Please note the availability of a new tax form, Form 1040-SR, featuring larger print and a standard deduction chart making it easier for older Americans to read and use. All lines and checkboxes on Form 1040-SR mirror the Form 1040, and both forms use all the same attached schedules and forms. The revised 2019 instructions cover both Forms 1040 and 1040-SR. Taxpayers born before January 2, 1955, have the option to file Form 1040-SR whether they are working, not working or retired. The form allows income reporting from other sources common to seniors including investment income, Social Security and distributions from qualified retirement plans. Moreover, married taxpayers filing a joint return can use the Form 1040-SR regardless of whether one or both spouses are aged 65 or older or retired. Finally, the form can be used to file the 2019 federal income tax returns, which is due April 15, 2020.
Contact Wilson Tax Law Group at 949-397-2292, if need assistance.
Tax Flash- Special Tax Return now Available for Seniors
Reminder to Employers: Deadline for Submission of Wage Statements and Independent Contractor Forms
Contact Wilson Tax Law Group if you require assistance or have questions regarding your legal filing requirements at 949.397-2292.
Take Advantage of Free Tax Return Preparation
Many people with less complex returns can do both their federal and state tax returns for free online through Free File offered either by the IRS or by states that have a similar public-private partnership. Inidivuals whose prior-year adjusted gross income was $69,000 or less can use IRS Free File. Generally, individuals must complete their federal tax return before they can begin their state taxes. More than 20 states also have a state Free File program patterned after federal partnership, which means many taxpayers are eligible for free federal and free state online tax preparation. Moreover, for residents of Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming, IRS Free File may be the only tax product required. Those states do not have an income tax. To take use of Free File:
go to IRS.gov/FreeFile to see all Free File options;
browse each of the 10 offers or use a "look up" tool to find the right product;
select a provider and follow the links to their web page to begin the tax return; and
complete and e-File the tax return only if the taxpayer has all the income and deduction records needed.
Free File partners charge a fee for state tax return preparation unless their offer outlines upfront that the taxpayer can file both federal and state returns for free. Finally, if an individual wishes to use one of the state Free File program products, they can visit their state tax agency’s Free File page.
Of course if you have more complex issues and do not meet the free file requirements you should consult a tax professional to do your tax return. Contact Wilson Tax Law Group if you require assistance with tax filings or issues before the IRS or FTB at 949.397-2292.
New Provisions Provide Some Help to Captive Insurance
Treasury issued new proposed (Reg-112607-19) and final (T.D. 9885) regulations on the base erosion anti-abuse tax (BEAT) on December 12, 2019. The BEAT is a minimum tax on modified taxable income, determined by adding back base erosion payments to US taxable income. The BEAT only applies to "applicable taxpayers" that have an annual average of $500 million or more in gross receipts, calculated over 3 years, and a base erosion percentage of 3 percent (2 percent for certain financial companies) (i.e., the ratio of deductible payments made to non-US related parties' overall deductible payments).
These new provisions provide some helpful news to captive insurance companies. The proposed regulations provide an election to forego deductions in order to stay under the 3 percent base erosion percentage cliff, and the final regulations provide that certain loss payments made on behalf of unrelated underlying insureds are not base erosion payments and are not included in either the numerator or denominator for purposes of calculating a taxpayer's base erosion percentage.
Contact Wilson Tax Law Group at 949-397-2292 if you have IRS or captive insurance tax concerns.
IRS opens 2020 filing season for individual filers on Jan. 27
The Internal Revenue Service confirmed that the nation's tax season will start for individual tax return filers on Monday, January 27, 2020, when the tax agency will begin accepting and processing 2019 tax year returns.
The deadline to file 2019 tax returns and pay any tax owed is Wednesday, April 15, 2020. Remember you can extend the return due date, but not the payment date. More than 150 million individual tax returns for the 2019 tax year are expected to be filed, with the vast majority of those coming before the traditional April tax deadline.
2020 Tax Update - Tax Court strikes down Syndicated Conservation Easement Transaction
In December 2019, the U.S. Tax Court delivered a gift to the IRS and entered its first decision on a syndicated conservation easement transaction. In TOT Property Holdings, LLC v. Commissioner, Docket No. 005600-17, the Tax Court sustained in its entirety the IRS's determination that all tax benefits from a syndicated conservation easement transaction should be denied and that the 40% gross valuation misstatement and negligence penalties applied. The Tax Court found that the transaction failed the legal requirements applicable to donations of land easements and, in imposing the gross valuation misstatement penalty, found that the actual value of the easement donation was less than 10 percent of what was originally reported on the tax return.
"In denying the deductions and upholding the 40% gross valuation misstatement penalty, the Tax Court confirmed that aggressive syndicated easement transactions simply will not survive scrutiny," said IRS Commissioner Chuck Rettig. "We will not stop in our coordinated pursuit of these abusive transactions while seeking the imposition of all available civil penalties and, when appropriate, various criminal options for those involved."
"If you engaged in any questionable syndicated conservation easement transaction, you should immediately consult an independent, competent tax advisor to consider your best available options," Rettig added.
Tax Court trials in four other syndicated easement cases were conducted earlier this year and more than 50 cases are pending. In other recent cases, the Tax Court has rejected arguments that various regulations taxpayers failed to comply with are invalid, essentially negating one of these taxpayers' main defenses.
Anyone considering a conservation easement donation or already involved in one should have the transaction reviewed by an independent tax attorney with experience in this area of law. Contact Joseph P. Wilson at 949-397-2292 or wilson@wilsontaxlaw.com. Mr. Wilson represents clients throughout California and the Globe, involving local, state, federal and international civil tax disputes and tax litigation and criminal tax defense. Mr. Wilson is the Managing Shareholder at Wilson Tax Law Group, APLC, former Member of the Executive Committee of the Taxation Section, California Lawyers’ Association, a former IRS Attorney, a former Assistant United States Attorney, and a former Tax Attorney, California Franchise Tax Board.
Wilson Tax Law Group, APLC is an Orange County law firm specializing in Federal and State tax audits, internal compliance, FBAR, offshore bank account disclosures, and criminal tax, including appeals, trials, and collections. The Los Angeles and San Francisco Daily Journals have named Wilson Tax Law Group, APLC as one of the “Top 20 Boutique Firms in California”.
Newport Beach Main Office
1401 Dove Street Suite 630
Newport Beach, CA 92660
949.397.2292
Yorba Linda Branch Office
18281 Lemon Drive
Yorba Linda, CA 92886
714.463.4430
https://wilsontaxlaw.com
Press Relations
Wilson Tax Law Group, APLC
Newport Beach, California
949-397-2292
Tax Litigation: Tax Court Denies Conservation Easement Deduction
For landowners, donating a conservation easement is a way to protect places they love. It’s also a major financial decision. Done right the tax incentives may offset some of that loss in property value, making conservation a viable option for more landowners. However, done wrong, the IRS may reign down on the transaction to deny the deduction as an abusive tax transaction.
In a recent case, the United States Tax Court ruled a limited liability company (LLC) was not entitled to charitable contribution deduction because the conservation purpose of the easement was not "protected in perpetuity" as required by Code Sec. 170(h)(5)(A). The taxpayer had donated a conservation easement to a qualified charitable organization. The easement deed provided that, if the property were sold following judicial extinguishment of the easement, the donee organization would receive a share of the proceeds, "after the satisfaction of prior claims," determined by a formula.
The easement did not satisfy the requirements of Reg. §1.170A-14(g)(6) because the portion of the proceeds to which the donee was entitled was improperly reduced by amounts paid in satisfaction of prior claims against the taxpayer. Further, the amounts inuring to the taxpayer were attributable to (i) appreciation in the value of improvements existing when the easement was granted; and (ii) the fair market value of any improvements the taxpayer subsequently made to the property, followed.
The taxpayer’s attempted use of a saving clause to reform the deed to comply with the regulation was not valid because the savings clause provided for a future event that altered the tax consequences of a conveyance and was therefore, declined to be enforced by the court. In addition, the taxpayer argued that Reg. §1.170A-14(g)(6) was ambiguous and that the text on which it relied did not constitute an impermissible saving clause but rather set forth a permitted interpretation provision. However, this argument was rejected because the regulation was unambiguous on its face as it plainly required that the charitable grantee be guaranteed to receive its full proportionate share of the sale proceeds, upon a sale following judicial extinguishment of the easement. Therefore, the IRS's motion for partial summary judgment was granted.
While the conservation easement transaction can sometimes be more difficult to attack, highly technically rules exist giving the IRS more ammo to find a reason to disregard and deny the perceived tax benefits.
Anyone considering a conservation easement donation or already involved in one should have the transaction reviewed by an independent tax attorney with experience in this area of law. Contact Joseph P. Wilson at 949-397-2292 or wilson@wilsontaxlaw.com. Mr. Wilson represents clients throughout California and the Globe, involving local, state, federal and international civil tax disputes and tax litigation and criminal tax defense. Mr. Wilson is the Managing Shareholder at Wilson Tax Law Group, APLC, former Member of the Executive Committee of the Taxation Section, California Lawyers’ Association, a former IRS Attorney, a former Assistant United States Attorney, and a former Tax Attorney, California Franchise Tax Board.
Wilson Tax Law Group, APLC is an Orange County law firm specializing in Federal and State tax audits, internal compliance, FBAR, offshore bank account disclosures, and criminal tax, including appeals, trials, and collections. The Los Angeles and San Francisco Daily Journals have named Wilson Tax Law Group, APLC as one of the “Top 20 Boutique Firms in California”.
Newport Beach Main Office
1401 Dove Street Suite 630
Newport Beach, CA 92660
949.397.2292
Yorba Linda Branch Office
18281 Lemon Drive
Yorba Linda, CA 92886
714.463.4430
Press Relations
Wilson Tax Law Group, APLC
Newport Beach, California
949-397-2292