We are looking for webinar topics for the upcoming year. Please share your concerns and interest so we can continue to provide targeted continuing professional education. We hope to run at least two webinars per month in 2022, serving up timely information and giving you the CPE credits you need.
We can’t do it without you!
Two ways you can help… 1. Please send any topic ideas to Dave Brown, email@example.com 2. If you know of a good speaker who can address timely information, please let Dave know. (Email is best/quickest), but you can also leave a comment in the box below.)
The Financial Crimes Enforcement Network has come out with proposed rules regarding the reporting of beneficial ownership information (BOI) in response to the Anti-Money Laundering Act of 2020 . These rules apply to domestic reporting companies which are defined as entities created under the laws of the United States or an Indian Tribe, as well as foreign reporting companies. (Reporting Companies).
There are 23 entities exempt from the Reporting Companies classification. These include banks, money transmitting businesses, RIA’s, investment companies, and large corporations. Large corporations are defined as corporations that employee more than 20 full time employees in the US, filed a tax return reporting more that $5 million in gross receipts in the previous year and have a physical office in the US.
Change in beneficial ownership must be reported within 30 days of the change. Beneficial owners include anyone who exercises substantial control over a Reporting Company or owns or controls at least 25% of such company. Failure to report is subject to a $10,000 fine and 2 years jail time.
As you can see this will impact most small businesses and will be a significant reporting burden which will ultimately fall to the CPA. The AICPA, NCCPAP, TACPA and many other organizations are working to minimize the impact of these proposed changes. The AICPA sent a letter to FinCEN on 2/4/22 with recommendations.
The final effective date has not been set. Presumably, the database FinCEN will use to capture the reports is not yet fully operational. It is not known if there will be data sharing between FinCEN and the IRS.
The IRS has just published brand new guidance on the exclusion of $10,200 of Unemployment Compensation.
If your modified adjusted gross income (AGI) is less than $150,000, the American Rescue Plan enacted on March 11, 2021, excludes from income up to $10,200 of unemployment compensation paid in 2020, which means you don’t have to pay tax on unemployment compensation of up to $10,200. If you are married, each spouse receiving unemployment compensation doesn’t have to pay tax on unemployment compensation of up to $10,200. Amounts over $10,200 for each individual are still taxable. If your modified AGI is $150,000 or more, you can’t exclude any unemployment compensation.
The IRS now allows taxpayers to view their Economic Impact Payment amounts online, if any, by using their online account. Online account is an online system that allows taxpayers to securely access their individual account information. Taxpayers can view:
The amount they owe, updated for the current calendar day
Their balance details by year
Their payment history and any scheduled or pending payments
Key information from their most recent tax return
Payment plan details, if they have one
Digital copies of select notices from the IRS, and
Their Economic Impact Payments (EIP 1 and EIP 2), if any
See payment plan options and request a plan via Online Payment Agreement, &
Access their tax records via Get Transcript. The amount of the Economic Impact Payment is needed when calculating the amount of the taxpayer’s Recovery Rebate Credit for 2020.
Warning. Taxpayers must first create an account with the IRS before accessing any information. Tax professionals are not allowed to access or create an account for their tax clients. The taxpayer must create his or her own account and is the only person allowed to access the information, even if the client provided their information to the tax professional to create or access an account, or consented to use their information to create or access the account. Unauthorized use of the online account system is prohibited and subject to criminal and civil penalties.
Rev. Proc. 2021-15 was just issued. It expands the definition of what expenses qualify under IRC Sec.62(a)(2)(D) (ii) for the maximum $250 above line deduction for teachers. Protective items that are, or will be, used by the teacher to aid in preventing the spread of Covid-19 are now qualified expenses. This includes but is not limited to: face masks, disinfectant, soap, gloves, tape, chalk, barriers, air purifiers, etc. The expenses must paid paid or incurred after 3/12/20.
Foreign Bank and Financial Accounts (FBAR) Filing Requirement for Virtual Currency: Virtual currency is a digital representation of value that functions as a unit of account, a store of value, or a medium of exchange. Some virtual currencies have an equivalent value in real currency or act as a substitute for real currency. Generally, a U.S. person who has a financial interest in, or signature or other authority over, any foreign financial accounts, including bank, securities, or other types of financial accounts located in a foreign country, must file an FBAR with the FinCEN if the aggregate value of those foreign financial accounts exceeds $10,000 at any time during the calendar year. Currently, the FBAR regulations do not define a foreign account holding virtual currency as a type of reportable account . However, FinCEN intends to propose to amend the regulations regarding FBARs to include virtual currency as a type of reportable account under 31 CFR 1010.350. FinCEN Notice 2020-2.
Thank you to NCCPAP and Bruce Oberfest, member of the Westchester/Rockland Chapter, for bringing this to our attention.
Recently, Durlene Reed, CPA & TACPA Executive Committee Member was able to attend the virtual meeting of the Texas State Board of Public Accountancy, (TSBPA). She filed the following notes for your information.
Texas State Board of Public Accountancy Committee & Board Meeting Notes for September 16 and 17, 2020
Peer Review Committee – TSCPA was approved to continue to sponsor peer reviews. – There is an exodus of reviewers and participating practices. – The cost to do a review is escalating. – There is a COVID‐19 related backlog. – Team captains are underperforming. – The PROB does not review each PR at the work paper level, but it does read 100% of the reports. – Rule 527 will be discussed at the next meeting. – Because of COVID‐19 the PROB’s contract was extended 120 days instead of 90 days. – Many firms have dropped out of PR by going to preparation of financial statements. The number of such firms will be discussed at the next meeting.
Rules Committee – Rule 507.4 needs clarification. – Limitations on operations after 2 review failures. – There needs to be an arm’s length between the PROB and the PR. – The wording in Rule 505‐20 should be changed from “referral” to “shall oversee”. To discuss this at the next meeting. – Free CPE
Executive Committee – Fee increase will be implemented as adopted last year. – Office relocation should be complete by next month. – In-person swearing in ceremony was cancelled in favor of a virtual one. – TSPBA audit. – Board succession plan to be presented at the November meeting. – Finger print status was updated. The deadline of 08/31/21 may be extended due to the pandemic.
The Tax Cuts and Jobs Act, P.L. 115-97 keeps on giving! Relief for small business! Proposed Regulation 132766-18 was issued in July. It addresses the TCJA changes dealing with who can use the cash basis of accounting for tax purposes.
TCJA simplifies recordkeeping for “small business”. If a business has average annual gross receipts of $25 million or less the cash method of accounting may be used for tax purposes (adjusted for inflation to $26 million for 2019 and 2020) (Sec. 448(c)). Also, uniform capitalization to inventory is not required (Sec. 263A), immaterial inventory can be treated as supplies and materials (Sec. 471 (c)), and the percentage of completion method of accounting for long term construction contracts is not required (Sec. 460(e)).
Average annual gross receipts amount is computed using the gross receipts for the three years preceding the tax year in question. Caution, aggregation rules apply at 50% or more common control. Filing a change in accounting method is required.
Not So Fast!
These benefits are not allowed for “tax shelters”. The definition of tax shelters is broad. It includes any non-C corp entity where more than 35% of losses in any tax year are allocated to owners who do not actively participate in management. This includes syndicates. Care is advised because a change in accounting method may generate a loss causing the entity to be classified as a tax shelter. Once this happens the taxpayer will be locked into the accrual method for five years.
Some things don’t change!
Sec 448(c) provides that qualified personal service corporations, farming businesses, partnerships with no C corp partners, and S corps generally can continue to use the cash method regardless of the gross receipts test as long as they are not “tax shelters”.
Conflicts between code sections have arisen and will require additional clarification.
Wednesday night 6/3/20, the Senate passed House bill HR 7010 which provides relief for PPP loan payback. The 8 week period is extended to 24 weeks. The payroll cost percentage is now 60% as opposed to 75%. Payback period for loan is now 5 years instead of 2. Business may now delay payroll tax payments.
The bill now goes to the President for signature. More to come!