Lee B

I remember watching the press conference at the capitol several weeks before Christmas 2017, listening to the congressional representatives talking about tax simplification, saying that most people would be able to file on a postcard, which they were waving around in front of the TV cameras. What you see is not always what you get. Situation Normal !

"The IRS issued Notice 2019-11 on Wednesday, providing a waiver of the addition to tax under section 6654 of the tax code for the underpayment of estimated income tax for certain individuals who would otherwise be required to make tax year 2018 estimated income tax payments on or before Jan. 15, 2019. The waiver, though, is limited to individuals whose total withholding and estimated tax payments equal or exceed 85 percent of the tax shown on the return for the 2018 taxable year."

It turns out only 809 of the recalled employees will be paid, those whose duties are being funded by user fees.

"Under an updated contingency plan covering the upcoming filing season, the IRS will recall 57% of its workforce to handle tax season duties, the agency reported Tuesday. Temporary funding for the IRS for fiscal year 2019 expired at midnight on Dec. 21. Since then, the IRS has been operating under a contingency plan that furloughed 88% of its workforce, and only 9,946 were considered “excepted/exempt” and allowed to continue working. Under the new plan, 46,052 IRS employees will be considered “excepted/exempt” and will return to work. The new plan will allow the IRS to process paper and electronic returns and issue refunds to taxpayers. The IRS had previously announced that tax season will start on Jan. 28 and that it would be issuing refunds during the government shutdown. The IRS will also be opening its call sites and responding to taxpayer questions. All IRS audit and examination functions and nonautomated collections will continue to be put on hold during the shutdown."

I see no dividing line here between owning 2 rentals or owning 20 rentals. The owner of two rentals can make a clear argument that they are involved continuously and regularly and that their primary purpose for engaging in the activity is income or profit. Where it starts getting murky is when a property manager takes care of everything. Even then the argument can be made that the property manager was acting as the owner's agent.

You use the phrases "continuous and regular activity" and "number of properties" ? Can you provide a cite for that because I am not aware that these are requirements in order to qualify. If they were, how do investments in REITs and PTPs qualify ?

That is exactly what I have always done for my clients for many years now . -:)

Here is a post by on a blog called "The Farm CPA" that sheds more light on the issue: The Farm CPA By: Paul Neiffer Paul is now part of the fourth generation in America that is involved in farming and hopes the next generation will be involved also. Through his blog he provides analysis and insight to farmer tax questions. Rentals - Is it QBI or Not? Nov 14, 2018 I would say that most of the emails and calls that I am getting right now on Section 199A is whether rents will be Qualified Business Income (QBI) or not. This blog post will provide my QBI conclusion on various types of rentals that farmers and farm landlords will typically have. However, I would like to start out with some of the case history directly related to farming and rents and see why this is so hard to know for sure based on the current proposed regulations. First, let's review the history of CRP rents. CRP contracts call for payments from the government in return for the landlord taking the ground out of production typically for 10 years. In return, the landlord will usually plant native grasses and other plants and "maintain" the property for the term of the contract. The maintenance in most cases is minimal. For several years, the IRS viewed these payments as not being trade or business payments subject to self-employment (SE) tax. However, starting about 15 years ago, the IRS started to assert these payments were related to a trade or business and subject to SE tax. Finally, in the Morehouse case, the Tax Court ruled that CRP landlords were in the trade or business of being an environmental friendly farm business and thus, subject to SE tax. Finally, this case was overturned by the Circuit Court and ruled that the CRP is in fact rents and not a trade or business. The IRS still views these payments as being trade or business income (even though they lost in court). Second, we have a long case history starting with the Mizell case dealing with whether rents received from related parties are in fact trade or business income subject to SE tax or are in fact rents not subject to SE tax. In one of the latest cases, the Martin ruling indicated that as long as the rents are at FMV and call for no involvement by the landlord, then the rents are not subject to SE tax. It is the active involvement by the landlord that causes "rents" to rise to the level of a trade or business, not simply any sharing of income or expenses. The bottom line of all of this case history is that landlords have to have some level of involvement in the "farm activities" to rise to a trade or business. Simply collecting cash or even a share of crops without any involvement likely does not rise to the level of a trade or business. And finally, even if we have that involvement, it is likely that the IRS will assert that the landlord at that point owes SE tax on the rents and will likely fully offset any tax advantage of the 199A deduction for lower income taxpayers. Here is my current verdicts on whether rents are QBI: Rents received by landlords that are part of a common group - QBI Rents received by landlords who may be related parties, but do not meet the requirement to be a common group. For example, Son is the farmer and Sister is the landlord. We don't know if Son and Sister are related parties even if mom and dad are alive and even if they are alive, are they required to have ownership in the farm operation and the land entity. - May Be QBI Cash rents received by landlords individually who may be owners in the farm operation, but do not meet the common group definition and have no involvement in farm operations as landlords (i.e. no SE tax on rents) - Not QBI Same as previous example, but landlord has active involvement in decisions, etc. and is paying SE tax on the rents - QBI Cash rents received by landlords renting ground to unrelated third parties and have no involvement - Not QBI Cash rents received by landlords renting ground to unrelated third parties, having involvement and likely paying SE tax - QBI Crop share landlords simply receiving a share of crop and only paying real estate taxes, crop insurance and interest and no involvement - Not QBI Crop share landlords paying share of chemicals, fertilizer and have some involvement, but not rising to the level of SE tax - Likely QBI All of these current conclusions are based on the current propose regulations. The final regulations will likely provide additional clarity on all of these types of rents and there may be material changes to all or some of these conclusions. We will keep you posted.

Here you go: https://www.taxreformlaw.com/wp-content/uploads/2018/12/General-Explanation-Of-Public-Law-115-97.pdf This is the link to the so called TCJA Blue Book, 457 pages long, published by the Joint Committee on Taxation.

This exact topic came up in the all day seminar sponsored by the OSCPA that I attended on Tuesday where we spent al least 3 hours on 199 A. The coauthor and presenter was Chris Hesse, a National Tax Partner for Clifton Allen Larson. He is the past chair of the AICPA Ag Conference, author and presenter of the Farm Tax Update and Chairman elect of the AICPA Tax Executive Committee. I recite all this background because these are his answers, so if you want to argue or disagree your fight is with him not me. Mr. Hesse's answer was, the farmer landlord needs to have some involvement that at least rises above the farm equivalent of a Triple-Net Lease. In his opinion, there is absolutely no requirement for the income to be subject to SE Tax. He at least needs to be paying the property taxes and have some additional involvement, perhaps buying fertilizer, maintenance of buildings, erosion control etc. You may find more answers at their website claconnect.com since their headquarters is in Minnesota and they specialize in Ag Tax issues.

According this article in the Journal of Accountancy, Statutory Employees may be able to claim QBI: https://www.journalofaccountancy.com/issues/2019/jan/qbi-deduction-for-statutory-employees.html How many more things will pop up like this during this tax season?

I would still check with your state because most states, including my state of Oregon have mandated the efiling of all W -2s and 1099s, meaning that they will not accept any paper filed W -2s or 1099s.

Print a pdf copy then select which one you want to print .

Actually they first unveiled this 2 years ago. I submitted a chat request, some one was assigned to to my request, but no one ever responded. Severally months later, they closed the chat, but I never received any chat reply of any kind. This was one of the final straws for me before I switched to Drake.

I don't about your state, but my state of Oregon has never received any 1099/W-2 info from the IRS or the SSA. I would suggest you check with your state to make sure. More than likely you will need to submit the 2nd file directly to your state.

I think you have prejudged this situation. The name of the presenter and coauthor of the seminar I attended yesterday is Christopher Hesse, who is a National Tax Partner for a National Accounting Firm and who also is currently the Vice Chairman and the Chairman Elect of the AICPA Tax Executive Committee . He has had multiple meetings with the Senior Staff of the Joint Committee on Taxation who write the Blue Book which is official Statement of Congressional Intent with respect to the TCJA. He has also has had multiple meetings with senior members of the Treasury Department with respect to the TCJA. Mr. Hesse said, that it is the clear intent of Congress and the administration for Section 199 A and QBI to be interpreted liberally. I have been attending this seminar for many years and place far more value on what I learn there than any other source. However as a famous person once said," The thing about opinions is that everyone has one." I will sleep quite comfortably following Mr Hesse's advice.

Why do you think it is risky ?

Actually the presenter at OSCPA seminar that I attended yesterday said that he would claim QBI in scenarios like this. When I walked into the seminar I wouldn't have claimed it, however after spending 3 hours on 199 A he completely changed my mind !

As I previously mentioned, I attended an all day seminar today sponsored by the OSCPA where the presenter spent at least 3 hours on 199 A. I think most members of our profession, including me are strongly influenced by what we already know about how tax law and rental real estate intersect. The problem 199 A presents to both us and to the IRS is that TCJA does not cite or reference most of those familiar Code Sections. All of those key phrases we have etched in our brains with respect to rental real estate are actually impediments to understanding 199 A which is exactly why the guidance from the IRS has either been either unclear or yet to be written. To paraphrase the ancient chinese curse, we are living in interesting times.

Just attended an OSCPA seminar where at least 3 hours were spent on 199 A. My thinking has totally changed. The presenter convinced me that most rentals will qualify for 199 A Give me a few days to gather my thoughts, review the seminar materials and I will make a detailed post on this subject.

There are lot of independent government contractors who will receive no back pay.

The presenter at the OSCPA seminar I attended today said that he would reduce the QBI by the amount of what reasonable compensation should have been.

I guess things are different here. Our local financial institutions are so security conscious, that they now prefer paper copies. Back in the summer of 2017, I went with my largest client to meet with a local bank about the renewal of her commercial real estate loan.. I took with me a DVD with copies of 3 tax returns and financial statements. I went to hand it to the senior loan official who recoiled and asked for paper copies because of their strict security protocols. They also will not accept emails with attached pdfs, encrypted, password protected or unprotected, due to the security risk. I have returned to mailing tax return copies, because that is the only thing they will accept.

"While the ongoing government shutdown had some concerned about a possible delayed start to tax season, the Internal Revenue Service confirmed Monday that it would begin processing tax returns on Jan. 28 – and issuing refunds on a regular schedule. “We are committed to ensuring that taxpayers receive their refunds notwithstanding the government shutdown. I appreciate the hard work of the employees and their commitment to the taxpayers during this period,” said IRS Commissioner Chuck Rettig in a statement. In 2011, the Office of Management and Budget had directed the IRS not to pay out tax refunds during “a lapse in annual appropriations,” but this year, at the request of the Treasury Department, the OMB reviewed the rules and reversed itself" "Tax refunds will go out,” the acting director of the White House Office of Management and Budget, Russell Vought, told reporters at a briefing on Monday. (See “IRS will pay refunds during shutdown, easing pressure for a deal.”) As a result, the IRS will recall what it described as “a significant portion” of its furloughed workers, and plans to release more details in an updated version of its “FY2019 Lapsed Appropriations Contingency Plan” in the near future" I wonder if these will be furloughed employees working without pay like the TSA and the Coast Guard ?

No I don't use QuickBooks. Currently, I am using a combination of Payroll Relief and Drake Accounting. Payroll Relief is handling the STT correctly on W - 2s and Form STT-2. They still don't have Form STT-1 quite right and they are still working on Forms STT-A and WR. Are you using QuickBooks Desktop or Online ?