To reverse 10 years of a steady decline in taxpayer audits, the IRS last summer announced plans to hire 2,500 new auditors by the end of the 2021 fiscal year and even more new hires in 2022. The coming increase in audit activity, coupled with changes to IRS audit practices due to COVID-19, has some taxpayers concerned about being audited and unsure of what to expect if their return is selected. (more…)
Can You Deduct Travel Costs to Monitor Properties? U.S. Tax Court Says Yes, Within Limits
The Internal Revenue Code allows the deduction of “ordinary and necessary” business expenses, including travel expenses while away from home overnight for business. A recent ruling by the U.S. Tax Court is a good reminder that the deduction is subject to some restrictions. (more…)
New IRS Guidance - Tax Treatment of Research Expenses
For many businesses, research and development (R&D) costs are a major expense—and a source of potentially significant tax questions. Two recent developments have complicated these questions. One is a new IRS memo announcing more stringent reporting requirements for some taxpayers claiming tax credits for research expenses; the other is a potential change in the deductibility of research expenses. (more…)
Tax Scams - IRS Issues 2021 “Dirty Dozen” List
The end of the year is a good time to review the annual “Dirty Dozen” list of common tax-related scams published by the IRS. The agency urges taxpayers to be especially alert to these schemes, both during tax filing season and throughout the year.
Instead of the traditional numbered list it published in prior years, this year the agency offers a longer, general discussion of more than a dozen common scams, which it has organized into four broad categories. (more…)
Dinner’s on Me! Big Changes to Meal and Entertainment Expense Deductions
Players in the real estate industry have long incurred meal and entertainment expenses while conducting business. But in recent years, there’s been some confusion about what’s deductible and what’s not, given that the Tax Cuts and Jobs Act (TCJA) placed some new limits on the meal and expense deduction beginning in 2018. Now the deduction for qualifying meals has temporarily increased to 100%, and some IRS guidance has provided more clarity on the TCJA’s limits.
Capital Gains Tax Issues - 1031 Exchange Variations and Alternatives
One widely used tax strategy among real estate investors is the “like-kind” exchange, often called a 1031 exchange after the Internal Revenue Code section that allows this tax treatment. A 1031 exchange enables taxpayers to defer capital gains taxes when they sell investment or business properties. A proposal to limit such deferrals faces an uncertain future in Congress this year, but even if it is not enacted there are other circumstances that can make a 1031 exchange impractical or inappropriate.
Here is a brief overview of alternative strategies for managing the tax consequences of a property sale. (more…)
Deductible Business Expenses - IRS Issues Guidance on Meals and Entertainment
With so many pandemic-driven changes to tax rules over the past 18 months, it’s easy to have overlooked some revisions. For example, recent changes to the deduction for business-related meal and entertainment (M&E) expenses may have slipped below the radar.
Earlier this year, the IRS issued Notice 2021-25 to provide updated guidance on M&E deductions. While you should always consult with your tax advisor for specific advice, it can be helpful to have a general understanding of what the current limits are and how they came about. (more…)
State Tax Liabilities May Increase for Companies Due to Remote Working Arrangements
By Charlie Shureen, CPA, Senior Tax Manager
In response to the COVID-19 pandemic as well as to the ongoing staffing shortage in many parts of the country, more companies are allowing their employees to work from home. While initially concerned with the technology and communication challenges that remote work presented, companies now are realizing that remote employees residing in other states may pose increased income tax liabilities. (more…)
Use of Delaware Statutory Trusts for 1031 Exchanges
By Jillian Pace, CPA, Tax Manager
ASL Real Estate Group
Real estate investors have long used 1031 exchanges to defer capital gains and other taxes from the sale of “like-kind” properties. In recent years, there have been some issues with typical 1031 exchanges such as finding replacement properties, complying with the required property identification and purchase time requirements, investing all sale proceeds from the exchange, seeking diversification, etc. Real estate investors may want to consider some alternatives to typical 1031 exchanges to help avoid these types of issues. One increasingly popular alternative is the use of Delaware Statutory Trusts. (more…)