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FinCEN Extends Beneficial Ownership Information Reporting Deadline Following Court Decision
By: In a significant development for tax practitioners and their clients, the Financial Crimes Enforcement Network (FinCEN) has extended the deadline for most reporting companies to file their Beneficial Ownership Information (BOI) reports to January 13, 2025. This extension came shortly after the Fifth Circuit Court of Appeals lifted an injunction that had temporarily suspended the reporting requirement. Key Deadline Changes The revised deadlines reflect FinCEN’s recognition that reporting companies need additional time to comply following the period of legal uncertainty. Here are the updated filing requirements: Pre-2024 Entities Companies created or registered before January 1, 2024, now have until January …
Employment Tax Fraud Case Highlights Critical Compliance Lessons for Business Leaders
A recent employment tax fraud case serves as a stark reminder of the serious consequences business leaders face when failing to properly handle employee trust fund taxes. The case involves John Comeau, CEO of Vivid, Inc., a Campbell, California metal coating services company, who faces up to five years in prison for failing to remit approximately $1.15 million in withheld employment taxes to the IRS over nearly a decade. Sentencing is scheduled for April 30, 2025. Case Overview From 2010 through 2019, Vivid, Inc. properly withheld Social Security, Medicare, and income taxes from employee wages. However, Comeau, who held responsibility …
The Irony of Overturning Chevron: New Challenges for Federal Regulations and Tax Professionals
In a striking turn, the Supreme Court’s June 28, 2024 decision in Loper Bright Enterprises v. Raimondo dismantled Chevron deference, the 40-year precedent that gave federal agencies wide latitude to interpret ambiguous laws. Originally established by a conservative court to support deregulation under President Reagan, overturning Chevron now imposes new limits on agency authority, ironically complicating conservative regulatory goals under the incoming Trump administration. Key Impacts on Federal Regulation State Challenges Amplified:Blue states, such as California and New York, gain a potent tool to challenge federal rules on immigration, healthcare, and environmental deregulation under a Republican-led administration.Conversely, red states have …
IRS Expands Business Tax Account: What Tax Professionals Need to Know
Hurriedly spending its IRA22 money, the IRS is improving how businesses manage their tax information with significant enhancements to the Business Tax Account (BTA). This digital evolution represents a critical step forward in providing more accessible and user-friendly tax management tools for corporations and business owners.Key Expansion HighlightsThe most recent update (FS-2024-31) introduces several important changes:Expanded access for C corporationsIntroduction of Designated Officials (DOs) with full tax account accessNew Income Verification Express Service (IVES)Enhanced digital transcript and payment capabilitiesUnderstanding Corporate Designated OfficialsA Designated Official is not just any corporate employee, but a key executive with specific qualifications. These individuals must:Be …
How to Get Your First Client as a CPA
Starting from the Ground Up So, you’ve started your journey as a new CPA. You’re a new force in the market ready to build your client base, but the proposition of finding your first client can be daunting. Where to begin? Networking? SEO? Do I need to build a website from scratch? Calm down. We’ll walk you through it. Whether you’re fresh out of certification or transitioning from a larger firm to start your own practice, this guide will show you how to get accounting clients. Follow these practical guidelines to ensure that you not only get your first client, …
Corporate Transparency Act Enforcement Blocked — For Now
A federal district court has issued a nationwide injunction against the Corporate Transparency Act (CTA), finding the law “likely unconstitutional.” The ruling in Texas Top Cop Shop, Inc. vs. Garland, filed on December 3, 2024, effectively suspends the beneficial ownership information (BOI) reporting requirements that were set to take effect on January 1, 2025. The court’s order provides immediate relief to reporting companies, halting the enforcement of the CTA and its accompanying regulations pending further judicial review. This preliminary injunction represents a critical moment in the ongoing legal scrutiny of federal regulatory mechanisms, potentially signaling broader implications for corporate disclosure …
California Corner: FTB Secure Email Process Change
By: Effective November 23, 2024, FTB Secure Email users are no longer required to register with the California Franchise Tax Board or log in with a password to open an encrypted email. Instead, the user will have two options to view an encrypted message received from FTB: Sign in to the email account (e.g. Gmail or Yahoo account) to view the message, or: Open the message with a one-time passcode. Please note that any existing email messages received from, and replied to, FTB through FTB Secure Email before the November 23, 2024, update will only be retrievable through December 8, 2024. …
IRS Provides Transition Relief for Third-Party Settlement Organizations
On November 26th, the IRS issued Notice 2024-85, which provides transition relief for third-party settlement organizations (TPSOs) like PayPal, Venmo, and CashApp. The reporting threshold for 2024 will now be $5,000, dropping to $2,500 in 2025 and $600 in 2026 and beyond.Notice 2024-85 also specifies that for calendar year 2024, the IRS will not assert penalties under section 6651 or 6656 for TPSOs that fail to withhold and pay backup withholding tax during that year. The Background of 1099-K Reporting Threshold Changes These new reporting rules were first introduced as a part of the American Rescue Plan Act in 2021 …
California Corner: California’s 15-Day Rule for New Businesses
As we approach the end of the year, it’s a good time to discuss the 15-day rule with your clients. Understanding the 15-day rule and realizing the rule only applies to short taxable years that are 15 days or fewer, is very important for your client’s decision about when to register their business entity with the California Secretary of State.The 15-day rule states that business entities (limited partnerships, limited liability partnerships, limited liability companies, and corporations) with a taxable year of 15 days or fewer are not required to file a tax return or pay the $800 annual/minimum tax, if …
Court Invalidates DOL Overtime Rule Nationwide
On November 15, 2024, the US District Court for the Eastern District of Texas retroactively invalidated a Final Rule from the Department of Labor (DOL) that had increased the minimum salary threshold for certain employees to be considered exempt from overtime pay under the Fair Labor Standards Act (FLSA). The rule was originally effective on July 1, 2024. An earlier ruling applied only to the State of Texas, but this decision affects all employers nationwide. The final rule provided staged increases to the standard salary level necessary for exemption from overtime pay for executive, administrative, and professional (EAP) employees. The …
Ideas & Price Tags: A Closer Look at President-Elect Trump’s Tax Reform Promises
As the nation heads into a period of political transition, many clients have questions about what potential tax reforms may mean for them and their finances. For this reason, Sharon Kreider, CPA, Western CPE’s Resident Tax Authority, has written a client letter that you can pass on to your clients as a trusted advisor to cut through the misinformation and keep them informed and assured. The letter is meant to be politically neutral and fact-based. Please read the letter carefully to make sure that you agree with the summary, the language, and tone, then modify it as required for your client …
DEA Considers Reclassification of Marijuana: A Potential Shift in Federal Tax Policy
By: In a move that could significantly alter the landscape of cannabis regulation in the United States, the Drug Enforcement Administration is set to hold a public hearing on the potential rescheduling of medical marijuana from a Schedule I to a Schedule III controlled substance. This development marks a pivotal moment in the ongoing debate surrounding medical marijuana’s legal status and its implications for the medical marijuana industry, law enforcement, and taxes.The proposed rescheduling of marijuana does not apply to recreational marijuana, only to medical marijuana. The Hearing: Date, Time, and Place The DEA has scheduled the public hearing for December …
Acqis Technology Inc. v. Comm., TCM 2024-21
Debit Cash, Credit Equity or Income? Settlements from Patent Infringement Lawsuits are Income (Acqis Technology Inc. v. Comm., TCM 2024-21) Acqis Technology’s business model was to acquire patents and engage law firms on a contingency basis to sue for patent infringement and failure to pay royalties. Defendants in some of the lawsuits entered into settlements that included licensing agreements and share purchase agreements (SPAs). The licensing agreements were generally free of additional costs to the defendants. Acqis sold Settlement Shares to the defendants. The Settlement Shares had limited dividend and distribution rights, limited liquidation rights, were nonvoting, and could not …
Growmark Inc. v. Comm., 160 T.C. No. 11 (May 16, 2023)
COGS Includes Net Amount of Excise Tax After Credit (Growmark Inc. v. Comm., 160 T.C. No. 11 (May 16, 2023)) Growmark incurs liabilities for excise taxes on fuels that it sells and is entitled to federal tax credits for some of the fuels that it produces or blends. Growmark claimed that it should be allowed to include the gross federal excise tax liability in its cost of goods sold before reducing the amount for any federal tax credits.Excise taxes are generally not deductible. (Treas. Reg. §1.164-2(f)) However, excise taxes incurred or paid in a trade or business as part of …
Betty Amos v. Comm., 11th Cir., No. 23-10532 Non-Argument Calendar (April 2, 2024)
No NOL means No NOL. (Betty Amos v. Comm., 11th Cir., No. 23-10532 Non-Argument Calendar (April 2, 2024)) Betty Amos appealed a Tax Court decision denying NOL carryforwards claimed in tax years her 2014 and 2015 and negligence penalties assessed for failing to provide documentation to substantiate the NOL deductions.In 2018, Amos received a notice of deficiency including penalties for tax years 2014 and 2015, disallowing NOL carryforward deductions of $4,220,639 and $4,149,326, respectively, on the grounds that the losses originating in tax years 1999 and 2000 were overstated and not available to be carried over. Tax returns filed for …
Cassandra Tucker and Edward Brodie v. Comm., T.C. Memo 2023-87
COGS is Not a Deduction, Some Expenses Allowed (Cassandra Tucker and Edward Brodie v. Comm., T.C. Memo 2023-87) Cassandra Tucker operated a fashion activity out of her home for many years. During 2015 and 2017 the activity generated gross sales of $1,542 and $1,498, respectively. Claimed cost of goods sold for each of the years were $6,510 and $8,086. To substantiate these amounts, Tucker provided a spreadsheet showing purchases in 2015 of fabric, packaging materials, including “bags, tissue, ribbon and boxes” along with other items. For 2017, the COGS spreadsheet showed purchases of “lifestyle flooring” and “lifestyle closet” totaling $9,003.Through …
Joseph and Louise Speizio v. Comm., TCM 2024-64
It’s Not About the NOL (Joseph and Louise Speizio v. Comm., TCM 2024-64) Joseph and Louise Speizio claimed expenses in 2017 that generated a net operating loss based on pension liabilities acquired in a business taken over by the taxpayer but not paid until 2018 or later. The taxpayer took over a sanitation business that had outstanding pension liabilities due to the local union. Through litigation and bankruptcy, the taxpayer became liable for the debt and was later relieved of the liability. In a bankruptcy proceeding, the pension liabilities were eventually settled and paid in 2019.In general, §404(a)(1)(A) allows a …
Anthony J.A. Bryan Jr v. Comm., T.C. Memo 2023-74
IRS Disallows NOLs by Reaching Back to Prior-Year K-1s (Anthony J.A. Bryan Jr v. Comm., T.C. Memo 2023-74) In 2007, Bryan gave a Watley Group, LLC (taxed as a partnership) a purported promissory note for $2.7 million with a single balloon payment due on or before Dec. 31, 2030 and interest accruing at 4.75%. The note was neither secured nor collateralized to any assets. Watley filed Forms 1065 for years 2008- 2011 without showing the $2.7 million note on the balance sheet. Watley gave Pool Boy the Movie, LLC (another tax partnership) a promissory note in the amount of $2.7 …
Edgardo Villanueva v. Comm., TCM 2022-27
“Concise Statement” Required for NOL Deduction (Edgardo Villanueva v. Comm., TCM 2022-27) Edgardo Villanueva reported a loss of $112,375 on Form 4797, Sales of Business Property, attached to his 2013 return, from the disposition of a condominium. He reported the date of loss as Aug. 5, 2013, although the condominium went through foreclosure in May 2009 and Villanueva lost possession of the condominium at that time. The Court determined that because Villanueva sustained the loss in 2009 when the foreclosure occurred, the deduction, if allowable, would have been for 2009. Villanueva was not permitted to carry forward any portion of that …
Edward & Ellen Berman v. Comm., 163 T.C. No. 1
Taxpayers Trigger Deferred Gain on Stock Sold to ESOP, But Installment Sale Works (Edward & Ellen Berman v. Comm., 163 T.C. No. 1 (July 16, 2024)) In 2002, Edward and Ellen Berman each sold stock to an ESOP for $4,150,000 in which they had bases of $27,428, thereby realizing a gain of $4,122,572 each. As payment, each received a $4,150,000 promissory note, on which a first payment of $449,277 was made in 2003. They made valid elections under §1042 on their 2002 federal income tax returns to defer recognition of the gain each realized for 2002. Effecting that deferral required …