Edsel

I'm hearing that GAAP will require capitalization of leases - even leases that are not attached to capital items. Capitalization of leases which are just for period rent??? Conversation welcomed.

Thanks to all who have participated in this discussion.

Medlin, let me see if I understand this correctly - I'm way out in left field if you are correct. You are telling me that such a shareholder cannot participate in their company's group insurance plan? I doubt that to be the case. What you may be telling me is that the tax advantages of s.125 do not apply to them and thus they are not considered to be an employee for s.125. If so, my original question "Can the Social Security/Medicare wages be reduced?" would be answered "No" since no part of the s.125 provisions can apply to them. Do I understand this correctly?

This is a much-discussed topic about 2% shareholders of S corps. I understand the situation has changed with the new tax law, but from what I've studied, I don't know what has changed. My specific question: The W-2 taxable wages for contributions to a s.125 medical plan cannot be reduced for a 2% shareholder as it can for other employees. Can the Social Security/Medicare wages be reduced? It is clear that related taxpayers who are employees may also not have their taxable wages reduced, even though they may not own stock. Thanks in Advance

Thank you to two esteemed ladies.

Are Medical Expenses deductible on Sch A if they are paid to foreign providers and countries? An ALS patient will be traveling to China for treatment. Normally such things as Travel and Lodging are nominal, but in this case it will be big-time expense. I know he can't deduct for his wife, but he needs a caretaker and wants to take one from the United States.

Thanks Judy. Lots of plain English in these narratives. I can talk to my client about QSEHRAs (lots of discussion at the seminar), but it appears all such employees would have to be treated the same way.

Thank you Mr. Golar, and I have read Section 4980D. I am not well trained to read Code - in this case, nowhere in plain English does it say a company cannot reimburse an employee directly for insurance payments - although it speaks of several different kinds of penalties and vague references to "failure." Mr. Golar has provided exactly what I've asked, but can anyone else direct me to the specifics of insurance reimbursement being a violation of 4980D?

Thank you Mr. Golar, but the link requires a user name and password...

Just got out of a seminar - where this subject was brought up. I have a client (a subchapter S) with a typical s. 125 plan which furnishes medical insurance along with other benefits. However, they have one employee who pays his own insurance and the company reimburses him. I am told they can be penalized for this to the extent of $100/day. Can anyone provide a cite for this? I would like to have a cite before beating up on my client. The seminar did not provide a cite.

Max are you saying this client will not be able to file 2011 & 2012? As you know, the IRS prepares substitute returns, which consist of all the revenue they can find and don't allow ANY expenses. The tax liability for a medical doctor with $2MM in gross receipts would be absurd. Can he do nothing about 2011 and 2012?

I have been presented with a wonderful golden opportunity to file tax returns for a physician from 2011-2018. Anyone else chomping at the bit to do this? For some reason, I seem to get asked once a year for backfiling such as this. Sometimes I have been able to help - sometimes it is useless. Often I get told they had an accountant who has been fired - more often than not it is the former accountant who has "fired" them. Specific questions: How far back are IRS records available? and what is the best procedure to order them? A little more interesting information: High income physician purchased a farm and claimed $1500 in revenue in 2010. Claimed a $275,000 loss on his tax return. He told me this provoked an audit and almost all of this loss was disallowed. Imagine that!! Thanks in advance - Ron J.

The pay upfront and then apply to get it back has been described above as "byzantine." I couldn't agree more. Outside of it being administratively cumbersome and byzantine, should we succumb to this strategy? Withholding payment is one way to draw attention to IRS mistakes, and if they get the money, it takes all the pressure off them to fix the problem. They already take too much time and often send several 60-day letters. I once received a 60-day letter over a $5.45 CP2000 liability.

I have encountered a situation where the medical premium for an employee is $800/mo ($9600/yr), but his bi-weekly withholding is $220 (or $5720/yr.). In other words, employee is paying nearly 60% of the cost. Perhaps not as rare as you may think. Some employers don't want to pay anything - believe employees should tote the entire bag. I have heard from other people that the employer may not recover more than 50% of the total premium. My information comes from a couple of comrades in the industry, but I don't know where the cite exists. Perhaps it is part of Obamacare, perhaps part of section 125 - dunno. Any discussion?

The employer is my client, and that is indeed why it is an issue. If SUTA is due to Oklahoma, this will create a need for doing a corporate return on a allocation of payroll basis. This would be the only employee creating an Oklahoma requirement, and as such may result in the employee's termination, along with other issues involving the employee.

Which state does the employer have to incur SUTA for 2020?

Situation: Couple with 18-yr old daughter lives in Texas. In August, 2019, daughter begins attending college in Oklahoma. Then, in January 2020, father and mother move permanently to Florida. Question: For purposes of state tax residency, which state should the daughter claim as her resident state in 2020?? Daughter is a part-time employee working from her computer. Neither Texas nor Florida has an income tax, but the employer will have to be liable for SUTA for some state. All states have SUTA.

After reading the ever-increasing scope of Form 8867, replete with apparent ways to intercept and enforce the tie-breaker, it could be that the IRS simply chooses not to challenge the claim unless both parents claim. I have found out (after going through certain channels) that Congress doesn't really care about smacking hands for EIC mistakes and fraud. The congressman I knew said they viewed the EIC as a wealth transfer to the needy rather than a regulated calculated exercise for someone to be accountable for. Dealing with Form 8867 leaves no doubt that the IRS wants preparers to be the accountable party. IRS doesn't want the accountability themselves, nor do they wish the taxpayer accountable either.

Thanks to both of you for responding. What has happened is Drake is no longer prompting me to fill out the form, although it is still available.

I am no longer prompted by Drake to declare why a taxpayer is not filing electronically. We used to have to choose from about half dozen reasons, the most prevalent reason being simply "taxpayer chooses not to." What has happened to this form?

Judy, the notice is for period ended Dec 31 2018, and is a CP224. The professional is a Physical Therapist, operating out of a rented office. Thank you for your response.

In spite of this discussion, one of my C Corp customers (a medical professional) received a letter from the IRS informing her that her SMLLC may qualify as a Personal Service Corporation with a flat rate of 35%.

Does income from a personal service corporation qualify under Section 199A? The mindset denying 199A treatment for C Corps apparently resulted from a reduction in C Corp rates to a flat 21%, therefore a C Corp did not need any further tax benefit. However a personal service corporation did not have its rates dropped to 21%. It's "flat" rate is 35%. Therefore the mindset described above should not apply. Opinions or cites?

I'm a bit confused. The tie-breaking rules specify the parent with the highest AGI is allowed the EITC. This does not state that the parents can pick and choose who gets to claim. Where have I gone off the track?? For what it's worth, every year some clients ask me to calculate it both ways and take the highest EIC that calculates to the attached parent. I tell them it must be awarded to the parent with the highest AGI. If they can pick and choose, then I have been handling it wrong.