Monday, December 10, 2018

Startups And Founders NOTE: Now besides making a Section 83(b) election most also get a Section 83(i) election


For private corporations and their employees, IRS provides initial guidance on new tax benefit for stock options and restricted stock units

The Internal Revenue Service issued Notice 2018-97 offering guidance on a recent tax law change that allows qualified employees of privately-held corporations to defer paying income tax, for up to five years, on the value of qualified stock options and restricted stock units (RSUs) granted to them by their employers.
The tax law change was included in the 2017 Tax Cuts and Jobs Act (TCJA). In general, executives, highly-compensated officers and those owning one percent or more of the corporation’s stock cannot make the deferral election. Federal Insurance Contributions Act (FICA) tax and Federal Unemployment Tax Act (FUTA) tax payable on the value of qualified stock may not be deferred.

Notice 2018-97, posted today on IRS.gov, offers initial guidance taxpayers can rely on until proposed regulations are issued and requests public comment on additional issues that should be addressed in those regulations.
Updates on this and other TCJA provisions can be found on the Tax Reform page of IRS.gov.

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IRS Increases Interest Rates for the First Quarter of 2019



The Internal Revenue Service announced that interest rates will increase for the calendar quarter beginning January 1, 2019.  The rates will be: 



  • six (6) percent for overpayments [five (5) percent in the case of a corporation];
  • three and one-half (3.5) percent for the portion of a corporate overpayment exceeding $10,000;
  • six (6) percent for underpayments; and
  • eight (8) percent for large corporate underpayments. 
Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis.  For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.

Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

The interest rates announced today are computed from the federal short-term rate determined during October 2018 to take effect November 1, 2018, based on daily compounding.

Revenue Ruling 2018-32, announcing the rates of interest, is attached and will appear in Internal Revenue Bulletin 2018-51, dated December 17, 2018.

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Thursday, October 18, 2018

Halloween Legal Questions Arise: Do The Undead Need Good Legal Representation ? - Part I

YES !!  Even The Undead Vampires Of Twilight, Vampire Diaries, And True Blood Need Wills, Trusts, and Asset Protection.

With Twilight New Moon and all the other vampire movies and TV shows like Vampire Diaries and True Blood so popular these days, now at Halloween questions naturally arise:

Do vampires need to do estate planning (assuming they are undead in the USA)??

One could argue no they don't need estate planning because they are already dead or almost can't be killed.  There is, however, the possibility of running into a stake through the heart or having their head chopped off or getting trapped out in the sunshine.

So I say the better view is that yes even vampires need to have a good estate plan complete with wills and various types of trusts and all the other goodies.  OK maybe they don't need an Advanced Health Care Directive - Medical Power Of Attorney, but they need everything else including proper life (or should it be undead) insurance to provide liquidity should they suddenly burst into flames.

Even vampires need to be able to make sure they can pass their property on to themselves (preserve a good chain of title in the deed records, etc.) for each new identity they assume over the centuries, and they need to make sure that their little undead Dracula Jr. is taken care of should they meet up with Buffy The Vampire Slayer or something.

So what are you waiting for all you non-immortal non-undead?  If even almost immortal undead vampires need a good estate plan with current wills, trusts, and life insurance, etc., obviously all the rest of us need one even more.  After all, if you don't protect yourself, the likes of Obama, Pelosi, and Schumer will be coming to suck ALL your income and assets well beyond the grave.


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Thursday, September 27, 2018

IRS Issues Simplified Per-Diem Rates Increase For Post-Sept. 30, 2018 Business Travel

Notice 2018-77, 2018-42 IRB:  The IRS has issued a new notice carrying the "high-low" simplified per-diem rates for post-Sept. 30, 2018 travel.


The high-cost area per-diem increases $3, and the low-cost area per-diem increases $4, from the prior simplified per-diems.


Background. An employer may pay a per-diem amount to an employee on business-travel status instead of reimbursing actual substantiated expenses for away-from-home lodging, meal and incidental expenses (M&IE). If the rate paid doesn't exceed IRS-approved maximums, and the employee provides simplified substantiation (time, place and business purpose), the reimbursement is treated as made under an accountable plan—it isn't subject to income- or payroll-tax withholding and isn't reported on the employee's Form W-2. Receipts of expenses aren't required.

In general, the IRS-approved per-diem maximum is the General Services Administration (GSA) per-diem rate paid by the federal government to its workers on travel status. This rate varies from locality to locality. These rates in effect for the federal government's fiscal year period beginning Oct. 1, 2018, may be found at gsa.gov. However, in applying the per-diem, M&IE, and incidental-expenses-only allowances, an employer may continue using the CONUS (continental U.S.) rates that were in effect for the first nine months of 2018 for CONUS expenses in all of 2018, instead of using the GSA rates that are effective Oct. 1, 2018, provided that the employer consistently uses those prior rates for the last three months of 2018. (Rev Proc 2011-47, Sec. 4.06; Notice 2018-77, Sec. 6)

Definition of incidental expenses. Rev Proc 2011-47, Sec. 3.02(3) provided that the term "incidental expenses" has the same meaning as in the Federal Travel Regulations, 41 C.F.R. 300-3.1, and that future changes to the definition of incidental expenses in the Federal Travel Regulations would be announced in the annual per-diem notice. On Oct. 22, 2012, the GSA published final regs revising the definition of incidental expenses under the Federal Travel Regulations to include only fees and tips given to porters, baggage carriers, hotel staff, and staff on ships. Transportation between places of lodging or business and places where meals are taken, and the mailing cost of filing travel vouchers and paying employer-sponsored charge card billings, are no longer included in incidental expenses. Accordingly, taxpayers using per-diem rates may separately deduct, if permitted (see below), or be reimbursed for, transportation and mailing expenses. (Notice 2018-77, Sec. 2)
Observation: Employee business expenses, such as unreimbursed transportation costs, are miscellaneous itemized deductions that are disallowed for tax years 2018 through 2025.
High-low rates. A payor that pays a per-diem allowance in lieu of reimbursing actual expenses an employee pays or incurs or will pay or incur for travel away from home may use the high-low substantiation method in lieu of the per-diem substantiation method or the M&IE-only method. (Rev Proc 2011-47, Sec. 5.01)

Under the high-low substantiation method, there is one uniform per-diem rate for all "high-cost" areas within CONUS, and another per-diem rate for all other areas within CONUS. Under the optional high-low method for post-Sept. 30, 2018 travel, the high-cost-area per diem is $287 (up from $284), consisting of $216 for lodging and $71 for M&IE. The per-diem for all other localities is $195 (up from $191), consisting of $135 for lodging and $60 for M&IE. (Notice 2018-77, Sec. 5.01)

Changes in high-low per-diem localities. The following changes have been made to the list of high-cost localities:

  • The following localities have been added to the list of high-cost localities: Sedona, Arizona; Los Angeles, California; San Diego, California; Vero Beach, Florida; Jekyll Island/Brunswick, Georgia; Duluth, Minnesota; Pecos, Texas; Moab, Utah; Cody, Wyoming. (Notice 2018-77, Sec. 5.03(a))
  • The following localities have changed the portion of the year in which they are high-cost localities: Oakland, California; Aspen, Colorado; Boca Raton/Delray Beach/Jupiter, Florida; Naples, Florida; Bar Harbor/Rockport, Maine; Boston/Cambridge, Massachusetts; Jamestown/Middletown/Newport, Rhode Island; Charleston, South Carolina; Vancouver, Washington; Jackson/Pinedale, Wyoming. (Notice 2018-77, Sec. 5.03(b))
  • The following localities have been removed from the list of high-cost localities: Mill Valley/San Rafael/Novato, California; Steamboat Springs, Colorado; Petoskey, Michigan; Saratoga Springs/Schenectady, New York. (Notice 2018-77, Sec. 5.03(c))
  • The following localities have been redefined: Traverse City, Michigan no longer includes Leland; Bar Harbor, Maine now includes Rockport. (Notice 2018-77, Sec. 5.03(d))
Limitation. A payor that uses the high-low substantiation method for an employee must use that method for all amounts paid to that employee for travel away from home within CONUS during the calendar year. The payor may use any permissible method (actual expenses, the per-diem substantiation method, or the M&IE-only per-diem substantiation method) to reimburse that employee for any CONUS travel away from home. (Rev Proc 2011-47, Sec. 5.03)

Transition rules. For travel in the last three months of a calendar year:
  1. A payor must continue to use the same method (per-diem method, or high-low method) for an employee as the payor used during the first nine months of the calendar year; and
  2. A payor may use either the rates and high-cost localities in effect for the first nine months of the calendar year or the updated rates and high-cost localities in effect for the last three months of the calendar year if the payor uses the same rates and localities consistently for all employees reimbursed under the high-low method. (Rev Proc 2011-47, Sec. 5.04; Notice 2018-77, Sec. 6)
Employer's deduction for high-low per-diem. A payor must treat M&IE allowances as a food and beverage expense that is subject to the 50% deduction limit on meal expenses. (Rev Proc 2011-47, Sec. 6.05) The percentage is 80% for food and beverage expenses of certain individuals (e.g., air transport workers, interstate truckers, bus drivers) during or incident to a period of duty subject to the hours-of-service limits of the Department of Transportation. (Code Sec. 274(n)(3))
Observation: Where the 50% deduction limit applies to food and beverages, an employer's deduction for a high-cost-area per-diem is equal to $251.50 ($216 for lodging plus $35.50 (half of $71 M&IE)). For non-high-cost areas, the payor deducts $165 ($135 for lodging, plus $30 (half of $60 M&IE)).
Optional method for incidental-expenses-only deduction. Instead of using actual expenses in computing deductions for ordinary and necessary incidental expenses of away-from-home business travel, employees and self-employed individuals who don't pay or incur meal expenses for a calendar day (or partial day) of travel away from home may, for post-Sept. 30, 2018 travel, deduct $5 per day (same as previous rate) for each calendar day (or partial day) the taxpayer is away from home. (Notice 2018-77, Sec. 4)This amount is deemed substantiated if the taxpayer substantiates the time, place, and business purpose of the travel for that day (or partial day). The incidental-expenses-only per-diem can't be used by payors that use a per-diem or M&IE-only per-diem method (see below), or by employees or self-employed individuals who use the M&IE-only per-diem method. The incidental-expenses-only per-diem is not subject to the 50% deduction limit on business meals. (Rev Proc 2011-47,Sec.4.05; Rev Proc 2011-47, Sec. 6.05(5))

M&IE-only per-diem. Under some circumstances, an employee may receive a per-diem reimbursement only for his or her M&IE for travel away from home. If simplified substantiation is supplied (time, place, business purpose), and one of several conditions is met (e.g., payor provides lodging in kind or pays the service provider directly for lodging), the amount paid is deemed paid under an accountable plan as long as the rate does not exceed the federal M&IE rate for the locality of travel for the period when the employee is away from home. Similar rules apply to self-employed individuals who pay or incur meal expenses. (Rev Proc 2011-47, Sec. 4.03)

Transportation industry per diem. Effective Oct. 1, 2018, taxpayers in the transportation industry paying (or deducting) a per-diem only for M&IE may treat $66 (up from $63) as the M&IE rate for all localities within CONUS and $71 (up from $68) as the M&IE rate for all localities outside of CONUS (same as previously). (Notice 2018-77, Sec. 3) A transition rule provides that taxpayers that used the federal M&IE rates or the special transportation industry rates during the first nine months of 2018 for an individual can't switch to the other method for that individual until 2019. (Rev Proc 2011-47, Sec. 4.06(2))


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Thursday, August 16, 2018

IRS AdvisesTaxpayers With High Incomes, Complex Returns: Check Withholding Soon To Avoid A Year-End Tax Surprise

WASHINGTON -- The Internal Revenue Service today urged high-income taxpayers and those with complex tax returns to check their withholding soon to avoid an unexpected tax bill or penalty when they file their 2018 federal income tax return in 2019. 

The Recently Passed "Tax Cuts and Jobs Act" made major changes to the tax law, including increasing the standard deduction, removing personal exemptions, increasing the Child Tax Credit, limiting or discontinuing certain deductions and changing tax rates and tax brackets.

Any of these far-reaching changes could have a big impact on the tax refund or balance due on the tax return taxpayers file next year. That’s why the IRS encourages every employee to do a “paycheck checkup” soon to check that they are having the right amount of tax taken out of their pay. The IRS Withholding Calculator and Publication 505, Tax Withholding and Estimated Tax, can help.

A checkup is especially important for those with high incomes and complex returns because they are often affected by more of these changes than people with simpler returns. This is also true if they also make quarterly estimated tax payments to cover other sources of income or are subject to the self-employment tax or alternative minimum tax.

Changes that affect high-income taxpayers

For 2018, the standard deduction nearly doubled to $24,000 for joint filers and $12,000 for singles. There were also numerous changes to itemized deductions, including:
- A $10,000 cap on deductions for state and local property, sales and income taxes.
- New limits on deductions for some mortgage interest and home equity debt. 
- Higher limits on the percent of income a taxpayer can deduct as charitable contributions.
- No deduction for those miscellaneous expenses that, in prior tax years, had to exceed 2 percent of a filer’s income to qualify. These included investment expenses and un-reimbursed employee expenses such as travel, meals, entertainment and uniforms.

Many who itemized in the past may find they’ll pay less tax in 2018 by taking the standard deduction.

Do a ‘paycheck checkup’ soon
Checking and adjusting how much tax is withheld from pay now can prevent an unexpected tax bill and penalties next year at tax time. It can also help taxpayers avoid a large tax refund, if they’d prefer to have their money in their paychecks throughout the year.

Taxpayers need to adjust their withholding as soon as possible for an even, consistent amount of withholding throughout the rest of the year. Waiting means there are fewer pay periods to withhold the necessary federal tax – so more tax will have to be withheld from each remaining paycheck.

Whether someone uses the Withholding Calculator or Publication 505, it’s helpful to have their completed 2017 tax return handy to help estimate the amount of income, deductions, adjustments and credits to enter. They’ll also need their most recent pay stubs to help compute their withholding to date.

Employees can use the results from the Withholding Calculator or Publication 505 to help determine if they should complete a new Form W-4, Employee’s Withholding Allowance Certificate, and what information to include on the form.

Though primarily designed for employees who receive wages, the Withholding Calculator can also be helpful to some taxpayers receiving pension and annuity income. Recipients of pensions and annuities can change their withholding by completing Form W-4P  and submitting it to their payer.

All taxpayers should remember that if their personal circumstances change during the year, they should re-check their withholding.

Taxpayers who change their withholding for 2018 should recheck their withholding at the start of 2019. This is especially important for taxpayers who reduce their withholding sometime during 2018. A mid-year withholding change in 2018 may have a different full-year impact in 2019. So, if taxpayers don’t submit a new Form W-4 for 2019, their withholding might be higher or lower than intended. To help protect against having too little withheld in 2019, taxpayers should check their withholding again early in 2019.

People with more complex situations may need to use Publication 505
Taxpayers with more complex situations might need to use Publication 505 instead of the Withholding Calculator. This includes employees who owe self-employment tax, the alternative minimum tax or tax on unearned income from dependents. It can also help those who receive non-wage income such as dividends, capital gains, rents and royalties.

The publication includes worksheets and examples to guide taxpayers through these special situations.

In some of these situations, a household may make estimated tax payments but also have tax withheld by an employer. It’s important to account for both amounts when figuring how much tax to have an employer withhold. Publication 505 helps taxpayers include estimated tax payments; the Withholding Calculator does not.

Adjusting withholding
If an employee determines they should adjust their withholding, they should complete a new Form W-4 and submit it to their employer as soon as possible. Some employers have an electronic method to update a Form W-4.

If an employee has a change in personal circumstances that reduces the number of withholding allowances they can claim, they must submit a new Form W-4 within 10 days of the change with the correct number of allowances.

As a general rule, the fewer withholding allowances an employee enters on the Form W-4, the higher their tax withholding will be. Entering “0” or “1” on line 5 of the Form W-4 means more tax will be withheld. Entering a bigger number means less tax withholding, resulting in a smaller tax refund or potentially a tax bill or penalty.

Taxpayers may also need to determine if they should make adjustments to their state or local withholding. They can contact their state's department of revenue to learn more.

Additional information

The Withholding Calculator does not request personally identifiable information such as name, Social Security number, address or bank account number. The IRS does not save or record the information entered on the calculator. As always, taxpayers should watch out for tax scams, especially via email or phone and be alert to cybercriminals impersonating the IRS. The IRS does not send emails related to the calculator or the information entered in it.
The calculator and Publication 505 are not tax-planning tools. Taxpayers needing advice regarding the new tax law and their personal situation should consult a trusted tax professional.

Taxpayers can get more information on these topics at www.irs.gov/withholding. Additionally, IRS.gov/getready has information about steps taxpayers can take now to get a jump on next year’s taxes, including how the new tax law may affect them.


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Friday, December 1, 2017

One-Stop Resource Center For Preparing, Filing And Paying IRS 2018 Income Taxes

The Internal Revenue Service wants new small business owners, including those involved in the sharing economy, to know that IRS.gov has an online resource center to help them learn all they need to know about the tax implications of running a small business.

The Small Business and Self-Employed Tax Center offers a variety of useful tools that small business owners can access to prepare, file and pay taxes.

The Center is a virtual one-stop tax shop with an A to Z index that gives answers for most business-related tax questions. It includes the Virtual Workshop, an educational video series that walks small business owners step-by-step through the basics. New owners can learn the ins and outs of their taxes at their own pace with other educational tools and products linked from the page. One of the Center’s newest features is the Sharing Economy Tax Center for those who use various online platforms to rent rooms, provide rides and offer other goods and services. Those involved in the Sharing Economy may visit the Pay as You Go, So You Don’t Owe page to learn more about ways to avoid paying the Estimated Tax Penalty.

Getting an Employer Identification Number (EIN) is often the first step for new small businesses, and the Center’s page makes it easy. There are links to the downloadable tax calendar and a variety of videos. Figuring out what is the best form of business entity to establish is easier with the selecting a business structure section. It explains the tax implications of  setting up a Sole Proprietorship, Partnership, Corporation, S Corporation or a Limited Liability Company (LLC) .

The Center features relevant tax forms and instructions for small businesses. It serves as a resource on how to handle employment taxes, if employees are part of a business, or figuring out self-employment taxes for the sole proprietor. The section on filing and paying business taxes details which IRS forms to use for what sort of business entity and when to file.

The resources on Small Business and Self-Employed Tax Center are not just for new small businesses but can be used for every stage of a small business lifecycle; from starting up and operating a business to selling or closing one. In addition, the page has information on topics like recordkeeping, types of retirement plans and the Affordable Care Act.

Additional IRS Resources:

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Texas Case Shows Why Single Member LLCs Not Good For Asset Protection

COURT OF APPEALS SECOND DISTRICT OF TEXAS FORT WORTH NO. 02 - 16 - 00213 - CV JULIA TERESA HECKERT APPELLANT V. CLYDE L. HECKERT, JR . APPELLEE  MEMORANDUM OPINION 

This appeal and cross - appeal involve the propriety of a turnover order . In her appeal, Julia Teresa Heckert (Teresa) –– who obtained the turnover order against her former husband Clyde L. Heckert , Jr......... 

"and (3) the only way his nonexempt interests in a sole - member limited liability company and a limited partnership may be reached by a judgment creditor is by charging order. We reverse the part of the trial court’s order requiring Clyde to turn over his Vanguard account, but we affirm the remainder of the trial court’s order ".

Additional Info From Jay Adkisson:

Charging Order Not Exclusive Remedy For SMLLC Interest In Heckert
The Texas Court of Appeals has held that a debtor/member's interest in a single-member LLC and partnership may be subject to a turnover order, despite language in the Texas statutes which says that the charging order is the "exclusive remedy". 
Nov 23, 2017
FDCPA Overrides State Law Limitations Period And Charging Order Exclusivity In Wilhite
The U.S. District Court for the District of Colorado has held that the Federal Debt Collection Practices Act (FDCPA) overrides contrary state law as to limitations periods for fraudulent transfers and charging order exclusivity.
   Full Details And Read More 
More from Jay Adkisson