Certified Public Accountants
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Tax Alerts
September 25, 2020
Tax Briefing(s)

The American Institute of CPAs (AICPA) has urged the IRS and Treasury in an August 12 letter to issue guidance on President Trump’s payroll tax deferral memorandum. The executive action signed by the president on August 8 instructs Treasury to defer the collection and payment of payroll taxes from September 1 through years-end for eligible employees.


The IRS has released final regulations that address the interaction of the $10,000/$5,000 cap on the state and local tax (SALT) deduction and charitable contributions. The regulations include:

  • a safe harbor for individuals who have any portion of a charitable deduction disallowed due to the receipt of SALT benefits;
  • a safe harbor for business entities to deduct certain payments made to a charitable organization in exchange for SALT benefits; and
  • application of the quid pro quo principle under Code Sec. 170 to benefits received or expected to be received by the donor from a third party.

The IRS has issued final regulations regarding the limitation for the business interest expense deduction under Code Sec. 163(j), including recent legislative amendments made for the 2019 and 2020 tax years. Also, a safe harbor has been proposed allowing taxpayers managing or operating residential living facilities to qualify as a real property trade or business for purposes of the limitation. In addition, new proposed regulations are provided for a number of different areas.


The IRS has issued proposed regulations that implement the "carried interest" rules under Code Sec. 1061 adopted by Congress as part of the Tax Cuts and Jobs Act of 2017 ( P.L. 115-97). Some key aspects of the lengthy proposed regulations include the definition of important terms, how the rules work in the context of tiered passthrough structures, the definition of "substantial" services provided by the carried interest holder, and the level of activity required for a business to meet the definition of an "applicable trade or business."


The Treasury and the IRS have issued temporary and proposed regulations to:

  • reconcile advance payments of refundable employment tax credits provided under the Families First Coronavirus Response Act (Families First Act) ( P.L. 116-127) and the Coronavirus Aid, Relief, and Economic Security (CARES) Act ( P.L. 116-136), and
  • recapture the benefit of the credits when necessary.

The IRS has provided guidance on the special rules relating to funding of single-employer defined benefit pension plans, and related benefit limitations, under Act Sec. 3608 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (P.L. 116-136). The guidance clarifies application of the extended contribution deadline, and the optional use of the prior year’s adjusted funding target attainment percentage (AFTAP), with examples.


The IRS has released proposed regulations that implement new Code Sec. 7602(f), which bars non-government persons who are hired by the IRS from questioning a witness under oath whose testimony was obtained pursuant to a summons issued under Code Sec. 7602. The regulations prohibit any IRS contractors from asking a summoned person’s representative to clarify an objection or assertion of privilege. The IRS has also withdrawn a notice of proposed rulemaking ( NPRM REG-132434-17) that contained proposed rules addressing the participation of persons described under Code Sec. 6103(n) in the interview of a summoned witness and excluding certain non-government attorneys from participating in an IRS examination.


Proposed regulations adopt the post-2017 simplified accounting rules for small businesses.


The IRS has modified two safe harbor explanations in Notice 2018-74, 2018-40 I.R.B. 529, that can be used to satisfy the requirement under Code Sec. 402(f) that certain information be provided to recipients of eligible rollover distributions. The modifications were necessary due to recent changes in law made by the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act). One safe harbor explanation is for payments not from a designated Roth account, and the other is for payments from a designated Roth account. The Code Sec. 402(f) notice may be provided as many as 180 days before the date on which the distribution is made (or the annuity starting date).


The IRS has reminded taxpayers that the Coronavirus Aid, Relief, and Economic Security (CARES) Act ( P.L. 116-136) can provide favorable tax treatment for withdrawals from retirement plans and Individual Retirement Accounts (IRAs). Under the CARES Act, individuals eligible for coronavirus-related relief may be able to withdraw up to $100,000 from IRAs or workplace retirement plans before December 31, 2020, if their plans allow. In addition to IRAs, this relief applies to 401(k) plans, 403(b) plans, profit-sharing plans and others.


The Treasury and IRS have issued final and proposed regulations under the global intangible low-taxed income (GILTI) and subpart F provisions for the treatment of high-taxed income. The final regulations provide guidance on determining the type of high-taxed income that is eligible for the exclusion (the "GILTI high-tax exclusion" or GILTI HTE).


Most homeowners have found that over the past five to ten years, real estate -especially the home in which they live-- has proven to be a great investment. When the 1997 Tax Law passed, most homeowners assumed that the eventual sale of their home would be tax free. At that time, Congress exempted from tax at least $250,000 of gain on the sale of a principal residence; $500,000 if a joint return was filed. Now, those exemption amounts, which are not adjusted for inflation, don't seem too generous for many homeowners.

Loans without interest or at below-market interest rates are recharacterized so that lenders must recognize market-rate interest income. Below-market loans are loans for which a rate of interest that is lower than the applicable federal rate (AFR) -a traditional interest benchmark issued each month by the Treasury Department-- is charged.

Asset protection planning is the process of organizing one's assets and affairs in advance to guard against risks to which the assets would otherwise be subject. The phrase "in advance" warrants strong emphasis. One who is planning to protect assets must be cautious and avoid the negative implications that may follow if there are creditors who are entitled to remedies under applicable fraudulent transfer and similar laws. Asset protection planning may be applied to protect every type of asset, including an operating business or a professional practice.

Parents typically encourage their children to save for college, for a house, or simply for a rainy day. A child's retirement, however, is a less common early savings goal. Too many other expenses are at the forefront. Yet, helping to plan for a youngster's retirement is a move that astute families are making. Individual retirement accounts (IRAs) for income-earning minors and young adults offer a head-start on life-long financial planning.


The bartering system is an ancient form of commerce that still thrives today. From livestock in exchange for grain, to legal advice in exchange for accounting services, money-less trades are still common. However, a major difference between bartering in antiquity versus modern American times is that the IRS wants in on the deal. Just because money does not change hands, does not mean that a traded good or service loses its value, or its taxability. And, unfortunately, the IRS won't accept a pig or a mule for its payment, making cash a necessary part of any barter arrangement when it's time to pay tax on it.


You should beware of fancy footwork when it comes to estimating, filing, and paying federal taxes. One misstep can lead to harsh penalties. Willful or fraudulent mistakes can generate criminal sanctions as well.