Archives for July 2024

IRS Chief Counsel Margie Rollinson announced the creation of a new Associate Office that will focus exclusively on partnerships, S-corporations, trusts and estates.

During the last decade of IRS budget cuts, the pass-through entities like S Corporations and partnerships have not seen too many audits or scrutiny. But this change is imminent because, as we discussed earlier, the IRS will receive an infusion of $60 billion over the next ten years, in addition to its annual appropriation. So now it has enough funding and it’s moving fast.

The IRS also plans to bring in outside experts with private-sector experience regarding pass-throughs to work alongside the expert in-house knowledge of current IRS employees.

Plus, the Internal Revenue Service now is paying a lot more than in the past and it’s attracting more mid-career professionals, so that the Service can increase its compliance enforcement fast and not spend a lot of time on training its employees.

S Corporations

If you have an S Corporation, make sure you have all owners pay themselves reasonable salaries for their work. Pay attention to properly calculate your basis in your S Corporation. When owners take distributions make sure that these are made according to the ownership percentages, so that you do not lose your S Corporation status. Make sure you have the proper support for your deductions, especially in hot areas like vehicle expenses, meals, uniforms, donations. Properly reconcile your books. Do your bank and credit card reconciliations.

Partnerships

If you have a partnership, pay attention to the basis calculation. Another hot are here is the income flowing to the owners that is subject not only to income tax, but also to self-employment tax. Pay attention to the status of the partners, if they are truly limited partners or are they involved in the management of the business? Pay attention to how you deduct your out-of-pocket expenses. And of course, do your reconciliations and have the proper support for your deductions.

Conclusion

If you need tax advice regarding your business or if you are opening a new business, we offer comprehensive business advisory services that help our clients not only avoid IRS headaches, but also save on taxes by having the right tax set-up and strategy. If you are in need of a good CPA firm contact us!

You can check our YouTube channel for more subjects that you might find useful.

This material is for informational purposes only. It does not constitute tax, legal or accounting advice.

The IRS is evolving fast! The IRS that you are dealing with today or dealt with last year is not the same IRS that you’re going to be dealing with in 2 – 3 years.

Over the next ten years, an infusion of a whopping $60 billion will be allocated to the IRS, in addition to its annual appropriation. This isn’t just a minor adjustment; it’s a major financial influx that’s enabling the agency to transform how it operates.

What Does This Mean For You And Me?

The IRS now has enough money that it can hire more people.  And we’re not talking fresh graduates, but mid-career professionals who can really hit the ground running. This is evident from the job postings on their website, which now offer significantly higher pay than in the past.
And with these new hires, the IRS is ramping up its audit activities of everyone, which are going to hit pretty soon.
Last year alone, they increased the number of revenue agents by about 9%.

IRS Commissioner Danny Werfel said in March that the Service has focused enforcement on high-income groups by serving notices to 125,000 people who have not filed a federal income tax return since 2017, including 25,000 with incomes over $1 million; conducting audits focused on the use of corporate jets; and collecting $520 million since mid-2023 in taxes owed by millionaires.
But it’s not just millionaires in their sights. Pretty soon they will expand their audit activities to all individuals and businesses. Because now the IRS doesn’t have to pick and choose among whom to audit anymore.

With new technology that the IRS is putting in place and with increased audit workforce they will have the capacity to significantly increases its examinations.

You can check our YouTube channel for more subjects that you might find useful. If you are in need of a good CPA firm contact us!

This material is for informational purposes only. It does not constitute tax, legal or accounting advice.

If your tax situation is simple enough, where you feel comfortable filling your tax return on your own, you might not need to buy a tax software, like TurboTax or Tax Act every year.

That is because starting with 2025, so starting with the next year tax season you will be able to file your tax return directly with the IRS.

This year, in the 2024 tax season, the IRS had a pilot program called Direct File which allowed people to file their returns directly with the IRS. This program was available only in 12 states and only for 5 weeks. The program went so well that the IRS decided to make Direct File permanent starting with the 2025 tax season while making it available to all states, with plans to expand to more complex returns.

As of now the returns supported by DirectFile are the ones with the following types of income and deductions:

Income: wages, Social Security income, unemployment compensation and interest income of $1,500 or less.

Credits: earned income tax credit, child tax credit and credit for other dependents.

Deductions: standard deduction, student loan interest and educator expenses.

So for now you cannot use the IRS software if you itemize deductions.

We will keep you posted as the IRS expends the type of returns that can be filed through their program.

You can check our YouTube channel for more subjects that you might find useful. If you are in need of a good CPA firm contact us!

This material is for informational purposes only. It does not constitute tax, legal or accounting advice.