Lee B

1. The IRS publishes guidance specifying the authorized formats for the 1099NEC 2. Software providers submit form format designs to the IRS for review and approval. 3. Following IRS approval, then software providers can move ahead Last month the IRS released a draft of Form 1099 NEC which was 2 forms per page On August 18th, the IRS released a new draft of Form 1099 NEC which was 3 forms per page There is no way to know if and when a 4 up format will be released. The software provider form design teams work closely with the IRS on this stuff so they probably know what's going on, however these details usually aren't known by support staff.

Just had my fourth online CPE class about PPP Forgiveness on Tuesday, since the Treasury and the SBA keep moving the goalposts. Many banks have yet to start accepting applications. The probable reason that banks are dragging their feet, is that most banks don't have the staff and expertise to process these applications, so they are subcontracting out the processing of these applications to large CPA Firms. If the "automatic forgiveness"for loans less than $ 150k ever goes thru it would save the banks a lot of money, which would go straight to their bottom line.

Interesting, I paper filed an amended 2018 1040 for a client in late March. She received her federal refund check plus interest a month ago. However she is still waiting for her Oregon refund. Even in years past I remember amended returns taking over 4 months

I didn't look this up but if it's non degree program, can you claim AOC?

Yeah, now that it's become known that this wasn't even an Executive Order, it was an Executive Memorandum which has the force of a f**t in the wind.

Apparently the Treasury Secretary has been receiving heavy pressure from businesses to resolve this SNAFU, because he was quoted today as saying, that business participation in the payroll tax deferral would be optional! I don't even know what to say ?

Copied from Accounting Today: "Employers wait for guidance on payroll tax deferral By Roger Russell August 18, 2020 In what amounted to an end run around Congress, President Trump signed a series of executive memorandums and an executive order on Aug. 8, 2020, to address issues left unresolved by the congressional failure to agree on additional bipartisan stimulus legislation. “It’s actually a memorandum rather than an executive order,” observed Mark Luscombe, CPA and principal federal tax analyst for Wolters Kluwer Tax & Accounting. “The difference is not legally significant. An executive order gets published in the Congressional Record.” While three of the executive actions are not tax-related — addressing enhanced unemployment payment, eviction moratoriums, and student loan relief — the fourth defers payroll taxes from Sept. 1, 2020, to Dec. 31, 2020. “There were three presidential memoranda and one executive order,” said Luscombe. “The order was the one relating to evictions.” The performance platform for the modern firm Firms are facing a new reality in how business is done. Right Networks and Rootworks have aligned front and back-office functions in a powerful... SPONSOR CONTENT FROM “The president has been pushing for forgiveness of payroll tax for some time, but neither Republicans nor Democrats were in favor of it because it doesn’t provide much immediate help, just a gradual benefit over time," Luscombe continued. "They would prefer a stimulus with more of an immediate benefit, but Trump went with a payroll tax deferral because that’s all he felt he could do with executive action without congressional involvement.” “The administration felt it only had the power to issue a deferral, not a forgiveness,” Luscombe said. “The memorandum only applies to the 6.2 percent employee’s share of Social Security taxes. It does not apply to the 1.45 percent employee’s share of Medicare taxes.” In addition, the memorandum only applies to biweekly income under $4,000 or less, which translates to annual income of $104,000, he said: “Some commentators have pointed out that if your salary is variable, you could end up being eligible even if your income for the year ends up being higher than $104,000.” Since the memorandum constitutes just a deferral, will someone have to pay the piper come January? “It’s likely that this would have to start to be repaid in January,” Luscome said. “The Treasury is expected to issue guidance on how the deferral will work and address several uncertainties. A lot of employers are waiting for the guidance to be issued.” “Many employers are concerned about implementation because it’s just a deferral,” he said. “There could be a double withdrawal from employees’ paychecks in 2021. That would be a burden on employees if Congress doesn’t get around to enacting forgiveness.” It’s not currently clear if employers will start deferral immediately, according to Luscombe. “Most employers think the executive memorandum is optional, not mandatory,” he said. “Some employers are worried that employees are not prepared for a future reduction in their paychecks,” he said. “They’re also concerned about getting their systems revised to take care of withholding. And if employees leave between now and the end of the year, will the employer be required to recoup the money out of their own pockets if they can’t get it from the employees starting in January?” The “Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster” directs the secretary of the Treasury to “explore avenues, including legislation, to eliminate the obligation to pay the taxes deferred pursuant to the implementation of this memorandum.” “Most people think the direction on forgiveness can only be accomplished by congressional action,” said Luscombe. “It’s likely we will get guidance from the Treasury pretty quickly because of the Sept. 1 start date." What a mess!

You need at least some basic paperwork. Have A sell the business to B for $ 1 plus the assumption of the loan, otherwise the interest expense is still deductible on A's Schedule C.

There are many, many different factors that go into determining whether someone is an employee or an independent contractor, as last count I read that 39 separate factors have been identified. The socalled gig employees fall somewhere in the middle. IMHO they are closer to being employees than they are to be independent contractors. And Tom you are totally right the state decides. In Oregon residential contractors for years tried this structure; a general contractor with zero employees, all the work being done by various subcontractors who also had zero employees. Until state law made it mandatory that someone on the job site had to have a workers compensation policy that covered everyone working on the job site, including the independent contractors.

That may be, but I remember about 10 or 12 years ago a discussion where the IRS said that they paid attention to how many days on average it took 1st class mail to travel from the sender's mailing location to their P O Box and that unless it was Certified Mail the postmark was not considered to be the determining factor. As I recall this came up because so many people had access to programs like Stamps.com or there own small postage meter which could allow you to imprint postage on a letter and then mail the letter some days later.

Copied from IRS eNews: "3. Pending check payments and payment notices If your client mailed a check with or without a tax return, it may still be unopened in the backlog of mail the IRS is processing due to COVID-19. Any payments will be posted as the date IRS received them rather than the date the agency processed them. To avoid penalties and interest, taxpayers should not cancel their checks and should ensure funds continue to be available so the IRS can process them. To provide fair and equitable treatment, the IRS is providing relief from bad check penalties for dishonored checks the agency received between March 1 and July 15 due to delays in IRS processing. However, interest and penalties may still apply. Due to high call volumes, the IRS suggests waiting to contact the agency about any unprocessed paper payments still pending. See www.irs.gov/payments for options to make payments other than by mail." I find this a bit confusing, so if my client mails a payment which is due on July 15th on the 15th of July and the IRS records the date of payment on the date they received my client's letter say July 19th, is my clients payment considered to be late subject to a late payment penalty?

AICPA requests guidance on payroll tax deferral By Alistair M. Nevius, J.D. 3 hours ago "The AICPA on Wednesday sent a letter to Treasury and the IRS requesting guidance on the recent presidential memorandum deferring some employee payroll taxes until next year. The memorandum, issued by President Donald Trump on Saturday, defers the withholding, deposit, and payment of the employee portion of the old-age, survivors, and disability insurance (OASDI) tax under Sec. 3101(a) and Railroad Retirement Act Tier 1 tax under Sec. 3201 for any employee whose pretax wages or compensation during any biweekly pay period generally is less than $4,000. It applies to payroll taxes on wages paid from Sept. 1 through Dec. 31, 2020. The AICPA’s letter, addressed to David Kautter, Treasury’s assistant secretary for tax policy, and Charles Rettig, IRS commissioner, requests guidance on several issues related to how the deferral will be implemented. Specifically, the AICPA asks for guidance: Stating that an eligible employee is responsible for making an affirmative election to defer the payroll taxes; Stating that an eligible employee can make an affirmative election at any time from Sept. 1, 2020, to Dec. 31, 2020, and if an employee does not elect to defer Social Security taxes, taxes will continue to be withheld, deposited, and paid; Stating that an “eligible employee” is an employee whose wages are less than $4,000 (or equivalent amount depending on the employer’s pay period) per biweekly period." Providing a model notice for employers to furnish to eligible employees to inform them that the election to defer Social Security taxes is available for the Sept. 1, 2020, to Dec. 31, 2020, period; Stating that the payroll amount used to determine eligibility is a cliff; if the wage amount for a specified pay period is above $4,000 or the equivalent amount based on the employer’s regular payroll periods, no deferral is permitted; Stating that the $4,000 limit should apply separately to each employer of an employee; Stating that it is the responsibility of the employee and not the employer to pay the deferred payroll taxes; Stating which penalties are waived as a result of this deferral, including the penalty applicable to responsible parties; Addressing whether the increase in take-home pay attributable to the deferred taxes can be used to satisfy other employee obligations such as Sec. 401(k) loan repayments, garnishments, and child support payments; and Stating a payment due date(s) for the deferred taxes and a mechanism for employees to pay the deferred taxes." At first it was thought that employers would have recapture the deferred tax from employees beginning with paydates after 12/31/20, which raises a lot of questions about employees leaving, new employees arriving etc, etc, etc! Now after a whirlwind of discussions between Payroll Companies, Employers, the Treasury Dept and the IRS, it is now likely that employees would be required to pay back the tax deferred when they file their Form 1040 on April 15th. Are we having fun yet I am really glad I don't do a lot of 1040s!

The Taxpayer Advocate's Blog details what to do: https://taxpayeradvocate.irs.gov/news/nta-blog-need-help-with-economic-impact-payment-issues-how-tas-can-assist-those-that-qualify?category=Tax News

The House passed a bill in the middle of May which made these expenses deductible. The Senate Banking Cmte introduced a bill to make these expenses deductible two months ago, but it has never been brought up for the full Senate to vote on it.

Another headscratcher will be timing differences. If payroll expenses are paid in 2020 and your loan is forgiven in 2021, how do you handle the situation. I predict a lot of business returns being put on extension to avoid amending the 2020 tax return.

yes

Generally speaking an error or a math mistake is an one-off. When the socalled "error" is repeated over multiple years, that creates a method. If it was my client, I would definitely file the 3115.

Copied from FTB Notice 2000-8 "If a California taxpayer 1) cannot rely on a federally approved request for permission to change an accounting period or method, 2) desires to obtain a change different from the federal change, or 3) desires a change for California tax purposes only, a federal Form 3115, Application for Change in Accounting Method, or federal Form 1128, Application to Adopt, Change, or Retain a Tax Year, should be completed and submitted to the Franchise Tax Board by the due date specified in California law or, if none is specified, by the due date for a federal change request if a federal change request had been submitted to the Internal Revenue Service for that change. The federal forms must be completed using appropriate California tax information and not with federal tax information, except that the Federal Employer Identification Number (FEIN) should be used in the FEIN field. The California Corporate Number (CCN) must also be included on the top of the first page of the form. Due account should be made for differences in federal and California law. For example, Line 18 of the federal Form 3115 refers to a "User Fee." California does not charge a user fee for submitting the change request. Any references on the forms and in the forms' instructions to the Internal Revenue Code should be read as referring to the Internal Revenue Code, as applicable for California purposes, or the specific Revenue and Taxation Code section, if any, that conforms to that federal provision. A cover letter must be attached to the front of the federal Form 3115 or Form 1128, clearly indicating that a "Change in Accounting Period" or a "Change in Accounting Method" is being requested. The name of the taxpayer requesting the change and the taxpayer's California Corporate Number must be included in the cover letter. The appropriate federal form and cover letter should be sent to: Franchise Tax Board Change in Accounting Periods and Methods Coordinator P.O. Box 1998 Sacramento, CA 95812 The Franchise Tax Board will acknowledge receipt of the request within 30 days. After the request has been reviewed, the Franchise Tax Board's Change in Accounting Periods and Methods Coordinator will notify the requestor, in writing, whether the request for an accounting period or method change has been approved or denied." Assuming this Notice is still current, you can in fact file a 3115 for CA only.

If it was a C Corp, then the due date was extended. However if it was S Corp due on March 15th and no extension was filed, then I would expect that there is a penalty due.

Use the worksheet in Pub 523 starting at page 11. Just took a online CPE class last week that covered this topic. It gets kind of convoluted. Really glad I never had to do one these!

Since you mention retained earnings, I assume you are referring to a C or S Corp? What you have is a Book - Tax Difference which is a Schedule M-1 adjustment for an expense recorded on the books which is not a tax deduction. There is no book entry needed.

Good Question, can you do a 3115 for CA only?

I will have to admit, this is a different approach and it would avoid the late filing fees and penalties on the federal and state quarterly reports. However the taxpayer is an employee, not an independent contractor.

If amending 2018 and 2019 would make more than a de minimus change to any partner's tax liability, then I would amend. or consider whether a 3115 would be appropriate. If,not, then I would fix it going forward.

Copied from Accounting Today: "Previously, taxpayers mailed a paper duplicate copy of Form 3115 to the IRS and filed the original Form 3115 with their tax return. Under the new temporary procedure, starting Friday, July 31, the IRS will accept the duplicate copy of Form 3115 via fax to (844) 249-8134. The change will apply only to taxpayers who are asking for consent to make a change in accounting method under the automatic change procedure. This temporary procedure will be in effect until further notice. “Taxpayers will still need to submit two copies of the Form 3115 to the IRS,” the IRS said on its website Wednesday. “Taxpayers must continue to file Form 3115 with their tax return (including extensions). However, instead of mailing the duplicate paper copy of Form 3115 to the IRS in Ogden, Utah, taxpayers can now fax it to (844) 249-8134.” The cover sheet of the fax should include the following information: Subject: Form 3115 Sender's name, title, phone number, address Taxpayer's name Date Number of pages faxed (including cover sheet) The IRS cautioned that taxpayers should not include sensitive information on the cover sheet, such as an Employer Identification Number or Social Security number. The IRS won’t provide a confirmation or receipt of the fax. It advised taxpayers to check their fax transmission log to verify that all the Form 3115 pages have been sent."