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Maribel Gonzalez v. Comm., TCS 2022-13
Clothing Business Schedule C Expenses Including Travel & Auto Allowed (Maribel Gonzalez v. Comm., TCS 2022-13) Maribel Gonzalez started a clothing design business in Los Angeles as a wholesaler, designing children’s clothing, and hired a patternmaker in Los Angeles. Ms. Gonzales lived and worked in Palo Alto. She drove from Palo Alto to Los Angeles approximately every other weekend to review the patternmaker’s work and deliver supplies. While her records were limited, she did have an excel spreadsheet travel log, indicating the purpose of the travel and estimating the costs of the travel. She also had car maintenance receipts substantiating …
Joseph William Sherman v. Comm., TCM 2023-63
ER Doctor’s Film and Music Activity Not Engaged in for Profit (Joseph William Sherman v. Comm., TCM 2023-63) “Doctor, doctor, please. Oh, the mess I’m in.” UFO got it right in this case. Joseph Sherman was an emergency room doctor with a side hustle “film production company that combines music and film.” In addition to working about 120 hours per month as a physician, Dr. Sherman “guesstimated” that he also spent 200 to 300 hours per month on his activity – Songswell. For 2015, Songswell generated no revenue and reported $104,758 in expenses. He was unable to produce anything other …
Leslyn Jo Carson & Craig Carson, Docket 23086-21S (March 22, 2023)
IRS Misinterpreted Activity – A Farm is Not a Rodeo (Leslyn Jo Carson & Craig Carson, Docket 23086-21S (March 22, 2023)) The Carsons deducted losses for several years on a Schedule F “livestock” activity. In 2017, Schedule F reported gross income of $2,741 in rodeo competition winnings and total expenses of $128,990. In 2018 Schedule F reported gross income of $8,063 ($1,867 compensation for the Carsons’ children’s labor and $6,196 in rodeo competition winnings) and total expenses of $133,929. The IRS proposed to treat the Schedule F activity as not engaged in for profit.Leslyn Jo Carson’s mother owned a ranch …
Robert Dean Mazotti and Debra Lea Jones-Mazotti v. Comm., TCM 2024-75
One and Two-Page Books do not an Author Make (Robert Dean Mazotti and Debra Lea Jones-Mazotti v. Comm., TCM 2024-75) Debra Jones-Mazotti claimed to be a for-profit writer-researcher. The IRS classified her activity as not for profit in tax years 2018, 2019, and 2020. She had been claiming expenses as a writer-researcher for three decades before recording a profitable year in 2022. She traveled for her writing to California, Florida, and Hawaii. Her husband or daughter generally traveled with her. Trips to California and Disney World (Florida) were purportedly research on a family trivia game she wanted to write. On …
Gary M. Schwarz & Marlee Schwarz v. Comm., TCM 2024-55
Millions in Revenue plus Millions in Losses Equals a Hobby (Gary M. Schwarz & Marlee Schwarz v. Comm., TCM 2024-55) Gary and Marlee Schwarz had been involved in real estate activities in South Texas, primarily focusing on ranch land development. Gary developed a “love of deer” growing up when visiting his grandparents’ ranch observing deer and other wildlife. He studied deer and ranch management, learning that deer in Canada and the Midwest were more plentiful and larger than in South Texas. He developed a system that would mimic the feeding and crop growing techniques of those areas to produce deer …
Michael Johnson, et al., 160 TC No. 2 (Jan. 25, 2023)
EECB Deduction Allowed (Michael Johnson, et al., 160 TC No. 2 (Jan. 25, 2023)) Michael Johnston, et al, in this consolidated case are shareholders in an S corporation, Edwards Engineering (Edwards). Edwards was hired by a Veterans Administration hospital to supply and install components of the federal building’s HVAC system. Edwards analyzed existing technical programming specifications, modified them as necessary, and then programmed the modified specifications into new, installed components. Upon Edwards’ request, the VA building’s chief maintenance officer signed a letter that agreed, pursuant to §179D(d)(4), to allocate to Edwards the full amount of the §179D deduction to which …
Donald E. Swanson v. Comm., TCM 2023-81
Fishing Charter Failed to Land Profit Motive Determination (Donald E. Swanson v. Comm., TCM 2023-81) Donald Swanson was an avid fisherman, favoring Alaska for more than 30 years. After retiring in 2010 from two onshore jobs (loading cargo and driving a city bus), he established Happy Jack Charters and acquired a halibut boat. For the years in this case (2015 and 2016), the IRS asserted that the charter fishing activity was not engaged in for profit.From 2010 through 2016 he never showed a profit, racking more than $130,000 in losses. He relied upon Square to track his income, did not …
Yes, IRS Direct File Still Exists — For Now
The IRS’s Direct File program is still here, despite some confusion on social media.On Monday, Elon Musk posted on X that he had “deleted” 18F, a digital services agency within the General Services Administration. 18F helps other government agencies build, buy, and share technology resources—including the IRS Direct File Program.While Musk’s digital declaration has invited speculation about the future of Direct File, the IRS is currently accepting returns through Direct File. As of Thursday, the 18F website is still live, but its X account has been deleted.During his January confirmation hearing, Treasury Secretary Scott Bessent was clear about his intentions …
IRS & State of California Fires Tax Relief – California Los Angeles County Fire & Wind Disaster January 2025
By: Federal Notices: CA-2025-01 & IR-2025-10IRS notices CA-2025-01 and IR-2025-10, issued January 10th, announced California residents of Los Angeles County, identified by FEMA as a “federally declared disaster area” due to the recent fires and wind conditions now have until October 15, 2025, to file and pay various federal individual and business tax returns and payments.This tax relief postpones until October 15, 2025, several tax filing and payment deadlines beginning on January 7, 2025, and eliminates any penalties or interest for payments made by the new deadline, October 15, 2025. See the exception below for payroll tax forms W-2 and W-3 …
Federal Disaster Relief Act Makes Big Changes to Casualty Loss Deduction: Key Provisions for Tax Practitioners
By: The Federal Disaster Relief Act of 2023 (enacted December 12, 2024) introduces significant modifications to disaster-related tax provisions that practitioners should consider when advising clients affected by qualified disasters. This analysis covers key provisions and implementation considerations for tax professionals. Effective Dates and Qualification Criteria The Act’s general provisions apply to presidentially declared disasters from January 1, 2020, through February 11, 2025 (60 days post-enactment). However, practitioners should note the special carve-out for California wildfire disasters, which extends retroactively to December 31, 2014. Modified Casualty Loss Treatment The Act fundamentally alters the traditional casualty loss framework for qualified disasters. Key …
BOI Reporting Remains Voluntary: A Tale of Two Injunctions
FinCEN announced Friday morning that beneficial ownership information (BOI) reporting requirements remain voluntary, despite Thursday’s Supreme Court decision that might have suggested otherwise. The situation stems from two separate nationwide injunctions: while the Supreme Court lifted one (Texas Top Cop Shop v. Garland), another (Samantha Smith and Robert Means v. U.S. Department of the Treasury) remains in effect, creating an interesting regulatory scenario where compliance is optional but increasingly inevitable. Implementation Timeline for the Corporate Transparency Act Congress passed the Corporate Transparency Act (CTA) in 2021 as part of an anti-money-laundering initiative. FinCEN initially set a January 1, 2025 deadline …
2025 LA Firestorm: Governor Announces Property Tax Relief
Tax professionals serving Los Angeles County have two significant relief measures to discuss with clients affected by the recent firestorms, following Governor Newsom’s January 16, 2025 executive order.Property owners in designated areas now have automatic extensions for property tax payments. Property taxes due April 10, 2025 and December 10, 2025, are now due April 10, 2026.For clients who had their property damaged or destroyed, the disaster reassessment program can provide immediate reductions to property tax assessments. While the postponement of payments to April 10, 2026 is good, it’s even better if the amounts due in 2026 are reduced. Automatic Extension …
IRS Commissioner Danny Werfel Resigns
IRS Commissioner Danny Werfel has stepped down from his position following a resignation letter sent to IRS employees on Friday, January 17. “After significant introspection and consultation with others, I’ve determined the best way to support a successful transition is to depart the IRS on January 20, 2025,” he wrote.Werfel was appointed as IRS Commissioner in 2023, and his term was set to end in late 2027. IRS Commissioners typically serve 5-year terms that span presidential transitions. However, in December President Trump announced plans to nominate former Missouri congressman Billy Long to the position of IRS commissioner.”While I had always …
The Best CPE for CPAs in 2025
With so many CPE options around, it can be difficult to tell which courses are helpful, and which ones are just going to take your money. When it comes to the best CPE for CPAs, we aim to provide options that are both effective and trustworthy. We understand that, as a CPA, your time is valuable, and you want to make sure you’re getting the right information from reputable sources. You owe it to yourself and your clients to get the best education from trusted instructors with years of experience. That’s why we’ve compiled a list of the best CPE …
LA County Tax Preparers Can Get Relief For Their Out-Of-Area Clients
If you are a tax preparer located in a federally designated disaster area, your clients can be considered as “affected” by the disaster. See FAQs for Disaster Victims posted on the IRS website. Here are two IRS answers that may help you get through the 2025 tax season especially if you, your family, friends, or clients are personally suffering through the CA Wildfires (or Milton or Helene or the many other disasters in the news.)Comment: All of the FAQs are important to you and your clients. You need to make time to review them all. Affected taxpayers: FAQ Q1 Disaster relief …
Treasury Proposes Key Changes to Circular 230
The Treasury Department has proposed the first major updates to Circular 230 since 2014. The comment period ends February 24, 2025, with a public hearing scheduled for March 6, 2025. Yes, in the peak of tax season. The Notice of Proposed Rulemaking can be accessed here. Major Changes Affecting Tax Preparers Tax Return Preparation Standards Following the Loving v. IRS decision, the proposed regulations eliminate provisions related to registered tax return preparers. The standards have been revised to apply only to tax returns prepared, approved, or submitted in connection with representing a client in a matter before the IRS. The …
Tax Relief for California Wildfire Victims: What Tax Professionals Need to Know
The IRS has announced significant tax relief measures for victims of the January 2025 California wildfires and straight-line winds, primarily affecting Los Angeles County. Here’s what tax professionals need to know to serve their affected clients. Scope of Relief The relief applies to any area designated by FEMA under declaration number 4856-DR. While currently limited to Los Angeles County, practitioners should monitor IRS.gov’s disaster situations page for potential additions to the covered areas. Key Deadline Extensions The IRS has established October 15, 2025, as a universal deadline for various filings and payments originally due between January 7 and October 15, …
How to Survive the 2025 Tax Season
Feeling the Seasonal Stress? Tax season is here. The long hours, endless client questions, threads on threads of email chains, and looming deadlines can feel overwhelming. But here’s the truth: while the period between January and April will always be demanding, it doesn’t have to consume your life. You have more control than you think! You can make this tax season different, maintaining both your wellbeing and the quality of your work. Setting Your own Expectations Every tax season the desire to do the best for each client is noble and necessary in the tax profession. It’s a sign that …
Disaster Relief – Federal Law Now Conforms to California Law for Certain Settlements
By: In an effort to ensure California wildfire victims achieve maximum tax relief, in 2022 and 2023 the state enacted legislation that excludes from taxable income settlement proceeds received by these taxpayers. Specifically, California allows an exclusion from gross income for:Settlement payments received from the Fire Victims Trust,Settlement payments received from Southern California Edison for claims relating to the 2017 Thomas Fire or the 2018 Woolsey Fire, andSettlement payments received from Pacific Gas and Electric Company for claims relating to the 2019 Kinkaid Fire or 2020 Zogg Fire.Now, effective December 12, 2024, federal law also excludes these payments from taxable income. …
IRS Recovered $4.7 Billion in 2024 via New Initiatives
You may have missed it during the buzz of the holiday season, but the IRS has released its latest update to the Strategic Operating Plan. The annual update reports that in 2024 the IRS recovered $4.7 billion through new initiatives in three areas:$1.3 billion collected from wealthy individuals who either failed to pay their tax debts or submit tax returns$2.9 billion recovered through IRS Criminal Investigation efforts targeting tax fraud, financial crimes, drug trafficking, cybercrime, and terrorist financing$475 million obtained from civil and criminal cases that originated from whistleblower tips A Renewed Focus on High-Income Non-Filers The IRS has attempted …