Lion EA

Per the IRS emailed notice, it's wrong for us civilians. I know military has always been able to exclude current year combat pay, or not, whichever benefits them in a tax year. I think I first heard of it in a NYSSEA webinar. I would probably trust NATP more.... You could jump to that section of the CAA (which I'm not doing today -- big biz client) to get it from the horse's mouth.

Depending on where they are on the bell curve for 2020, if 2019 is higher and gives them more EIC, they can use 2019 instead of 2020. It's a choice to use 2019 if it's higher. Per IR-2021-10: Also new this year is the option to use prior year income amounts when computing the Earned Income Tax Credit and the Additional Child Tax Credit.

I was in a webinar today (KnoxTaxes/Taxaroo) and another tomorrow (NYSSEA) and four last week and.... Forbes has some good articles and blogs by Tony Nitti. IRS Issue Number IR-2021-10 has last-minute changes to tax laws.

1. For EIC purposes, a tax payer may use his 2020 earned income OR his 2019 earned income IF IT IS HIGHER, to calculate his 2020 EIC. 2. See 1. 3. $300 for all filing statuses on 2020 returns, except $150 for MFS. (I don't think the law gives 1/2 to each MFS, so there may be an update on that). 2021 returns get $300 for all filing statuses, except $600 for MFJ. Think of it as $300 per return for 2020 (MFS return splitting a MFJ return in half) and $300 per taxpayer/spouse for 2021. 4. The Recovery Rebate Credit is a 2020 credit. The EIP1 and EIP2 were advances on a 2020 credit. Both EIP1 and EIP2 will be reconciled on the 2020 return. (The law did say the EIP2 is to go out by 15 January 2021.) Tax Payers might receive a positive refundable RRC; but the RRC will not go below zero, so no one has to repay a RRC on their tax return.

It will be on-demand about Monday-ish, per the speakers. Not sure where, but you could start with www.taxpracticepro.com. They also recommend a Facebook group: Covid-19 Best Practice for Tax Pros/Tax Offices. Both speakers will post any updates there. Kathy Morgan for the first two hours was fabulous; I'd known of her but not heard her teach before. John Sheeley is an instructor that I return to, but he got the dryer payroll topics for the last hour today. If you're looking for written material, Tony Nitti writes a lot for Forbes, for example the following was cited in today's class: https://www.forbes.com/sites/anthonynitti/2020/12/25/breaking-down-the-employee-retention-credit-part-1/?sh=45acfb17f3d3 but just go to Forbes.com and search for Tony Nitti. I've been told that CCHCPELink is getting a lot of self-study up re the new CAA, and maybe webinars too, but I haven't looked at their class schedule this month.

https://www.irs.gov/pub/irs-drop/rr-21-02.pdf reflects changes to law contained in the COVID-related Tax Relief Act of 2020, enacted as part of the Consolidated Appropriations Act, 2021 (Act), Public Law 116-260, which was signed into law on Dec. 27, 2020. Subscribe to the IRS Newswire [email protected] for the latest news.

PPP funds are non-taxable income, so M-1 adjustment. Expenses paid with PPP funds ARE DEDUCTIBLE.

EIP1 only could be offset for Child Support only. EIP2 can NOT be offset. Per The CARES Act (EIP1) and the CAA (EIP2).

A good CAA course is coming up at 2pm today by KnoxTaxes. Register here: https://www.bigmarker.com/taxaroo/Consolidated-Appropriations-Act-of-2021-2-CE-CPE-6dfe5d327564f39f7c7c0791?show_live_page=true

But we know from years of experience that most will not know the amount. Also, how many amounts (EIP1 only) given by clients will be missing their child support offset; how many clients tell you they owe back child support? I can deduct my new crystal ball as a business expense, right?

And, does that say that pass-through income from Forms K-1 (partners in partnerships, shareholders in S-corporations) WILL add back expenses the partnerships and S-corporations deducted that were paid with PPP Loans?!

Medlin, I can't help how people think, especially non-clients telling ME why they do what they do to save taxes! But I know I need to lay out the options for my own clients and let them decide, even when I think I know what's best for them.

Yep, Other Income, then however you need to break it out, such as a sub-account Non-taxable PPP Forgiveness. The bank accounts will reconcile. Schedule M adjustment. The tax return will NOT show taxable income and WILL show deductible expenses.

I don't care whether my software calculates one RRC or two. I care about finding out how much EIP my clients already received.

Yes, and there's been RETROACTIVE changes to NOLs, too. One more thing we have to study.

Like people who did not apply for PPP Loans because they wouldn't be able to deduct the expenses paid with them anyway. Now...

I don't have that situation, but I know both NJ and NY are VERY aggressive re nexus and expecting returns. Follow the instructions unless you have a NJ &/or a NY authoritative source telling you otherwise.

M-1 adjustment on the balance sheet.

I'm going to have to explain the options to Sch C clients (and take up even more time explaining lots of new tax laws) for them to decide. If I don't tell Sch C clients and Congress decides to forgive the deferred SS (my crystal ball predicts a D Congress might), clients will be mad at me that they didn't defer, kinda like PPP. I'm more angry about having so much to explain to Every. Single. Client this year than I am about a few bad tax preparers.

Kathy Morgan, EA, Ustcp: For folks looking - the IRS has posted new draft instructions for the 1040 that includes the new worksheet for computing both EIP payments and the credit (page 59 of the instructions). We will have several examples in class on Saturday.

Read the trust document.

Tom: do NOT charge too little or accept the wrong clients. You are NOT a newbie that needs any tire-kicker that happens to call. You are an intelligent and experienced preparer and have this water cooler surrounded by colleagues. Take ONLY the clients you want and CHARGE THEM WHAT YOU'RE WORTH. PS That goes for ALL of you, whether it's your first year or your last.

The first round received letter 1444; the second round, I think, nothing. Line 30 -- your software may use a worksheet to do your data entry. Your software should compute your client's allowable Recovery Rebate Credit; you will enter the two payments your client received, or one, or none; your software will reconcile to see if your client has some remaining credit to transfer to line 30. Something like that!! I've heard that the payments are showing up on transcripts that you can check on e-Services or have clients check on Get My Transcript...

And, for the mail to arrive for those receiving paper checks. (We just received a Christmas card postmarked 8 December.)

I have a group plan via NAEA; underwriters vary by state. Check with your professional groups, and consider adding Cyber insurance, too. (I did.)