Wood, Ellis & Wood
Certified Public Accountants
Newsletters
Tax Alerts
March 06, 2021
Tax Briefing(s)

The IRS has released new Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals. The form allows eligible self-employed individuals to calculate the amount to claim for qualified sick and family leave tax credits under the Families First Coronavirus Response Act (FFCRA) ( P.L. 116-127). They can claim the credits on their 2020 Form 1040 for leave taken between April 1, 2020, and December 31, 2020, and on their 2021 Form 1040 for leave taken between January 1, 2021, and March 31, 2021.


The IRS is urging employers to take advantage of the newly-extended employee retention credit (ERC), which makes it easier for businesses that have chosen to keep their employees on the payroll despite challenges posed by COVID-19. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Division EE of P.L. 116-260), which was enacted December 27, 2020, made a number of changes to the ERC previously made available under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) ( P.L. 116-136), including modifying and extending the ERC, for six months through June 30, 2021.


The IRS has announced that lenders who had filed or furnished Form 1099-MISC, Miscellaneous Information, to a borrower, reporting certain payments on loans subsidized by the Administrator of the U.S. Small Business Administration (Administrator) as income of the borrower, must file and furnish corrected Forms 1099-MISC that exclude these subsidized loan payments.


The IRS is providing a safe harbor for eligible educators to deduct certain unreimbursed COVID-19-related expenses. The safe harbor applies to expenses for personal protective equipment, disinfectant, and other supplies used for the prevention of the spread of COVID-19 in the classroom, paid or incurred after March 12, 2020. All amounts remain subject to the $250 educator expense deduction limitation.


With some areas seeing mail delays, the IRS has reminded taxpayers to double-check before filing a tax return to make sure they have all their tax documents, including Form W-2, Wage and Tax Statement, and Forms 1099. Many of these forms may be available online. However, when other options are not available, taxpayers who have not received a W-2 or Form 1099, or who received an incorrect W-2 or 1099, should contact the employer, payer, or issuing agency directly to request the documents before filing their 2020 tax returns.


The IRS has highlighted how corporations may qualify for the new 100-percent limit for disaster relief contributions, and has offered a temporary waiver of the recordkeeping requirement for corporations otherwise qualifying for the increased limit. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 ( P.L. 116-260) temporarily increased the limit, to up to 100 percent of a corporation’s taxable income, for contributions paid in cash for relief efforts in qualified disaster areas.


The IRS has announced that tax professionals can use a new online tool to upload authorization forms with either electronic or handwritten signatures. The new Submit Forms 2848 and 8821 Online tool is now available at the IRS.gov/TaxPros page. The new tool is part of the IRS's efforts to develop remote transaction options that help tax practitioners and their individual and business clients reduce face-to-face contact.


The IRS has urged taxpayers to e-file their returns and use direct deposit to ensure filing accurate tax returns and expedite their tax refunds to avoid a variety of pandemic-related issues. The filing season opened on February 12, 2021, and taxpayers have until April 15 to file their 2020 tax return and pay any tax owed.


Amounts received as an annuity are included in gross income to the extent that they exceed the exclusion ratio, which is determined by taking the original investment in the contract, deducting the value of any refund features, and dividing the result by the expected yield on the contract as of the annuity starting date. In general, the expected return is the product of a single payment and the anticipated number of payments to be received, i.e., the total amount the annuitant can expect to receive. In the case of a life annuity, the number of payments is computed based on actuarial tables provided in IRS Regulation Sec. 1.72-9.

Q: After what period is my federal tax return safe from audit? A: Generally, the time-frame within which the IRS can examine a federal tax return you have filed is three years. To be more specific, Code Sec. 6501 states that the IRS has three years from the later of the deadline for filing the return (usually April 15th for individuals) or, if later, the date you actually filed the return on a requested filing extension or otherwise. This means that if you file your 2014 return on July 10, 2015, the IRS will have until July 10, 2018 to look at it and "assess a deficiency;" not April 15, 2018.


The closely-held corporate form of entity is widely used by family-owned businesses. As its name implies, the owners of the business are typically limited to a small group of shareholders. Many businesses operate for years as closely-held corporations without giving a second thought to a little-known danger: the personal holding company tax.

Many people are surprised to learn that some "luxury" items can be deductible business expenses. Of course, moderation is key. Excessive spending is sure to attract the IRS's attention. As some recent high-profile court cases have shown, the government isn't timid in its crackdown on business owners using company funds for personal travel and entertainment.

Whether a parent who employs his or her child in a family business must withhold FICA and pay FUTA taxes will depend on the age of the teenager, the amount of income the teenager earns and the type of business.

Owning a vacation home is a common dream that many people share...a special place to get away from the weekday routine, relax and maybe, after you retire, a new place to call home.

A remainder interest is the interest you receive in property when a grantor transfers property to a third person for a specified length of time with the provision that you receive full possessory rights at the end of that period. The remainder is "vested" if there are no other requirements you must satisfy in order to receive possession at the end of that period, such as surviving to the end of the term. This intervening period may be for a given number of years, or it may be for the life of the third person. Most often, this situation arises with real estate, although other types of property may be transferred in this fashion as well, such as income-producing property held in trust. The holder of a remainder interest may wish to sell that interest at some point, whether before or after the right to possession has inured.

For U.S. taxpayers, owning assets held in foreign countries may have a variety of benefits, from ease of use for frequent travelers or those employed abroad to diversification of an investment portfolio. There are, however, additional rules and requirements to follow in connection with the payment of taxes. Some of these rules are very different from those for similar types of domestic income, and more than a few are quite complex.