Your Questions Answered

New year, new rules, the changing features of United States Tax Court practice and procedure confront the tax practitioner (even those who don't practice in Tax Court themselves), who must keep current among all the demands on our time, especially as the season opens. Let's jump in.

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.

Despite the five days off for the two Federal holidays this month, there's plenty from Tax Court, for both specialists and general practitioners. No other Court gets as deep into the "wrinkled skin" of US tax law. As always, there's something for (almost) everyone.

A very mixed bag this month: IRS shifting ground on the eve of trial, plenty of discovery, loyalty programs, the end of the road for meaningful Section 6751(b) supervisory approval, and arrival of a new Special Trial Judge. And, as always, a lot of questions.

The latest Federal Tax Court news, updates, and hot topics!

This roundup will spend a lot more space than usual on one story, because it’s the biggest of the year in Tax Court so far...

The dog days, the doldrums, the get-out-of-town days...they're here. The United States Tax Court is not immune, as the blockbuster cases and newsletter headliners have largely vanished. Still, there are report-worthy stories, despite the call of seashore and mountain meadow.

Question: I’ve heard other planners talk about using an accountable plan to reduce tax, but how exactly does this save a taxpayer money? Answer: An accountable plan is a type of reimbursement arrangement between an employer and employee that meets certain IRS criteria. It often covers business expenses that an employee incurs while performing their job, such as travel costs, home office expenses, or supplies. The way this plan helps save money on taxes is through the appropriate treatment of reimbursements or allowances under the tax law. Did you know that reimbursements for out-of-pocket expenses are taxable income? Normally, reimbursements for expenses are income, and the employee needs to pay income tax on them. However, if the expenses meet the criteria of an accountable plan, they’re excludable from the employee’s income. This means the employee does not have to pay income tax, Social Security, Medicare, or unemployment taxes on these funds. What about the case of partners in partnerships and shareholders in S-corporations? These individuals often face out-of-pocket expenses that the respective partnership or S-corporation doesn’t reimburse. Is there a way for these individuals to reap tax benefits for these expenditures too? There used to be. Under pre-TCJA rules, employees and owners of partnerships and S-corporations could deduct ordinary and necessary expenses, which were unreimbursed from the business as a Miscellaneous Itemized Deduction subject to the 2 percent floor. To learn how to make sure your S-corporation and partnership out-of-pocket expenses are deductible, and reimbursements are not taxable to the owners, click here to read on.