Dear Clients and Friends,
Season’s Greetings from all of us at Beverly and Bucker! We hope that the holidays find you in good health and high spirits. As we prepare for the upcoming tax season, we have some news for our clients and a few announcements.
We’re excited to welcome back Marcel Kay and Christy Gray this tax season! Marcel, a Fredericksburg native, has been with us for three years and has continued his work in the local community between tax seasons. This will be Christy’s second year with us and we are happy to announce that she has passed the Individual Tax portion of the Enrolled Agent Exam. These exams are tough and require a great knowledge of tax preparation. We’re very proud of Christy and glad to have her on the team. As always, we look forward to implementing our knowledge to provide our clients with the best service this tax season.
Last year was a doozy! We had several clients who were surprised by their results, mostly due to under-withholding. It appears that many payroll departments were using inaccurate tax tables and not taking out enough. We’ve checked in with several clients and it seems like the tax tables are more accurate this year, but it’s always good to make sure that you have enough federal and state tax withheld. IRS has provided a “paycheck checkup” on their website. Please visit if you would like to see if you are underwithheld in 2019. If you have concerns, please contact me and we can discuss if an estimated payment is necessary. If you need to make an estimated payment for 2019 it will be due January 15th, 2020.
● Businesses: Note that Partnership and S-Corp business returns are due March 15th If you are a Corporation, S-Corp, Partnership, or Self Employed business owner, we request that you to drop off your information by January 31st, 2020. In many cases, our accounting department will need to complete Year-End Statements for your company that are then used to prepare your tax return. If we do not receive the necessary info to prepare your Year-End Financial Statements by Jan. 31, 2020, we may have to file an extension for your business return. This does not mean that you will incur penalty, be considered late, or be forced to file an extension for your personal returns. We intend to file all returns by or before April 15th. If you know that you would like an extension, feel free to call in now so that we can add you to our list. If you do not want an extension, it is imperative that we receive your information well in advance of the March 15th deadline.
● Investments: If you have investments and receive the brokerage statement in midMarch, we recommend that you drop off your tax papers or make your appointment before receiving these forms. This allows us to prepare the majority of your return in advance. We will be able to apply the brokerage statements as soon as they arrive and complete your return. If you wait to drop off all of your forms before receiving this statement, your taxes may need to be filed for extension.
● Appointments: Please schedule your appointment soon as spaces fill up quickly. If you are unable to find an appointment with your preferred tax preparer, please know that we are all here to provide quality service and prepare accurate tax returns to get you the best results.
● Drop off service: For your convenience, we also offer a drop-off option which saves many clients from having to take time away from work. We are happy to correspond via phone or email while preparing dropped off returns if there are any questions or concerns. Documents can be dropped off at our front desk during office hours or in the drop-off slot to the left of our front door after hours. Please include a phone number with any information you drop off.
● Client Organizer: Client organizers serve as a type of checklist for your tax information. If we’ve prepared your returns in the past, your organizer will show items that you have provided in prior years. Please contact us to request a client organizer if needed. We can send the organizer via mail or email, or you can pick one up in person.
IRS has been sending more letters than we have ever seen before. We responded to twice as many letters in 2019 than we have in any other year. It is possible that this is due to IRS automating more of its correspondence in an attempt to minimize fraudulent returns. Regardless of the reason, it appears that this will continue for the foreseeable future. Know that if we fail to report information that you have provided to us, causing IRS to send a letter of adjustment, we will correspond for you free of charge. However, due to the recent increase in the volume of letters from IRS, we must charge a fee to respond to letters not caused by preparation error.
We would like to reiterate that the IRS will never contact taxpayers via phone. If you receive a phone call from a person or machine claiming to be from the IRS, please disregard or call us immediately. We are here to answer any questions concerning correspondence to or from IRS.

Tax Alerts
September 22, 2020
Tax Briefing(s)

The American Institute of CPAs (AICPA) has urged the IRS and Treasury in an August 12 letter to issue guidance on President Trump’s payroll tax deferral memorandum. The executive action signed by the president on August 8 instructs Treasury to defer the collection and payment of payroll taxes from September 1 through years-end for eligible employees.

The IRS has released final regulations that address the interaction of the $10,000/$5,000 cap on the state and local tax (SALT) deduction and charitable contributions. The regulations include:

  • a safe harbor for individuals who have any portion of a charitable deduction disallowed due to the receipt of SALT benefits;
  • a safe harbor for business entities to deduct certain payments made to a charitable organization in exchange for SALT benefits; and
  • application of the quid pro quo principle under Code Sec. 170 to benefits received or expected to be received by the donor from a third party.

The IRS has issued final regulations regarding the limitation for the business interest expense deduction under Code Sec. 163(j), including recent legislative amendments made for the 2019 and 2020 tax years. Also, a safe harbor has been proposed allowing taxpayers managing or operating residential living facilities to qualify as a real property trade or business for purposes of the limitation. In addition, new proposed regulations are provided for a number of different areas.

The IRS has issued proposed regulations that implement the "carried interest" rules under Code Sec. 1061 adopted by Congress as part of the Tax Cuts and Jobs Act of 2017 ( P.L. 115-97). Some key aspects of the lengthy proposed regulations include the definition of important terms, how the rules work in the context of tiered passthrough structures, the definition of "substantial" services provided by the carried interest holder, and the level of activity required for a business to meet the definition of an "applicable trade or business."

The Treasury and the IRS have issued temporary and proposed regulations to:

  • reconcile advance payments of refundable employment tax credits provided under the Families First Coronavirus Response Act (Families First Act) ( P.L. 116-127) and the Coronavirus Aid, Relief, and Economic Security (CARES) Act ( P.L. 116-136), and
  • recapture the benefit of the credits when necessary.

The IRS has provided guidance on the special rules relating to funding of single-employer defined benefit pension plans, and related benefit limitations, under Act Sec. 3608 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (P.L. 116-136). The guidance clarifies application of the extended contribution deadline, and the optional use of the prior year’s adjusted funding target attainment percentage (AFTAP), with examples.

The IRS has released proposed regulations that implement new Code Sec. 7602(f), which bars non-government persons who are hired by the IRS from questioning a witness under oath whose testimony was obtained pursuant to a summons issued under Code Sec. 7602. The regulations prohibit any IRS contractors from asking a summoned person’s representative to clarify an objection or assertion of privilege. The IRS has also withdrawn a notice of proposed rulemaking ( NPRM REG-132434-17) that contained proposed rules addressing the participation of persons described under Code Sec. 6103(n) in the interview of a summoned witness and excluding certain non-government attorneys from participating in an IRS examination.

Proposed regulations adopt the post-2017 simplified accounting rules for small businesses.

The IRS has modified two safe harbor explanations in Notice 2018-74, 2018-40 I.R.B. 529, that can be used to satisfy the requirement under Code Sec. 402(f) that certain information be provided to recipients of eligible rollover distributions. The modifications were necessary due to recent changes in law made by the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act). One safe harbor explanation is for payments not from a designated Roth account, and the other is for payments from a designated Roth account. The Code Sec. 402(f) notice may be provided as many as 180 days before the date on which the distribution is made (or the annuity starting date).

The IRS has reminded taxpayers that the Coronavirus Aid, Relief, and Economic Security (CARES) Act ( P.L. 116-136) can provide favorable tax treatment for withdrawals from retirement plans and Individual Retirement Accounts (IRAs). Under the CARES Act, individuals eligible for coronavirus-related relief may be able to withdraw up to $100,000 from IRAs or workplace retirement plans before December 31, 2020, if their plans allow. In addition to IRAs, this relief applies to 401(k) plans, 403(b) plans, profit-sharing plans and others.

The Treasury and IRS have issued final and proposed regulations under the global intangible low-taxed income (GILTI) and subpart F provisions for the treatment of high-taxed income. The final regulations provide guidance on determining the type of high-taxed income that is eligible for the exclusion (the "GILTI high-tax exclusion" or GILTI HTE).

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