Corduroy Frog

A client of mine is confronted with the need to provide cellphone service for 8 employees.  All of them already have cellphones.  It will be cheaper to pay a stipend of $20/month directly to the employees than to furnish phones and service.

The question is:  This is $240 per year.  Is it taxable?  or does it fall into a "deminimus" category than the IRS would ignore?

Asked from a different perspective:  Is there a "safe harbor" dollar amount where such a stipend crosses a threshold from deminimus treatment into taxability??

Thanks Max.  This is good information.  I believe the person doing only EFTPS could be immune for most practical purposes.  But if the IRS can't find anyone more central to management who has any money, they will go down the list until they find someone who does.

Items 6 and 7 are usually synonymous.  And if they had intended for #7 and #8 to be exempt, they wouldn't have put them on the list.

You shouldn't sign on the company's bank accounts because the IRS could actually hold you responsible for unpaid trust fund taxes.

I borrowed the above quote from Judy on another thread, and thought this topic was significantly different - hence the new topic.

I have long wondered about electronic filing with EFTPS and various state websites.  States have passed laws which now require electronic filing plus a requirement to PAY electronically as well.  Some states are really aggressive - won't let you file at all unless you pay simultaneously.  Whoever completes the process has enjoined a withdrawal to the taxpayer's bank account, having the same effect as a check.

Question:  Does liability attach to the person who pays electronically?  Even if that person is not a signatory to the bank account?  Is it the same liability that would attach as if a paper check had been signed?

Thanks in advance for responses.

Me too - got a couple.  They keep wondering what is wrong.   One is holding up a $7500 refund - but they did get a stimulus of $2900.  I don't think they can complain about the circumstances too much if they eventually get their money.

If you go back and follow the thread, it started with a simple question - Is tax depreciation a valid election under GAAP?  I would think this would be as simple as "yes" or "no" and that could have ended before the cannons came out and the discourse degenerated.

We all have minimal exposure to GAAP - I have about 12 entities which require a "book" presentation on the Balance Sheet and disclosure of differences on the M-1.  Most of the customers present bookkeeping and will not pay a couple thousand of dollars for a review.  Crossing the line is not well-defined until representations are made to a third party.

Hi Tom -

You're quite lucky - you're getting good help from CPAs who are familiar.  The last time I had the unmitigated nerve to ask a GAAP question, a few outraged CPAs chastised me for entering the realm of public accounting.  You would think I touched the Ark of the Covenant from the old Indiana Jones movie.  But as to be expected, there were also some CPAs who were quite conciliatory.

I'm surprised that an expensive CPA firm would expect the local controller to furnish "Notes."  I'm sure they include "Summary of Significant Accounting Policies" and for a company your size this could be 15 pages or more.  I'm also convinced your owner is not in synch with normal relations between a company and its Attest professional, as their request is not normal.  I'm wondering if this condition is a trend of things to come but I doubt it.  I'm wondering if their position would be different if another CPA were hired - and if a professional standard places a requirement on a successor firm to disclose why the previous firm was disposed.

Judy, Margaret, and others are great help when it comes to resources and particulars, and I am not so I'll shut up.  Good luck Tom, and I see where Fresno St is starting to play again.

I would also believe there would be a reporting difference based on whether the SCorp sold its assets, or whether the SCorp ownership stock were sold.

I've already filed all my 941s for clients.  Used the April revision before they had a chance to revise it and mess it up even further.  None of mine chose to participate in the deferral, so most of what I have are zeroes and empty numbers for Family Medical Leave, Sick Leave, and all the special features that few employers register for.

I understand that after the Executive Order, all Federal Employees were defaulted into the deferral, but don't know whether they could choose to bail out.  My non-political view of the deferral is that it is a very bad idea.  What was unclear to me was the unclear collection responsibility of the employer if an employee quit in December.  The mere mention of this to my clients pretty well scared them off.

Credit for excess FICA withheld on the employee's tax return will be launched regardless of how many W-2s or how many employers.  As long as the payee on the W-2 is correct.  The same employer is entitled to a break on the employers' share once the limit is reached, however they can botch this up by changing payroll in the middle of the year, multiple payroll services, etc.

Thank you my friend from Illinois.

The latest 941 form was revised in April of 2020.  For a company that does not have the payroll tax deferral, would you recommend using it for the 3rd quarter?

Isn't there an option for reversing the order of when to invade the AAA?  I don't have ATX but maybe this is what is happening.

Thanks for your response, DANRVAN - this is quite typical of geographical differences.  In your state, you can holler down the street and 3-4 forestry experts will turn around and look at you.  Down here, you won't find one except at large sawmills, and when you're getting information for the tax return, the farmer/client doesn't even know one, and even if he did he wouldn't pay for the information.  The thing that keeps him from getting ripped off is his typical contract calls for 50% of the proceeds.

You are much more able to find a tree-trimmer to cut dangerous trees away from your house than a trained forester.  Many farmers can't even look at a tree and tell its species.

On 9/12/2020 at 12:42 PM, DANRVAN said:

If those are Schedule F expenses allowable under section 163, then  why would you capitalize instead of taking the deduction to maximize the tax benefit to your client?  The 266 election is for allowable expenses, so they should be deducted if that is to the advantage of your client.

If this is an isolated  parcel which farmer is holding strictly as an investments, then the expenses would fall under section 212 otherwise deductible as misc on Sched A, subject to TCJA.

What reasonable method do you use to allocate those cost?  You would have to allocate by the amount of standing  board feet of timber at the end of each year,  then recognize per board foot as logged. 

Thanks for responding DANRVAN.  I don't know whether this answers all your questions or not, but to some degree this is often a "facts and circumstances" situation.  It starts with the purchase of acreage, maybe 50 acres, and I'm told the intent is to put cattle on the acreage.  3-4 years later the pasture is still vacant and is being mowed.  I am still told cattle will be there.  I simply cannot deduct Sch F expenses in such a case.  I generally tell the owner that we will begin deducting expenses when the cattle are there.  I will deduct expenses with cattle even though there are no sales, because it takes several months for calving to be ready for market.

Answering your question about allocation of expenses to timber, I don't know any sophisticated means of measuring growth patterns and expected board feet. If there are 20 acres of timber and 80 acres of pasture, I will allocate 20% of the taxes and interest to the timber, using acreage as an allocation base.  If a farmhouse is there, there is an initial allocation of taxes based on tax appraisal, and this is true for interest if purchased all at once.  Otherwise interest is traced to the purpose of the loan, and there could be multiple loans.

Your home state has a multi-bilion $ timber industry, and the aforementioned sophisticated methods are more likely commonly used in Oregon.

Capitalization of Expenses?  I do this for a few people - farmers in particular.

Attention is drawn to the discussion about which expenses can be capitalized.  From the discussion, only interest and taxes, and there is no interest.  And taxes in 2018 are limited to $10,000.

I approach the farmers as though the only expenses which can be capitalized are those expenses which can be deducted.  Many farmers purchase vacant land and let it sit.  Anyone who knows about farming knows that it cannot just "sit".  It has to be mowed, fenced, and maintained, and these expenses are not as small as mowing your front lawn.

So I capitalize those expenses which can be deducted on a Sch F.  The acreage is available for use, and in most cases it ultimately is used for pasture in later years.  Is this questionable?  I still believe it is conservative because most farmers expect me to deduct it outright and claim a loss on the land.  I won't do that if it is just sitting there.

Moving the discussion to timber.  Standing timber can never be used for farming as long as the timber is there.  I capitalize interest and taxes for the timber until sold, and limit the capitalization to interest and taxes only.  In the year of a sale, I deduct expenses of the sale.  Typically in these parts, standing timber is left for years and years before sold, and is capital gain or loss.  There are operations who harvest timber every year and this is ordinary Sch F income - farmer/clients who do this are practically non-existent - operations such as this are run by huge companies like Boise-Cascade or Champion Paper.

Moderator note - the above post was moved out of the topic entitled "No BS" because that discussion is still ongoing for a specific case, and the above post may have derailed it into other areas of farming and timber.

13 hours ago, Lion EA said:

Form W-2 was redone.

Thank you Lion, I think you mean the W-4.  And indeed this happened (in fact they've been messing with the W-4 for a couple years - actually had a version which asked how much your spouse made).  No one will have their 2020 tax liability changed because the W-4 was redesigned, but somehow they might expect someone to wish executing a new W-4.  Like the ancient text from the Bible "straining at a gnat and swallowing a camel."  All of us, including the IRS, would be better off spending time opening their mail which has been piling up.

Thank you Lion and Catherine for your interest in this wacky subject.  This group is wonderfully helpful.

Thanks Max.  They are in fact in Pub 15-T but are double-barrelled based on something that doesn't affect their liability one whit.  Gone are the days of plain English.

Thanks gang.  I had heard that as soon as the executive order came out, all Federal employees automatically had the deferral but were given the opportunity to opt out.  Can anyone guess what could happen if the 1st quarter rolls around and for some reason the employer is not able to collect?  For example, what if the employee quits at Christmastime?  Is the IRS going to program their systems to collect from him as soon as he finds another job?  A really bad idear.

If an employer doesn't wish for his(her) employees to participate in this ridiculous PR tax deferral, can the employer opt out?

Good grief, Illigitimas, you've got Rita figgured out!!

Surprised that TaxSlayer was not considered part of the Big 7.  I had it at one time, and although it is inferior to Drake and some of the others, it was quick, direct, and seemed to be a perfect fit for a large chain tax prep store.  Cheap, fast, slick, and great support.  Developed in Augusta GA, so state programs for GA and SC were flawless, but when you got into other states, especially entities other than individuals, it became weak.  I was happy with it until encountering govt contracting clients with operations in several states.

The tax withholding tables??   Where did they go??

I haven't had occasion to use them in a while, but looking at the old familiar "Circular E - Pub 15" - they're not there!!  There is a link to another website offering an Excel Spreadsheet to "assist" and a percentage method chart.

However the chart is multiple depending on whether the W-4 is issued in 2020 or not.  (I can't think of a single penny of tax liability for this year that would depend on when a W-4 was executed).  And there is no provision for a withholding allowance.  In other words no difference between M-1 and M-5.  Yes, I know the personal exemptions are no longer part of the tax calculation, but there are huge credits between a M-1 and M-5.

Obviously, this goofy train has left the station and I wasn't on it...

Wazz going on?  Better yet, where izzit?

Thank you Judy.  I'll research Texas.

If you filed a joint return for 2018, you are on the hook to provide to either spouse.  You can charge for preparing a copy, which will probably enrage this guy.  But you can do it.

You have absolutely no obligation to discuss 2019 with him.  A state court order to file jointly means nothing to the IRS.  If Wisconsin decrees this as a domestic solution, make them go through the misery of going through the legal channels to do so.  Even if this happens, you have no obligation to discuss anything with him.

If these two finally divorce, you absolutely cannot file jointly.  That is Federal and Wisconsin can't do anything about it.  If a Wisconsin return has to be filed, I can't speak to that.

I've looked at a 1065 with an associate of mine who is concerned things aren't being handled right.  This one is probably for Judy because of her geographical area.

The "tax matters person" is a Nebraska corporation.  There are two other corporations which form the LLC (filing as a partnership).  One of the corporations is in Maryland, and the other is in Tennessee.  The three corporations bill the LLC, who in turn bills the customer, and after paying the three corporations, there is profit, all of which is taxable.

The LLC is chartered in Delaware, as an attorney advised them their liability would be lower.  I've seen this before, but I'm not aware of any peculiar tax advantage (or disadvantage) for a charter in Delaware.  The partners operate in Texas and have fixed assets in Texas as well.  The LLC itself does not operate either in Delaware or Texas.

There are two tax forms filed - a Federal Form 1065 and a Nebraska partnership return.  All of the state allocations are 100% for Nebraska.

My question:  Does Delaware require a tax return to be filed?  Charter is there, but zero operation.

How about Texas?  LLC does not operate in Texas but they have equipment there.  Each of the three partners operate in Texas but not the LLC.

I'm leaving out Maryland and Tennessee - although the respective partners there should file with those states.  The LLC does not physically operate in either Maryland or Tennessee, but make substantial payments to the members.  I don't believe the LLC has a filing responsibility to either of these.

Long story short, does the LLC have responsibility to file in either Delaware or Texas?

Thank you in advance for wading through this post -