I couldn’t end the week without highlighting some other great tidbits from the IRS Nationwide Tax Forum. Believe it or not, it was a really fun conference, and not just for tax nerds like me.
Over the three days, I attended 17 seminars and heard a great keynote address from IRS Commissioner John Koskinen. While I can’t boil down all 18 hours into one blog post, I wanted to at least pass along my top ten practice tips from the forum (in no particular order):
- Installment sales: You can’t include inventory of personal property when selling property in an installment sale (the sale of property where at least one payment comes after the tax year).
- S-Corp Returns: When a S-Corp’s total receipts and total assets at the end of the year are less than $250,000, the business does not need to file a balance sheet (Schedule L).
- Penalty Abatement: Reasonable cause is the crux of all penalty abatement requests, so make an affirmative showing of all events alleged as reasonable cause (death or illness are usually good ones).
- Birth of an LLC: Four key factors in the birth of a LLC – a) articles of organization, b) operating agreement, c) state fees, and d) correctly titling assets.
- Active Participation in Real Estate Rental: If you have a rental property, make sure to perform tasks like approving the tenant and level of rental income, deciding on repairs above $50, and signing the lease (rather than the management company) in order to get the active participation deduction for any losses on the property.
- Deductibility of Business Expenses: When a conflict arises between § 162 of the Internal Revenue Code (allowing a deduction for all ordinary and necessary expenses paid or incurred in a trade or business), and §262 (disallowing deductions that are inherently personal expenses), §262 usually wins.
- The “but for” test for Business Expenses: A good way to test the deductibility of an expense is asking if you would not incur the expense but for your job.
- Limit on Direct Deposits: The IRS is only allowing three direct deposits into one bank account. All refunds after that will be mailed. (Trying to cut down on fraud.)
- Resident Aliens: If preparing a resident alien’s return, you have to report his or her worldwide income. Non-resident aliens have to report U.S. income.
- Alternative Minimum Tax (AMT): you may be able to reduce your total AMT hit by not itemizing your deductions, even if they are more than your standard deduction.