS wants people to stay indebted, to a point where the taxpayer wi... Randall Brody, EA
What Is — and Isn’t — Included in the Inflation Reduction Act of 2022
The Inflation Reduction Act of 2022 (IRA) was signed into law by President Biden on Aug. 16, 2022. It has been championed by the administration and Congress as the most sweeping climate and energy reform in history, altho...
IRS Tax Examinations in the Past and Future and the Impact of the Inflation Reduction Act on the IRS’s Audit Activities
In June 2011, Internal Revenue Service (IRS) Commissioner Shulman warned that the proposed cuts of $2 billion to the IRS’s budget in the United States House-passed fiscal 2012 budget resolution could have a long-term impact on taxpayer compliance. Notwithstanding the commissioner’s warni... Marcus Dyer, CPA
Tax Credit Bonanza: Benefits in the Inflation Reduction Act
The Inflation Reduction Act (IRA) of 2022 uses dozens of tax credits to move the United States towards energy efficiency and clean energy development. Five of these credits will be essential to know for client tax planning and advi... Thomas Gorczynski, EA, USTCP
An Enrolled Agent’s Guide to the Systemic Advocacy Management System
Do you know of issues at the Internal Revenue Service (IRS) that affect multiple taxpayers? Want to do something about it? Try the Systemic Advocacy Management System (SAMS). You might be thinking, “The IRS needs to a... Beth Logan, EA
When Your Client Says, “I’ll Fake a Receipt.”
You are representing a long-time client in an Internal Revenue Service (IRS) audit. You just received a Form 4564, Information Document Request (IDR), from the IRS. The IDR is focusing on his Schedule C business expenses. You call the clie... Daniel N. Price
Should Circular 230 More Widely Permit Contingent Fees?
Editor’s note: Fees are a hot topic currently in the tax industry since there is high demand for our services but limited capacity in our firms. Circular 230 does cont... Jeremy Wells, EA, CPA, and Sarah Moessinger, EA
Your Top Ethics Questions Answered
Q: Contract law often looks to lack of choice when considering unconscionability. Do you think an unconscionable fee can occur when a client has a choice to not engage or disengage?... Karen L. Hawkins
Health Savings Accounts: An Often-Overlooked Tax Savings
For certain taxpayers, such as high-income employees, it is challenging to find ways to reduce federal tax liabilities proactively. Since high-income employees often have sufficient cash to fund out-of-pocket medical expe... Thomas Gorczynski, EA, USTCP
Should Congress Permanently Extend the Filing Deadline?
PRO Cryptocurrency Did Not Exist in 1955. It Is Time to Update National Tax Day. National Tax Day (April 15) has not been modified since 1955. In 1955, the federal tax code was 929 pages....
Is a Remote Tax Court Exam Easier to Pass?
Circular 230 practitioners know we cannot always resolve tax controversies in the Internal Revenue Service (IRS) administrative processes within the Examination, Collection and App... Sherrill Trovato, EA, USTCP
Factors to Consider When Estate Planning with Cryptocurrency
The storm is here. The world is now fully entrenched in the cryptocurrency phenomenon and there is likely no turning back. Instead, tax and estate planning professionals must make sense of the cryptocurrency mania. Taxing authorities are g... Simon Mayali and Travis Thompson
Timing the Creditability of Accrued Foreign Taxes
Compliance-oriented tax professionals are—in many cases, for very good reason—most likely to first turn toward material published by the Internal Revenue Service (IRS) via instructions to tax forms and various handbooks in the resolution of que... Anthony Malik, EA
The Challenges of Non-fungible Token Taxation
By now, you have probably heard of nonfungible tokens (NFTs), but what are they? And how are they taxed? Non-fungible tokens have made big news lately: selling for astronomical sums at auction, becoming major status symbols, and attracting plenty of ire along the way.... Zac McClure and Tynisa (Ty) Gaines, EA
Nonresident Aliens Who Own U.S. Real Property: A Primer
The United States (U.S.) tax system allows for residentsi and nonresidentsii to file a federal income tax return and pay any taxes owed by the due date of the return. Though the Internal Revenue Service (IRS) has various tools in its arsenal to go...
Catch-22: My Nightmare with Minnesota Statute 332B
At the close of 2020, most tax practitioners–and Americans, in general–held out hope for better things to come in the new year. Without a doubt, 2020 was rough, and the best we could hope for was that it was in our rearview mirror. As a tax practitioner, 202... Jonathan B. Call, EA
Questions for Clients During the 2021 Tax Season
Every year, most tax professionals take a Form 1040 update class to understand the tax law changes that affect tax preparation. Then many take the cookie cutter organizer and send it to clients without review. Instead, take the... Beth Logan, EA
Tax Evasion and Fraud: The Enrolled Agent’s Role
Taxpayer A, who is being audited by the Internal Revenue Service (IRS), comes to you seeking assistance. The problem, she says, is that she reported $20,000 in bogus expenses in each of two years during which she had tried to launc... Rod Monger, EA
2021 and 2022 By the Numbers
Many numbers we use in our profession are indexed for inflation. The effective date for many of these inflation calculations is August 31st. This chart contains the amounts for 2021 and 2022 for many items we deal with on a regular b... David Mellem, EA
A Social Media Primer for Busy Enrolled Agents
Not on social media? Feel like you are too old or not techy enough? Have an established practice and do not think it is necessary to engage with your community or outside your immediate circle? Even experienced enrolled agen... Amber Gray-Fenner, EA
Tax Planning Versus Preparation – What Is the Difference?
Visit social media or Google these days and you will most likely see advertisements for tax planning. But many taxpayers (and even tax professionals) are confused about the differences between tax planning... Dominique Molina, CPA
Limited Partners and Self-Employment Tax
As tax professionals, we are often given Schedule K-1 forms by our clients in order to report their income and/or losses from their investments in pass-through organizations. How involved are we, ... Keith A. Espinoza, EA
The Role Technology Plays in Your Practice
Wikipedia has defined technology as "the sum of any techniques, skills, methods, and processes used in the production of goods or services or in the accomplishment of objectives, such as scientific investigation.” As a n... Nayo Carter-Gray, EA
Calling for Backup: When Do You (or Your Clients) Need to Bring in Counsel?
Tax controversy practitioners include various professionals with diverse experience and expertise. From tax return preparers to certified public accountants (CPAs) and enrolled agents (EAs) to tax attorneys, a client has many options in see... Caroline D. Ciraolo
Code Section 1341 to the Rescue!
How many times over the last few tax seasons have you found yourself having to tell your client: “Sorry, the 2017 tax cut doubled the amount of the standard deduction so your deductions are not enough to make a difference?” Or “The 201... Keith A. Espinoza, EA
Assessable Penalties and Abating Them
The United States federal tax system operates on a system of somewhat voluntary compliance. However, human nature being what it is, a voluntary system without a means of enforcement lends itself to fraud, ignorance, and disregard. I... David Woods, EA
Tax Reporting for Foreign Real Property Rentals
This article addresses the reporting of foreign real property rental activities conducted directly by individuals who are United States citizens or subject to United States taxation as resident aliens. The discussion focuses on foreign currency... Patrick D. Dimmitt, EA
Overview of the Foreign Earned Income Exclusion
There are two primary provisions that United States citizens can use to mitigate potential double taxation when working and living abroad: the foreign earned income exclusion and foreign tax credit. The foreign earned income exclusion al...
From Hero to Zero in 60 Seconds or Less
The following is a collection of anecdotes from members of the National Association of Enrolled Agents' (NAEA Ethics and Professional Conduct (EP&C) Committee. Names have been changed to preserve the confidentiality of our complainants and respondents. So...
Due Diligence: How Do You Do It and How Much Is Enough?
When I was director of the Office of Professional Responsibility, one of the most frequent questions I received from tax professionals around the country was: "How do I know when I have done enough due diligence?" The ultimate answer: “It depends,” sho... Karen L. Hawkins
A Primer on Significant Sections of Circular 230 for the New Practitioner
Circular 230 imposes certain duties and restrictions upon all practitioners.i It also delineates 18 nonexclusive acts of incompetence and disreputable conduct for which a practitioner may be disciplined. If ... Karen L. Hawkins
Preparer Due Diligence Under IRC §6695(g)
Section 6695(g) was added to the Internal Revenue Code (IRC or the Code) by P.L. 105-34, the Taxpayer Relief Act of 1997. It was one of several statutory changes intended to improve earned income credit (EIC) reporting compliance. As originally enacted, the law... Patrick D. Dimmitt, EA
Correcting Partnership Returns After the Centralized Partnership Audit Regime
Practitioners who make or find errors on a filed Form 1065 for their partnership clients may find themselves in for a bit of a shock when it comes to correcting those errors. Congress passed the Bipartisan Budget Act (BBA) of ... David Woods, EA
The Desirable (Yet Complex) Real Estate Professional Classification
Being a real estate professional has its tax advantages, And the average landlord does not want to pass it up. But misusing the classification can unravel expected tax consequences. Investing in rental real estate can be a l... Thomas J. Williams, EA, and Iris K. Palma, JD
Excluding Medicare Waiver Payments from Income
The Internal Revenue Service (IRS) has provided guidance on the tax treatment of certain payments to individual care providers for the care of eligible individuals under a state Medicaid waiver program in IRS Notice 2014-7.i The prog... Laurie W. Ziegler, EA
Anti-Money Laundering: A Primer
The Problem Despite the prevalence of credit and debit cards, Cash App, and Venmo, cash still is, in many circles, king (or queen). As of November 11, 2020, there was US$2.01 trillion in circulation.Ellie Nava-Jones, EA
An Introduction to the Supervisorial Approval of Penalties Under Internal Revenue Code Section 6751(b)
Internal Revenue Code (the IRC or the Code) §6751(b)’s supervisory approval requirement has been a hotly litigated issue over the past few years. This article will introduce you to §6751(b) and help explain how supervisory approval is obt... Frank Agostino and Phillip J. Colasanto
The IRS Is Moving the Crypto Disclosure Question to the Front of Form 1040: Here Is What You Need to Know.
Cryptocurrency Question Moved to the First Page of Form 1040 New for the 2020 tax year, the Internal Revenue Service (IRS) asks taxpayers on the very first page of Form 1040 the following disclosure question:... Zac McClure and Barrett Strickland
Reasonable Compensation: What Is It, Why Is It, and How the Heck Do We Get Our Clients to Understand It?
We doubt reasonable compensation compliance was part of your New Year’s resolution. However, the beginning of the year is the best time to address reasonable compensation with your clients. Getting all your ducks in a row now will make the end of the ... Paul S. Hamann and Jack Salewski, CPA
CARES Act and Retirement Plan Distributions
As with so many things in 2020, the tax laws changed in regard to distributions from various types of retirement plans. Just as we were getting comfortable with the changes made at the end of 2019 under the Setting Every Community Up for Retirement Enhancement (SECUR... Kathryn M. Morgan, EA, USTCP
How to Be Eligible for Substantial Tax Savings as a Trader
There are tax advantages for traders who are eligible for trader tax status (TTS). This article provides an overview of how to qualify for TTS (no election is required): Automated trading systems can qualify for TTS, providing the trader is significantly involved ... Robert A. Green, CPA
Relief Keeps Opportunity Zones an Attractive Option
The Tax Cuts and Jobs Act’s powerful new investment tool, the opportunity zone program, was intended to enable companies to make smart, potentially profitable, investments in troubled economic areas. The economic downturn brought about by COVID-19 may, at first glance, appear to ... Dustin Stamper and Michael Eickhoff
New IRS FAQs: 2020 Employment Tax Deposits/ Payments Deferral
The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides employers with a deferral mechanism for the employer portion of any Social Security taxes and self-employed individuals with a deferral mechanism for the employer portion of any self-employment taxes... David E. Peritz, CPA
Notice 2020-51: The How-To Guide on Waiving and Rolling Over 2020 RMDs
The IRS released Notice 2020-51 on June 23, 2020, in an effort to answer outstanding questions surrounding the waiver of required minimum distributions (RMDs) from retirement plans for 2020 brought about by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The ... Jennifer Kiffmeyer, JD
COVID-19 Presents Opportunities for Leave Sharing
In an attempt to find a silver-lining to the current health situation, this article examines how the current national emergency for COVID-19 presents an opportunity for employers to enhance their benefits for employees. While leave-sharing programs are common in the public s... John Kirk, JD, and Alex Mattingly, JD
IRS Crackdowns and Expatriate Tax Compliance
In the past year, the IRS has released new compliance initiatives that target expatriates (expats), specifically. As part of these crackdowns, enrolled agents (EAs) are likely to see a rise in noncompliance notices, passport revocations, and other penalties. While these puni... David McKeegan, EA
Red Flags and Tax Audits in Cash-Intensive Businesses
Cash-Intensive Businesses A cash-intensive business is one that receives a significant amount of receipts in cash. Think of as many businesses as you can that deal in cash such as hair salons, pizzerias, restaurants, laundromats, ... Jo-Ann Weiner, EA, NTPI Fellow®
Recent Developments in Employment Tax Controversies
THE INTERNAL REVENUE CODE (IRC OR THE CODE) IS CHOCK-FULL of laws employers must follow. They are required to collect and remit taxes withheld from employee wages, including federal income tax and taxes under the Federal Insurance Contributions Act (FICA), which ... Marcus E. Dyer, CPA
Teleworking Employees, COVID-19, and the Resulting SALT Effects
The novel coronavirus (COVID-19) pandemic is changing the way we work. More specifically, it is changing where we work. At first blush, simply working from home might not raise any tax-related red flags. Why should it matter for a business whether its employees work f... Scott Smith, JD
As Streaming Subscriptions Surge, So Do Tax Complexities
Is your streaming company seeing a sudden surge in subscriptions? Many providers are. With consumers spending the bulk of their time at home these days, trials and signups are skyrocketing. While it can be easy for companies to get caught up in a whirlwind of widespre... Steve Lacoff
Keeping a Pandemic at Arm’s Length: A COVID-19 Transfer Pricing Example
The COVID-19 pandemic is impacting global supply chains – and, as a result, international tax transfer pricing policies – at alarming speeds. Amid this chaos, companies risk making impulsive, short-term decisions with long-term effects. In order to successfully prepare for sign... Kevin Croy, CPA
Impact of COVID-19 on Accounting for Income Taxes
The spread of COVID-19 is impacting businesses around the world. As entities consider the effects of COVID-19 on their global operations, careful consideration is needed in understanding the accounting implications of these developments. The many ramifications of the curr... April D. Little, Ciro Buttacavoli, and Adam Lehmann
Revisiting Base Erosion and Anti-Abuse Tax Post-Pandemic: Final and Proposed Regulations are Worth a Second Look
In today’s economic environment, the base erosion and anti-abuse tax (BEAT) may apply to taxpayers who did not need to consider it as recently as three months ago. Considering recent economic developments and the Coronavirus Aid, Relief, and Economic Security (CA... Brian Abbey, JD
Tax Practice Management and Ethics
Managing a tax practice is tricky. I frequently meet clients who defend their tax choices and dicey positions because they feel it is correct. The disdain for tax agencies, particularly the IRS, becomes transparent in their conversations. To them, I am the governm... Thomas J. Williams, EA
Common Ethical Issues in a Tax Practice
The nature of tax practice presents a number of unique ethical issues. Tax practice requires compliance with multiple ethical frameworks. This creates ambiguities and raises complex questions. Courts have even questioned whether certain regulatory... Ryan Dean
Tax Preparer Ethics in the Modern World
After the Civil War in 1884, Congress enacted a law known as the “Horse Act,” which allowed citizens to make claims against the Treasury Department for the value of horses confiscated for use by the troops. The Treasury soon discovered that people were making cl... Anita Robinson, EA
An Inquiry Into the Factors Aiding Clemency for Foreign Corporations Requesting Protective Tax Return Filing Deadline Waivers
Foreign corporations (FCs) often have varying degrees of U.S. business activities which in turn subject them to varying degrees of U.S. tax exposure. Anthony (“Tony”) Malik, EA
Earnings And Profits of a C Corporation
When preparing a corporate tax return or advising a corporate client on the distribution of dividends, it is important to properly understand the term “earnings and profits.” Earnings and profits (E&P) is a tax term that applies to C corporations and is governed by IRC §312. It... Kevin C. Huston, EA, USTCP
Taxable Mergers and Acquisitions and the Unwanted Asset
Under One Roof I sometimes wonder at the number of corporations that own real property. It is often the case that the property is the corporation’s principal asset, which it leases to one or more commercial tenants, for example. That is bad enough.i There are o... Lou Vlahos
The Recent Shift Towards Territorial Taxation of U.S. Corporations
Prior to passage of the Tax Cuts and Jobs Act (TCJA), the U.S. was the only G-7 country that taxed its corporations with headquarters in the U.S. using a worldwide tax system. Marshall J. Heap, EA
S Corporations Rules & Strategies
Formation and Requirements A corporation is created under state law and elects S corporation status by timely filing Form 2553, Election by a Small Business Corporation. The requirements under most state laws are that the taxpayer files articles of incorporation, obtain an employe... Anita Robinson, EA
Lessons Learned From the 2018 Tax Season
Now that the extended deadlines have passed for 2018 returns, we can take a moment to reflect on the lessons learned throughout a challenging year. Below we have put together five major takeaways we have come across to aid in planning for the 2019 tax year and beyond. To this end, please kee... Megan Bierwirth, CPA
A Primer on the New Excise Tax on Nonprofit Compensation
As a result of the Tax Cuts and Jobs Act, passed at the end of 2017, many nonprofits found themselves facing a significant tax on both the compensation of certain employees and any separation payments, often called “parachute payments,” paid to highly-compensated employees, u... Joan Vines, CPA, Norma Sharara
It’s Deja Vu All Over Again: New Tax Forms for 2019
Form 1040 changed significantly for the 2018 tax season. It is changing again for the 2019 tax year. It appears that the 2017 and 2018 forms had a baby — the 2019 form. In other words, the pendulum is swinging back a bit. Beth Logan, EA. 1040 and 1040-SR The cha... Beth Logan, EA
Financial Planning Using Qualified Opportunity Zones
The Tax Cuts and Jobs Act of 2017 (TCJA) expanded the federal estate, gift, and generation-skipping transfer tax exemption amounts, dramatically changing the landscape of estate tax planning. Less appreciated has been the TCJA’s creation of a new tax-de - ferred investment opportuni... Kevin Matz, CPA, JD
Demystifying §199A and Rental Activities
I read Gil Charney’s analysis of the application of §199A to a rental activity in the September/October 2019 edition of EA Journal (“Your Questions Answered,” pp. 12-13) and I do not agree with it. In that case, I believe the taxpayer clearly qualifies to take the §199A deduction on th... Thomas A. Gorczynski, EA, CTC, USTCP
Is Cryptocurrency a Major Opportunity for Enrolled Agents?
The short answer is yes. Cryptocurrency is a major opportunity for enrolled agents. However, seeing the opportunity and capitalizing on it are two different things. Blockchain > Cryptocurrency > Bitcoin You might already know this, but stil... Andy Frye, EA, Joshua Azran, CPA
One Year after Wayfair – What Nonprofits Need to Know
It has been more than one year since the Supreme Court announced the landmark decision in the South Dakota v. Wayfair case, opening the door for states to require organizations to collect and remit sales tax even if the organization has no in-state physical presence. Th... Marc Berger CPA, JD, LLM, Katherine Gauntt
Tax Change Transforms Charitable Giving Landscape
Donor-advised funds are growing in popularity as a way for individuals and corporations to give to charities. Broad-sweeping changes to the tax code at the end of 2017 sent nonprofits into a state of panic. The doubling of the standard deduct... Kim Moore
Top 10 Changes in the Taxpayer First Act of 2019
On July 1, 2019, President Trump signed into law the Taxpayer First Act of 2019 (TFA), enacting changes to the IRS’s organizational structure, customer service, enforcement procedures, management of information technology, and use of electronic systems, with a focus on improving its int... Sidney Kess, JD, LLM, CPA, Steven I. Hurok, JD, CPA
Understanding the Complexity and Confusion Over Internal Revenue Code Section 199A
The 2017 Tax Cuts and Jobs Act (TCJA) created a 20 percent qualified business income (QBI) deduction for non-C corporation businesses. On August 16, 2018, the IRS, as part of the rulemaking process inherent to administrative law, opened the proposed ... Christine Kuglin, EA, JD
When Is a State Refund Taxable
The TCJA Raises Some Questions. As anyone not living under a rock these last 18 months knows, the Tax Cuts and Jobs Act (TCJA) imposed a $10,000 ($5,000 married filing separately) cap on deductions of state and local taxes (SALT)—including income, real estate, property, and s... Gil Charney, CPA/PFS, CFP, CGMA, CMA, MBA
How to Manage Taxpayers Complaints
What is the form for reporting customer service-related complaints regarding the Internal Revenue Service? The answer will appear at the end of this article (remember that everyone’s tax problem is an emergency to him!). The Taxpayer Advocacy Panel Within the Taxpayer Ad... Cheryl Williams, EA
Impact of the Wayfair Supreme Court Decision on Nonprofits
Sales tax is imposed upon retail sales of tangible personal property and taxable services in 45 states and the District of Columbia. Each state determines the circumstances under which a sales tax is imposed on the purchaser. Purchases by nonprofit organizations are exempt in most... Katherine Gauntt
Successful Journey to Tax Court Practice
“This was the most physically and intellectually demanding exam I have ever taken,” reports Amber Gray-Fenner, EA, USTCP, who passed the November 8, 2018, Tax Court exam on her first attempt. She took it because it seemed “like all the people I admired on the Facebo... Sherrill Trovato, EA, USTCP
Tax code changes put nonprofits in a bind
In 2016, a new record was surpassed in private giving to charities. Individuals, estates, foundations, and corporations were estimated to have contributed a record $390 billion to U.S. nonprofits, according to a report published in 2017 by Giving USA Foundation, an initiativ... Kim Moore
Tax Reform Means Strategic Opportunities For Nonprofits
“The GOP tax reform will devastate charitable giving.”i “Nonprofits are the unintended victims of the new tax bill.”ii “Tax reform could cost charities $13 billion a year.”iii While ... Ellie Burke
Blockchain Technology And What it Means For Tax Professionals
The business world has been slow to warm up to virtual currency. Bitcoins are accepted by Overstock.com , but not by Amazon.com. Signs reading “Bitcoin accepted here” are scattered throughout Chicago, New York, and San Francisco, but are not commonplace nationwide. In many ... Peter Horadan
Blockchain Technology Explained
Blockchain tech plays an important role in cryptocurrency mining Blockchain technology allows for fast, secure, and transparent peer-to-peer transfer of digital goods that include money and intellectual property. In cryptocoin miningiScott Orgera
Crypto Tax Tech Tools To the Rescue?
What is a crypto tax tool? For the purpose of this article, a cryptocurrency tax tool is defined as a software program designed to assist taxpayers and tax professionals with the often onerous job of calculating gains, losses, and other tax implications associated... Andy Frye, EA; Joshua Azran, CPA
Cryptocurrency Taxation Trends: Spring Always Follows Winter
Writers who cover the cryptocurrency space are nothing if not prolific. Well into 2018, legions of them trumpeted the glow of the crypto messiah. Those same writers now have the grimmer task of writing about what is commonly called the “crypto winter.” ... Michael Minihan
RPA Enables Tax Pros to Focus on Planning
It is not hard to recognize the value of robotic process automation (RPA). Robotic process automation relieves staff of repetitive tasks, increases the usability of data, virtually eliminates errors, and boosts efficiencies. Tax professionals would welcome any of these results, but is ther... McClur
Tax Technology APIs
Tax technology is rapidly changing to keep pace with the recent year’s tax law changes, be it federal income tax, state income and franchise, or state sales and use taxes. One configurable and customizable solution to tax technology is application programming interfaces (APIs). What... Alyssa Marchand, MST
Does Net Rental Income Quality For the Section 199A Deduction
Does Net Rental Income Quality For The SECTION 199A Deduction? By David M. Fogel, EA, CPA, USTCP One of the changes made by the Tax Cuts and Jobs Act of 2017 (P.L. 115-97) was to introduce a new 20 percent deduction for qualified business income. The deduction is intended to benefit taxpayers who have net business income. One of the questions being debated in the tax preparer community... David M. Fogel, EA, CPA, USTCP
Reconstructing Vehicle Mileage Logs
Reconstructing Vehicle Mileage LOGS By Bill Nemeth, EA Most examinations of personal tax returns involving Schedule C self-employment request information on car and truck expenses. IRS recommends contemporaneous mileage logs per IRC §1.274-5T(c)(1), but does not require them. The code makes the point that the records should be created in “close” proximity to the time of the activity. Adequat... Bill Nemeth, EA, NTPI
The Ins and Outs of Day-Care Provider Taxes: Part 1
The Ins and Outs of Part Day-Care Provider Taxes Part 1 By Laura Strombom, EA As the profession adapts to the changes under the Tax Cuts and Jobs Act of 2017, those who prepare primarily basic returns, such as a 1040 with only a Schedule A, may need to add additional areas to their practices. One strategy is to specialize in an area that will continue to demand expert preparation services.... Laura Strombom, EA, MBA, NTPI
Ethical Due Diligence – Self Cancelling Terms
Due diligence. Two little words with oversized implications for tax professionals. In most cases, under the due diligence guidelines set forth in Circular 230, tax professionals can rely on the representations of their clients without having to verify the accuracy or veracity of those rep... Dave Du Val, EA
Cryptocurrency Tax Preparation: Ethics Nightmare
"Who makes more money: the general practitioner doctor or the specialist spine surgeon?" Consultants love to ask that question, as part of recommending that tax professionals specialize our services. And, yes, we must admit: the question is a valid one. Specialists often do enjoy str... Andy Frye, EA; Joshua Azran, CPA
OPR Radar (for how long?)
You have been a licensed tax professional representing your clients before IRS for many years. On a current controversial complex case, unknown to you, the IRS agent you have been working with files a “Report of Suspected Practitioner Misconduct” with the Office of Professional Responsibilit... Ruth Ann Michnay, EA, CPA, USTCP
A New Opportunity for Nonresident Aliens: Ownership in an S Corporation Introduction
Changes to U.S. tax law brought about by the 2017 Tax Cuts and Job Acti (TCJA) have affected many longstanding tax planning tools. One favorable change amends the rules regarding the persons who can own shares of an S corporation. Historically, the S corporation election was ... Rusudan Shervashidze, JD; Stanley C. Ruchelman, JD
Books to Tax in a Snap
When clients hands over a QuickBooks (QB) file at income tax time, the expectation is you have what you need and tax preparation will be a breeze. Depending on the client, you are either elated or you want to cringe; there is not much in between. It is important for tax preparers to feel ... Geri Bowman, EA, CPA, USTCP
Impact of Tax Reform on Choice of Entity
The tax reform legislation known as the Tax Cuts and Jobs Act that was passed by Congress and signed by President Trump on December 22, 2017, has significantly changed how many businesses and their tax advisors approach the choice of entity decision. When deciding on how to be cla... Timothy C. Smith, JD
Sales Tax Nexus: South Dakota v. Wayfair, Inc. – The Facts
On June 21, 2018, the Supreme Court of the United States ruled on South Dakota v. Wayfair, Inc. The Supreme Court was asked to examine the physical presence precedents it set in two prior cases: Quill Corp. v. North Dakota (U.S. Supreme Court, No. 91- ... Alyssa Marchand, MST
The Gig Economy
The gig economy is a growing income sector in the world and a growing niche for tax professionals to harvest. Before jumping into this market, it is necessary to know some things about this area of practice. Let’s start with the definition of a gig, per Merriam-Webster: “a job usually for ... Kathryn M. Morgan, EA
The Tax Cuts and Jobs Act Moves the U.S. Closer to a Territorial Tax System
The Tax Cuts and Jobs Act (TCJA) fundamentally changes the taxation of outbound activities of U.S. corporations and foreign corporations doing business in the U.S. and moves the U.S. international tax regime closer to a territorial system on par with other developed countrie... Sean Clancy, JD; Frank Emmons, JD; Shahzad Malik, JD
Sales Tax Nexus: The Unintended Consequences of South Dakota v. Wayfair, Inc.
On July 24, 2017, the U.S. House Judiciary Committee held a hearing to discuss the implications of the South Dakota v. Wayfair, Inc. Supreme Court ruling. The Supreme Court overruled the physical presence nexus in this case, in favor of allowing the states to impose economic nexus standards... Alyssa Marchand, MST
Employees and the Self-employed: A Comparison under the Tax Cuts and Jobs Act
The 2017 Tax Cuts and Jobs Act (TCJA), signed into law on December 22, 2017, is favorable to businesses of all types – corporations, partnerships, and sole proprietorships. The TCJA reduced C corporation taxes to a flat rate of 21 percent, down from a gradua... Gil Charney, CPA/PFS, CFP, CGMA, CMA, MBA
Home Mortgage Interest & TCJA
I have been preparing income tax returns for more than forty years. During that time, there have been many changes as to how nonbusiness interest expense has been treated on Schedule A of a client’s personal income tax returns, Form 1040. In my first couple tax ... C. Dale Boushley, EA, CFP
Post-TCJA Qualified Personal Residence Trust Planning
The sweeping changes of the Tax Cuts and Jobs Act (TCJA) have prompted a reconsideration of many financial plans. The realm of estate planning will be especially affected by the TCJA’s doubling of the federal estate tax exemption. The author presents a hyp... Martin Shenkman, CPA/PFS, JD, AEP
The QBI Effect – §199A
This topic can easily occupy several hours. So, what is all the hype about? Qualified business income (QBI) qualifies a small business to deduct up to 20 percent off its net income. This is income that normally gets reported on Form 1040. This includes sole proprietors, andlords, farmers, p... Ben A. Tallman, EA, USTCP
What Are They Doing with Tax Forms
Please remember that this article was written in late September based on the draft forms available at that time. Some changes may have occurred between that date and the publishing of this article. Line 7 Wages. Line 21 — Other income. Lines 37 and 38 – adjusted gross income (AG... Beth Logan, EA
Five Secrets Client Wealth
Enrolled agents typically focus on compliance, asking such questions as: How do we complete the required forms correctly? How do we determine the correct amount of tax? Are the positions we take on tax returns likely to meet our ethical and legal requirements? However, to be the most effective tax professional possible, and the best advocate for our clients, we must move beyond compliance and form preparation for proactive tax planning. Wit... Thomas A. Gorczynski, EA, USTCP
International Representation: What You Should Know
Return preparation and representation of clients with offshore accounts and assets has become one of the hottest and fastest-growing areas in tax practice. It is a difficult and convoluted world of rules with high stakes that often lack definitive and clear guidance. Before taking on a taxpayer with foreign ties, be sure to read up on what needs to be filed, when it needs to be filed, and what defines “filed.” You will also want to know what ... Mary Beth Lougen, EA, USTCP
2018 Tax Law Changes
This year, we get to deal with many tax changes. Members of Congress, as well as presidential candidates, stated that one of their goals was to simplify the tax code (U.S. Code title 26). And simplification has occurred to some extent with Public Law 115-97, also known as the Tax Cuts and Jobs Act of 2017 (TCJA). Congress made some issues simpler while creating at least one new issue that has confused many. Many popular de... David Mellem, EA
The Ins and Outs of Day-Care Provider Taxes: Part 2
IRC Section 162, Trade or Business Expenses Section 162(a) states: In general there shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business... . In a home daycare, many of the expenses have personal and business elements. Te Audit Technique Guide for child-care providers (ATG for CC) states: The examiner needs to evaluate in a fair a... Laura Strombom, EA, MBA, NTPI Fellow®
I Spy Tax Fraud! Do You?
The word “fraud” conjures up many images, none of which are positive. As Circular 230 tax professionals, we never knowingly jeopardize our credentials while serving clients. Ever cautious, we could, nevertheless, find ourselves representing a client who has engaged in fraudulent activity. Can you recognize the signs of tax fraud? How do you handle a client’s matter with potential or actual fraudulent transactions? According to the Interna... Alan L. Pinck, EA, Ann E. Kummer, EA, CPA
The IRS Revenue Officer: Friend or Foe?
It is likely you will encounter an IRS revenue officer who is difficult, unyielding, and possibly aggressive. You may perceive that the revenue officer's job is to make your and your client’s lives difficult. However, the truth is very different. Sure, a collection case making its way to a revenue officer is deemed serious by the IRS. After all, revenue officers are the IRS’s most experienced and sophisticated collection agents. Their foc... Howard S. Levy, JD
Overview of Practice Before the U.S. Tax Court
This article will focus on income tax deficiency and collection due process (CDP) jurisdiction, but the Tax Court also has jurisdiction over IRS’s denial or refusal to act on abatement of interest under IRC §6404 and innocent spouse cases under §6015; cases related to employment status; and denial of whistleblower claims, among others. The Tax Court was established to handle tax deficiency cases that require a timely filed notice of defic... Sherrill Trovato, EA, USTCP
Action Required, Addressing the Complexity of Tax Practice Rules
Historically, Circular 230 has embodied the regulation of tax practice before the IRS, including the ethical standards that tax practitioners must follow. Originally, 31 USC Sec. 330, which originated in the Horse Act of 1884, granted the secretary of the Treasury the authority to regulate agents representing claimants before the Treasury Department. Treasury used circulars to provide guidance to these agents. In 1921, these circulars were co... Marshall J. Heap, EA
Become Americas Advanced Tax Expert
BECOME AMERICA’S ADVANCED TAX EXPERT BY Mary Sunderland, EA, USTCP & Bill Nemeth, EA Do you want to stand out as a tax practitioner? Are you confident that you offer the latest and best tax advice to your clients? Do you want to grow your business by taking on more complicated tax returns and representation clients? Do you want to know the tax experts in these areas? ... Mary Sunderland, EA, USTCP
Due Diligence: It’s Not Just About EITC Anymore!
Due Diligence IT'S NOT ABOUT EITC ANYMORE By Kathy Morgan, EA, USTCP How many of you are starting to feel like we work for the IRS, “pre-auditing” clients for them? As grEAt tax professionals, the rock that we stand on has always been and will always be our integrity. However, just how much must we scrutinize our clients’ information to meet our obligations to the IRS, our clients’ well-b... Kathy Morgan, EA, USTCP
Governors From 22 States Issue “Enrolled Agent Week” Proclamations
GOVERNERS OF 22 STATES ISSUES ENROLLED AGENT WEEK PROCLAMATIONS By John Michaels Every year, representatives from NAEA state societies across America ask the governor from their respective state to help kick off filing season by issuing a proclamation declaring the first week in February “Enrolled Agent Week.” We ask for these proclamations in an effort to help educate the public about th... John Michaels
Is Merely Following Circular 230 Good Enough
Is Merely Following Circular 230 Good Enough? David J. Silverman, EA, In the years since the Of fice of Professional Responsibility began requiring enrolled agents to complete annually two credits of continuing education in ethics or professional conduct, not one seminar I have attended on these topics has gone beyond what is stated in Circular 230. Some tax practitioners might seek com... David J. Silverman, EA
How I Got Into Tax and Why I Love It
When I was in high school, my 11th-grade English teacher noticed that I wrote really well and loved to read, but I was getting a D in her class. She determined that I was bored and wasn’t being challenged. So, I was moved to Honors English. My first day in Honors English we were given the assignment to write a short story. At the time, I was reading a lot of Clive Barker novels, and I wrote a 25-page story called “Meat Loc... Craig W. Smalley, EA
Undisclosed Foreign Accounts: Protecting the Executor
An executor administering an estate with undisclosed foreign accounts is exposed to substantial risks that may not be apparent. The following discussion is intended for executors and administrators who wish to understand and avoid those risks.1 A Typical Scenario A taxpayer dies. An executor is appointed and learns of foreign accounts: Tose foreign accounts hold investments. The ... Frank Agostino, Esq., Nicholas R. Karp, EA, USTCP
Taxation of Dividends From Foreign Corporations
U.S. persons frequently own legal entities abroad to pursue a variety of economic interests. Common U.S. ownership scenarios include expatriates forming foreign entities to locally operate businesses, U.S. residents forming foreign entities to capitalize on expansion opportunities, and entrepreneurial immigrants coming to the U.S. More often than not, these foreign entities default to corporate status à la the tax law’s default classification... Anthony (“Tony”) Malik, EA
Basis and At-Risk Amounts for S-Corporations
Often, tax practitioners ignore or are unaware of limitations that exist for deducting losses on taxpayers’ returns. Some of the more overlooked areas in this regard are those of basis and at-risk limitations. "is article will shed some light on what may be confusing issues for practitioners dealing with these topics. S Corporation Basis Basis for an S corporation should in theory be easy to determine. An S corporation's sharehol... David Woods, EA
Educating America Growth of a Movement
As with most great ideas, the idea to promote the enrolled agent (EA) license to students and administrators at two and four-year colleges did not begin with one person. When several NAEA leaders independently recognized the high demand for licensed tax professionals, they also recognized that this required additional education for current college accounting majors to ensure that they could fill this demand. This created the perfect opportuni... Andrew “Andy” Stadler, EA
Filing Requirements of Americans Abroad
Ownership of passive foreign investment company (PFIC) shares can easily be missed because their ownership is often hidden in security portfolio statements. A company is a PFIC by fulfilling one of two requirements; having at least 75 percent of its income be passive or having at least 50 percent of its assets be investments held for the production of passive income. Passive income includes, but is not limited to, interest, dividends, rents, ... Rainer Fiege-Kollmann, EA
Superchange Your Career in Tax: Become an EA
If you are considering a career in tax, there is no time like the present to obtain your enrolled agent (EA) license. EAs are America’s tax experts, and they are the only federally licensed tax preparers who also have unlimited rights to represent taxpayers before the IRS. Unlike some professional certifications, you can become an EA before you complete your degree, and there are many advantages in doing so. Start Now To become ...
2017 Tax Law Changes
So far this calendar year there has been very little action by Congress involving tax matters. Maybe I should say there has been no final action by Congress on tax matters. Lawmakers have discussed and introduced many small bills, but nothing that has reached joint committee. The one exception is the Disaster Tax Relief and Airport and Airway Extension Act of 2017, which is discussed in the cover article. The items that were last exte... David Mellem, EA
How Education Can Save You Money on your Income Taxes
Education is perhaps the single best investment that a person can make during his or her life. According to a recent report from the U.S. Bureau of Labor Statistics, bachelor degree holders earn $1 million more over t heir lifetimes t han high school graduates. The Internal Revenue Service allows several tax benefits that help to defray the cost of education. These benefits are not just for the taxpayer, but they are also for the spouse and/o... Anthony Santullo, EA
Preparing an Accurate FBAR: Ten Common Mistakes
The failure to file an accurate and complete Financial Crimes Enforcement Network (FinCEN) 114, (Report of Foreign Bank and Financial Accounts (FBAR)) can result in serious penalties and consequences for a taxpayer. Unfortunately, the FBAR is one of those deceptively simple forms that does not appear to be complex due to the limited number of entries required. However, those unfamiliar with the form are prone to mistakes, as detailed rules ex... Randall Brody, EA
Section 165 Casualty & Losses
With the devastating impacts of Hurricanes Harvey, Irma, and Maria still fresh, we need no reminder that August through October is the peak of the Atlantic hurricane season (which occurs from June 1 to November 30). High winds, heavy rain, tornadoes, and subsequent flooding can all wreak havoc on coastal residents, including destroying billions in property every year for individuals and businesses alike. Taxpayers who live far from the oc... Stephen Mead
An Introduction to the Internal Revenue Manual
As a tax professional, what do you do when you encounter a client who has a problem or an issue which you have limited familiarity with or experience with? Do you prefer the client to another practitioner? Do you contact a colleague (or post a question in a forum) and hope that any advice that you receive will be sound? Or do you tell the client that you will do some additional research on the issue and get back to him? Your course of act... John G. (“Jack”) Wood, EA
Breaking Down the Tax Professionals Role in Estate Planning
Many of us look for additional income- generating avenues during the off-season. I became a certified estate planner to bring in extra money. You may be thinking, “What exactly is a tax professional’s role in estate planning?” Simply put, it is our job to watch for issues like the estate tax, while at the same time having a solid understanding of what will be done at the time of death and how to adhere to the estate plan. First of all, th... Craig W. Smalley, EA
Tax Implications of Home Flipping: Dealer Or Investor
With today’s hot real estate market and rapidly escalating property values, many clients are engaging in real estate investing and house flipping. Indeed, there are many reality TV shows and real estate networks dedicated to glamorizing the quick profits that can be made in these activities. What these programs fail to mention are the tax consequences of these transactions. As tax professionals, that’s where we come in... Keith A. Espinoza, EA
Womb For Rent
Tom and Cindy Jones are your long-time clients. Tom has an auto body repair business with three employees and files a Schedule C. Cindy is a part-time dental hygienist, receiving W-2 wages. They have two children, ages 12 and eight. Their Schedule A deductions are pretty standard: home mortgage interest, charitable contributions, property taxes, and so forth. In May 2016, Tom calls you and asks for assistance on an IRS aud... Ruth A. Rowlette, EA
Adding Client Value, Divorce
The first in a series on using tax planning to guarantee satisfied clients and grow your business By Beth Logan, EA People think of tax season as running January through April. But most people make their biggest tax mistakes from May through December. There are two reasons for this. First, they aren’t thinking about taxes. Second, there are more days in which to err. This is my tax mantra. If you tell clients this, they ... Beth Logan, EA
Cyber Security For Tax Professionals
In the “Capitol Corner” column of the January/February 2017 EA Journal, Robert Kerr acknowledged that enrolled agents “did not become enrolled agents because of a deep and abiding passion for information technology, firewall construction, and/or secure remote access.” Kerr, however, added a warning to tax practitioners not to delude themselves: “The bad guys are out there, and they are after information that modestly sized practices h... Marshall J. Heap EA
Indirect Methods of Proving Income
Did you know the IRS requires its agents to perform a minimum income probe on every audit? And did you know that a minimum income probe can result in the IRS agent using indirect methods of proving income? If you have a client who is being audited—and even if you don’t—it is to your advantage to learn everything you can about indirect methods of proving income. Minimum income probes are discussed as part of the examination process governed... Jo-Ann Weiner, EA
Why Clients Hire Us to Represent Them
ONEDAY. I was meeting with a revenue agent (RA), representing a client during an audit. The office was set up with cubicles, and it was easy to hear what was going on in the cubicle next to me. I happened to hear a taxpayer who was representing herself while another RA was raking her over the coals. The RA who was helping me went off to make photocopies as I heard this lady begin to sob. I mean, the RA was really handing it to her. I got u... Craig W. Smalley, EA
Ethics Rules, Penalties, and the Tax Preparers Engagement Letter
Perhaps one of the most important, but also one of the most overlooked, parts of the 1040 U.S. Individual Income Tax Return is the section near the bottom of the second page that states: “Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct and accurately list all amounts and sources of income I received duri... Anthony Santullo, EA
Excess Depreciation Claimed, An Ethical Dilemma
I MET JUSTIN FUNDALINSKI of Jim Saulnier & Associates while volunteering time for the betterment of the Financial Planning Association. He asked a question that gave me pause. Tax questions that cause me to pause are the spice of life. His question was about a fascinating situation he encountered regarding depreciation and disposition of residential rental real estate. So down the rabbit hole I went, thoroughly reviewing t... John R. Dundon II, EA
Learn to Lead at SSLA
Are great leaders born or made? This question has been debated for generations. In my opinion, the answer is a resounding, “both.” Some people do seem to have an innate something that makes others gravitate toward them and follow their lead. Yet leadership is also a skill that can be studied, practiced, and developed over time. Imagine what kind of leader you would be today if you had been taking 30 hours of leadership edu... Jerry Gaddis, EA, MBA
Reading the Internal Revenue Code
Why would anyone subject themselves to reading the Internal Revenue Code? It’s not exactly a spellbinding novel, or even an interesting nonfiction work on your favorite topic, unless your favorite topic is tax law. When most people think of the Code, they think of it as being an impenetrable morass of legalese gobbledygook, more useful as a cure for insomnia than a practical resource for the tax professional. But being able to effecti... Carolyn Richardson, EA
Gambling As a Profession Tax Implication
The thrill of a slot machine jackpot is exhilarating. Waiting for a casino attendant to come and do the legendary “hand pay” (paying the taxpayer at the machine) gets taxpayers’ hearts racing. Most taxpayers get so caught up in the moment that the tax consequence of their winning is a distant thought. It is so distant, in fact, that many taxpayers forget they even received that W2-G and leave it off their tax return. However, when the... Tracy L. Bunner, EA
Preparing For The New IRS Partnership Audit Rules
Partnerships and entities taxed as a partnership, such as certain limited liability companies (LLCs), have become a popular entity choice for doing business over the past 50 years. This tax structure offers business owners significant benefits, including taxation at only the partner level. Another benefit that often goes unnoticed is that very few partnerships are audited by the IRS. Moreover, when the IRS engages in a partnership audit, t... Travis Greaves, JD, Josh Wu, JD
Strategies for Avoiding CP2000 Notices
Let’s start at the beginning. What is a CP2000 Notice, and when is it generated? Here’s what happens. The IRS Automated Underreporter Unit (AUR) matches income reported on individual tax returns with the income that is reported to the IRS from various third parties (e.g., employers, financial institutions, and banks) and recorded in its wage and income transcript file. If there is a difference, the IRS “flags” the tax ... Bill Nemeth, EA
The Adoption Tax Credit and Foster Care Adoptions
Do you have clients who are foster parents? Do you have clients who have adopted from the foster care system? If you have answered yes to either of these questions, you need to know about the Adoption Tax Credit. Many taxpayers who are adoptive parents have been told they do not qualify for the Adoption Tax Credit because they had no expenses. As tax professionals, we often hear our clients say, “My friend told me something different.” Wi... Becky Wilmoth, EA
Using Your Website and Social Media to Gain Clients
Websites and social media are great ways to attract younger clientele to your business. In our digitally interconnected age, it is imperative to have a website that is more than an online business card. Here are five tips for an effective website: 1. A modern website must be mobile-friendly. In a world where there are more mobile devices than there are people on Earth, it is essential that your website be mobile-friendly. What e... Jennifer Brown, EA
Affordable Care Act For The 2017 Filing Season
This may be the final year for the Affordable Care Act (ACA). The incoming administration has vowed to repeal and replace Obamacare as quickly as possible. With that being said, the purpose of this article is to update you on the ACA changes affecting your clients for the 2017 tax filing season. The changes that began in 2013 are intensifying in 2017. So strap yourself in and get ready for the new changes. Since this article was written in De... Ben A. Tallman, EA, USTCP
Ride Share
Rideshares are a new phenomenon that replaces taxi services. These services use technology as the main apparatus for their business strategy. Customers can now request a ride through a smartphone application that will subsequently ping a driver nearby. Uber Technologies, Inc. started this idea in 2009, which led to numerous other startups. Rideshare services are more efficient than typical taxi cabs and are less expensive for the customer. Fu... Christine Kuglin, EA, Angela Busila, CPA, Brandon Anderson
Tax Implications of Owning Vacation Rental Property
One of the greatest feelings is being on vacation. At some point in our lives, we seek to travel to a special place to enjoy time away from work and the daily routines of life where we can relax and explore a place that we have dreamed about. Many people fall in love with their vacation destinations, and they want to come back to them on a regular basis. Some are fortunate and wise to purchase a place to live at one or several of these locati... Anthony Santullo, EA
2016 Tax Law Wrap-Up
Congress did finally take action on the “extenders” last December, but it has not done very much this year. Some of the extenders were made permanent, and some were extended for a set period of time, such as two years. The items extended for two years are again expiring on December 31, 2016, and have so far not been extended further, which means we are again faced with uncertainty on these items. Form 1099 As we ... David Mellem, EA
Section 174 – Research and Development Credit Revised Regulation Analysis
In 1954, Congress enacted a temporary research and development (R&D) credit codi!ed by Internal Revenue Code (IRC) Sec. 174. "e purpose of the credit is to encourage inventors and companies to pursue research and development of new technologies. Although simple in theory, there have been problems with its implementation. Critics have argued that the credit is confusing as to which expenses qualify as “quali!ed research expenses.”1Darshan Wadhwa, CPA, and John Leavins, CPA
Tax Appointment Worksheet
The Tax Appointment Worksheet is a tool to help you gather the needed information for new and returning clients for the 2016 tax year. This year’s worksheet has been enhanced to reflect the changes in tax law. Now that the American Opportunity Credit is permanent, the need for the proper Form 1098-T and the educational expense evidence is increasingly crucial. Type of plan Amount of contribution Form 1099-... Mary Mellem, EA
Understanding the PFIC Rules and the Implications of Owning Foreign Mutual Funds
While many portions of the U.S. tax code possess confusing and sometimes harsh rulings, the tax rules for passive foreign investment companies (PFICs) are almost unmatched in their complexity and draconian features. Countless times, Americans overseas uncover a startling revelation that the small foreign investment they had made in a non-U.S. mutual fund is now subjecting them to all the significant filing requirements and tax obligat... Michael J. DeBlis III, Esq. and Randall Brody, EA
A World Of Alternative Fundraising A World Of Uncertainty
There are many ways our clients seek to get money for their businesses, inventions, or new endeavors. They apply for bank loans, ask family members, dip into personal savings, or in some circumstances, seek the help of venture capitalists. As with most things in life, each option has its plusses and minuses. But now there is a new kid on the block: crowdfunding. What is crowdfunding? According to Oxford Dictionaries.com, it is defined as ... Jeffrey A. Schneider, EA
Gearing Up For Tax Season Promote Your Practice and Your Credential
Autumn is the perfect time to begin promoting yourself and your EA credential in preparation for the upcoming tax season. Many members already know that NAEA provides tools to help them attract new clients and raise awareness of their EA credential, but many may not know that these tools are regularly refreshed. It’s time to take another look. Last year, NAEA formed a new partnership to present the improved “Find a Tax Expert... Gigi Jarvis, CAE
How to Maximize Penalty Relief For Your Clients
There are a number of ways delinquent taxpayers (your clients) can potentially reduce their overall debt to the IRS. There is the offer in compromise (OIC), that oft-dangled carrot and so-called “pennies on the dollar” settlement that many tax resolution firms pitch to lure negligent taxpayers to their companies. There is an innocent spouse resolution that can prevent one member of marriage from being liable for a tax debt caused by h... Jim Coleman, EA
The Uncanny Cannabis Controversy
I used to work in a Loew’s Theatre in California during the days of Flower Power, the draft, and the advent of the eighteen-year-old vote. Back then, movie theatres sold cigarettes and other tobacco products. After all, Loews owned the Lorillard Tobacco Company. At the time, word on the street was that Lorillard had trademarked several brand names for marijuana cigarettes, though you can’t find any evidence of that today. We were all very exc... Eva Rosenberg, EA
Criminal Tax Investigations Proceed with Caution
EACH YEAR, the NAEA National Conference delivers high-quality tax education to enrolled agents and other tax professionals. This year will be no exception! Once again, seekers of top-notch representation and tax preparation education will gather in Las Vegas, NV, at the Cosmopolitan Hotel August 1–3. To give you a sip of the action, we’ve chosen to showcase some of the outstanding education on tap this year. In the following... Theodore (Ted) A. Sinars, JD
How to Stop a Trust Fund Recovery Penalty Interview
Your client operates a business that owes employment taxes to the IRS, and an IRS Revenue Officer has just called you and requested that your client come down to his office for a meeting to discuss the debt. You presume the Revenue Officer wants to discuss collection of the debt from the business, maybe requesting that your client complete a Form 433B, Collection Information Statement for Businesses. After all, the business owes the debt,... By HOWARD LEVY, JD
Portrait of a non-filer
What is a non-filer? A non-filer is defined as a person (individual, corporation, estate, trust or partnership) who has met certain thresholds but has yet to file a tax return by the statutory or extended due date. As enrolled agents, we have to figure out how to help these people get compliant. Aft er all, besides making sure our clients do not pay more in taxes than they are required to, part of our job is to make sure that they are complia... Jeffrey A. Schneider, EA
What’s Your Process – How to Work a Collections Case
Introduction Coming into collection representation work in the late 90s, much of the disparity between practitioners rested in sorting out who knew the most rules and laws. A representative’s ability to answer questions relating to technical aspects of IRS enforcement (such as how many days exist before I lose levied money? or how long do I have to appeal a Trust Fund Recovery Penalty assessment?) were commonplace. Yet today with al... David Miles, EA
A Preparer Penalty Can Ruin Your Day
This issue of the EA Journal is all about ethics. Preparer penalties are often about a lack of ethics or a lack of due diligence. Here is one of the most comprehensive definitions of due diligence I have ever heard, given by my friend, fellow NAEA member, and NTPI Fellow, Conrad Mangapit, EA: Definition of Due Diligence – Part I A duty that paid tax professionals must perform to the best of their abilities in order... Kathy Morgan, EA
My EA Journey
I think I truly fell in love with taxation my sophomore year of college. At this point, I had already declared accounting as my major at Montclair State University. After years of working with my mom during tax season and after my first “Taxation of Individuals” class with a near perfect GPA, I was convinced that I would follow in my mom’s footsteps. Taxation was the career path I would choose. I decided after my four years at Mon... Brianna Antonelli, EA
Outer Limits of Tax Preparation Practice
One of the primary reasons people become enrolled agents is to be able to help their clients with tax problems. EAs (as well as attorneys and CPAs) can represent taxpayers before all administrative levels of the IRS. In order to effectively represent taxpayers, however, EAs need to be aware of just how far a practitioner can go, both ethically and professionally, without exceeding the limits of authority granted by the EA designation. In the ... Thomas A. Gorczynski, EA, USTCP, Kevin C. Huston, EA, USTCP
Walking the Tight Rope
NINE STEPS TO MAKE YOUR MARKETING EFFORTS FROM RUNNING AFOUL OF CIRCULAR 230 Marketing your business is a critical skill to develop for bringing in customers and preventing violations of the tricky regulations surrounding how we represent ourselves before the public. Frequently, there are posts on social media groups about how best to market our businesses, yet few responses ever mention the legalities. Most areas of Circular 230 ha... Crystal Stranger, EA
Classification of Foreign Business Entities under U.S. Tax Law
An elementary question in business international taxation involves ascertaining the classification of foreign entities for U.S. tax purposes. This question emerges whenever a foreign business pursues U.S. economic activity or when a U.S. person establishes a business outside the U.S. While foreign entities enjoy definite classification under the laws of their respective countries of organization, their classification under U.S. tax law may be... Anthony (Tony) Malik, EA, MPAcc
Speaking the Same Language
Matt Groening, creator of The Simpsons, once lamented, “I know all those words, but that sentence makes no sense to me.” As an enrolled agent, you may mutter something similar to yourself as you scan through the latest IRC update for the umpteenth time. Then, once you master the tax jargon, you must translate it into layman’s terms and communicate with your clients. Challenging as this may be in English, some NAEA members go another step furt... Julia Shenkar
Streamlined Compliance Procedures for Non-disclosed Foreign Bank Accounts
With the global business environment changing, the world does not seem as vast. Advances in technology have increased awareness of different parts of the world and have made communication cheaper and more efficient. The U.S. citizen is now more mobile than ever before. Additionally, immigrants who may have thought the U.S. was an ultimate destination have begun to move back to their home countries because of equally attractive incomes and lif...
2015 and 2016 Key Numbers
Single TAX RATES 2015 2016 10% bracket tops at 9,225 9,275 15% bracket tops atDavid Mellem, EA
2016 Healthcare Updates
The following is designed to review healthcare changes impacting your clients for the 2016 filing season. The changes that began in 2013 and 2014 are intensifying in 2015. So, strap yourself in and get ready for the latest changes and information that is coming. Since this article was written in the fall of 2015, review of more recent updates is recommended. New Healthcare Coverage Forms for Tax Year 2015 You’ve se... Ben A. Tallman, EA
Read Between the Lines
AN INTERACTIVE ORIENTATION AND PROJECT OF THE SCHULDINER/SMOLLAN LEADERSHIP ACADEMY By Raven Deerwater, EA, Ph.D The Schuldiner/Smollan Leadership Academy (SSLA) was designed to train volunteers for success as leaders of NAEA at the local chapter, state affiliate, or national level. At each training, participants are asked to create a project for themselves to take back and develop at the affiliate level. ... Raven Deerwater, EA, Ph.D
The Grand Parent Tax
GST is imposed on a direct transfer of property to a grandchild that would otherwise be subject to two levels of estate taxation if first taxed as part of the parent’s estate. It is then transferred from parent to child, taxed as part of the child’s estate, and finally transferred to the grandchild. To ensure that such transfers do not entirely escape two levels of taxation, assets conveyed are subject to GST at the time they are tran... Monica Haven, EA, JD, LLM
The IRM: A Resource for the EA
It may not make the New York Times best seller list (and it certainly would not be light reading while waiting for a plane at the airport) but the Internal Revenue Manual (IRM) can be an extremely useful document for enrolled agents in their dealings with the Internal Revenue Service. The Freedom of Information Act at 5 USC 552(a)(2)(c) requires agencies to make staff instructions available to the public. Frank X. Degen, EA, USTCP
Up in the Air with IRD
25 January• February 2016 B January• February 2016 26 In short, IRD is income that had been earned by a taxpayer prior to his death but that had not yet been paid to him. 27 January• February 2016 January• February 2016 28 29 January• February 2016 January• February 2016 30 SOURCE OF INCOME NOTES REGARDING IRD TREATMENT ACCOUNTS RECEIVABLE Uncollected sales proceeds from pre-death sales of c... Monica Haven, EA, JD, LLM