video thumbnail usataxhelp

SUB S OWNERSHIP CHANGE

If a shareholder terminates his or her interest in an S corporation during the tax year, the S corporation, with the consent of all affected shareholders (including those whose interest is terminated), may elect to allocate income and expenses, etc., as if the corporation’s tax year consisted of 2 separate tax years, the first of which ends on the date of the shareholders termination.

To make the election, the corporation MUST attach a statement to a timely filed original or amended Form 1120S for the tax year for which the election is made. In the statement the corporation must state that it is electing under section 1377(a)(2) and Regulations section 1.1377-1(b) to treat the tax year as if it consisted of 2 separate tax years. The statement must also explain how the shareholder’s entire interest was terminated (e.g., sale or gift), and state that the corporation and each affected shareholder consent to the corporation making the election. A single statement may be filed for all terminating elections made for the tax year. If the election is made, write “Section 1377(a)(2) Election Made” at the top of each affected shareholders Schedule K-1.  If not filed on the original due date, an extension must be filed or else the actual filing will not be considerd timely.

Exchange - not Sale to defer tax

SUMMARY OF IRS LINK       https://www.irs.gov/uac/like-kind-exchanges-under-irc-code-section-1031

You cannot sell ANYTHING and defer taxes…

You can EXCHANGE (qualified intermediary is hired.. you don’t get your hands on the money)… subsequent property is identified within 45 days… and have a total of six months from sale date to purchase like kind property.

When the exchange is done, if you received boot (money, cars, debt forgiveness in excess of debt assumed), then you are taxed on a part of the boot.

The old rules of selling a primary and reinvesting the proceeds in a home of equal or greater value are gone.

AND, it did not apply to a vacation home anyway, only a primary.

Required Minimum Distributions RMD

HEIR HAZARDS when INHERITING an IRA
 
RMD (Required Minimum Distribtutions) are required when the owner turns 70 1/2 years old.
 
NON-SPOUSE beneficiaries can 'stretch' the regular inherited IRA over their own life expentancy but must start the RMD the year following the death of the owner.
 
While ROTH IRA owners never are required to distribute RMD, NON-SPOUSE beneficiaries must.  Those withdrawls are still tax free.

Accountable vs Unaccountable Vehicle Plans

Two kinds of vehicle plans

ACCOUNTABLE PLAN

Employee hands employer expense report showing X business miles. Employer reimburses X for that amount up to the approved business mileage rate per mile for that year. Done. Employer gets the deduction. Employee is not taxed.

UNACCOUNTABLE PLAN

Employee receives X per month with no accounting to the employer. Employee is taxed on X for both FICA and Income Tax. The legitimate documented business miles is a deduction for the employee in 2017 and prior years (maybe, depended on a lot of things on his/her personal return as to whether they actually received a tax benefit).

BUT new tax law for 2018 does not allow a W2 employee to deduct anything for unreimbursed employee expenses. So, the employee is taxed on the per diem, period. Employer is deducting the per diem because it is a part of the W2. Employee has no deduction and actually pays tax on otherwise legitimate business deduction.

BEST METHOD

ACCOUNTABLE PLAN IS BEST. Employee is not taxed. Employer deducts the ACTUAL expenses with no payroll reporting.

Sub S Basis Reporting 2018 Forward

2018 Form 1040 U.S. Individual Income Tax Returns that have an S Corporation K-1 are required to check a box on line 28 of Schedule E to attach a basis computation.  This applies to corporations reporting a loss, stock disposal, receive a loan repayment or DISTRIBUTION!