All Articles - Think Outside the Tax Box

CURRENT EDITION

By Keith Schroeder, EA

Buying Tax Credits: Inflation Reduction Act

Tax shelters offered high income taxpayers an easy way to reduce and even eliminate federal income taxes at the individual level. The growing tax avoidance schemes, many questionable in nature, threatened to collapse the U.S. tax system. Hence the need for tax reform and the Economic Recovery Tax Act of 1981 (ERTA). New rules cannot keep a tax professional down. Real estate was once again the favorite tool for reducing taxes. Enter cost segregation. Couple that with bonus depreciation and the automatic change of accounting method using Form 3115 , and you have a recipe for serious tax reduction. The tax shelters of the 1970s were often questionable. Cost segregation is still a valid way to accelerate deductions for income property owners. But none of that compares to the tax benefits available under the Inflation Reduction Act of 2022 (the IRA).

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The Constitution for Tax Pros

A case currently before the Supreme Court, Charles Moore, G. Moore et ux. v. United States , has the court looking at some of the fundamentals of the Constitution’s treatment of taxation. Advocates of various views are hoping for an earthshaking result. Also, many “tax protester” arguments base themselves on misreading of Supreme Court decisions from around the time of the 16th Amendment. Knowing a fuller version of what surrounds the snippets they feed you probably won’t help you bring them around if they have drunk deep of the tax protester Kool-Aid, but it will help you maintain your own sanity. Let’s start with what the Moore case is about.

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Passive Activity and Self-Employment Tax In Rentals – One Of These Definitions Is Not Like The Other

Somebody I consult for threw a kind of oddball fact pattern at me. Their client, “Terry,” owns a big house with many rooms in a kind of resort type area. Terry rents the rooms out on a short-term basis averaging three or four days and provides no other services. Between this and that, Terry ends up spending about 15 hours a week. The big concern comes from Terry buying a cost segregation study, which will mean a big loss. Can Terry use the loss in the year incurred, or will it be suspended? And is the income subject to self-employment tax in the future? I thought the answers to those questions were the same, but we learned from the Chief Counsel’s Office, one of those things is not like the other.

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Start Planning Now For Expiring Provisions of the TCJA

Time flies when you’re dealing with taxes. For instance, eight years must have seemed like an epoch when Washington passed the Tax Cuts and Jobs Act of 2017 (TCJA), the biggest federal tax reform in decades and one that altered tax brackets, deductions, and estate planning, to name just a few. Best of all, lawmakers probably thought back then, we won’t have to worry about some of these provisions changing until all the way off in 2026! Except suddenly, we now have less than 26 months to get ready for the end of nearly two dozen TCJA provisions that will happen without action from Congress. That’s barely enough time for some of the planning before what could be one of the biggest groundswell tax years of recent memory.

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Harnessing the Power of Client Testimonials: Boosting Trust and Referrals

When I started my business, referrals and testimonials were not on my mind. Like most entrepreneurs, my crucial motivator was to have freedom of time for my family, to expand my skill set, and to remove the cap on my earnings potential. When I got my first client as a side hustle, my referral source was a board member who knew my skills very well and recommended me to the non-profit he served as treasurer. In December 2018, a prospect asked me for referrals, and I had no idea what to say. There was only a little besides my resume and employer as a reference. Then I thought, hey, I have my non-profit client, and I asked my client whether they would speak with this prospect and answer any questions they had, and they agreed. That’s when I realized the power of referrals and testimonials.

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Are You Really Sure Your Electronic Form 1040 Was Filed?

Considering how soon Halloween comes after October 15, the extended due date for individual returns, having a tax horror story seems really appropriate. The horror story came out on October 24, with the Eleventh Circuit decision in the case of Lee v U.S. Dr. Wayne Lee seemed to have done everything right to be in compliance. His estimates overpaid his taxes every year, and he would let the refund ride into the next year. He hired a CPA to prepare his returns and dutifully signed and sent the CPA Form 8879 IRS e-file Signature Authorization. He did this for his 2014, 2015, 2016, and 2017 returns. Then disaster struck.

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TAX COURT ROUNDUP – JANUARY 2024

The last month of 2023 featured more technical expositions than policy discussion. Practitioners will find insights worth their time. Generalists shouldn't overlook some nuggets here. As always, Tax Court sees and deals with more varieties of income taxation than any other court.

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Maximizing 2023 & 2024 Personal EV Credits

Thanks to the Inflation Reduction Act of 2022, the federal government is giving out tens of billions of dollars in tax credits to incentivize taxpayers to purchase electric vehicles. As with any government program, claiming the benefits can be complicated. Since Congress used tax credits to deliver the program, and the personal tax credits are income-limited, tax planning can help a taxpayer who would otherwise not qualify for these benefits. This article will briefly overview the two personal electric vehicle tax credits, followed by several tax planning strategies to unlock these credits for taxpayers who may not otherwise qualify.

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Small Biz Faces a Huge New Reporting Reg Next Year

Regulatory tsunamis come in batches. By now, for example, most of you have heard about the tax-reporting requirement slated to kick in next year, where the IRS would've learned about the income of individual taxpayers who made just $600 on the likes of eBay. That sounded like a looming nightmare -- until the IRS suddenly put it off a year two days before Thanksgiving. (Sometimes removing tax regulations without warning creates as much confusion as adding them.) Small businesses aren’t off the regulatory hook that easily for 2024. Come January 1, a new ownership-reporting requirement begins for millions of American companies. Now’s the time to prepare yourself and your company.

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