Summary of Questions with Answers Received During the 2022 Fall Seminars

Please refer to the November 2022 Newsletter for the first portion of the Q & A. 

Q1:

How do other professionals handle privacy papers for tax prep?  We have 3 sheets where we require a signature from the client. What do others require regarding signatures?

1. Gramm-leach Bliley privacy act notice.
2. Taxpayer statement stating they received a copy and they have provided all the information; they have adequate records, and everything has been reported.
3. Our duties as a tax preparer which includes our fees, how long they should keep their records, e-filing and they have received a copy of their return.

Do you have them sign just one time for all 6 pages or sign their name on each page?  Do you have both spouses sign?

• All you have mentioned is good. I can only speak concerning our firm. We have the information you noted, but we have a couple other forms we request they sign. All documents are signed separately, so they have to sign multiple times. At this time, we only ask that one spouse signs.
• We have a bank verification form if they want direct deposit. The clients verify that this is their valid bank account for the direct deposit. It includes the bank name, routing number and account number.
• The other document concerns Cryptocurrency. We ask the basic question as stated on the Form 1040 concerning Cryptocurrency: At any time during 2022, did you: (a) receive (as a reward, award, or payment for property or services); or (b) sell, exchange, gift, or otherwise dispose of a digital asset (or a financial interest in a digital asset)?

Q2:

We have a client who is a United States citizen but works 12 months of the year in England.  He is self-employed in England. Is the income he earned in England subject to self-employment tax in the US?

• S. Citizens are taxed on worldwide income. The income would be fully taxable once converted to U.S. dollars if they are paid in British Pounds. If they are a self-employed U.S. citizen or resident, the rules for paying self-employment tax are generally the same whether you are living in the United States or abroad. The self-employment tax is a social security and Medicare tax on net earnings from self-employment.
• You must take all the self-employment income into account in figuring net earnings from self-employment, even if all, or a portion of, gross receipts were excluded from income because of the foreign earned income exclusion.

Example:

• You are in business abroad as a consultant and qualify for the foreign earned income exclusion. Your foreign earned income is $95,000, your business deductions total $27,000, and your net profit is $68,000. You must pay self-employment tax on all the net profit, including any amount excluded from income.

Q3:

If a client opens a new business in Ohio and registers with the Secretary of State, is the client responsible for registering with the Feds as well?

• I am not sure of the type of business entity you are selecting, but when applying for a employer identification number (EIN), if needed, is generally all IRS needs when starting a new business. Note not all new business need an EIN. Under the Corporate Transparency Act, once the databases are completed it will connect to all state agencies that deal with business filings and registrations.
• Do not forget filing obligations for the state where the business is located.

Q4:

Larry, can you provide the name and contact info for the service you mentioned in reaching out to the Service by phone?

• CALLENQ

Q5:

Deceased client was discovered to be victim of scam of $100,000 of retirement distributions.  Theft loss deductions gone for 2021 is there any recourse for deduction?

• The COVID emergency does not allow the theft loss. I know of no “deduction” currently available for this issue. Our office did present our concern with a letter to Senator Charles Grassley, as scams are still ongoing. The Tax Cuts and Jobs Act suspended disaster and theft losses through 2025.

Q6:

Does it look like student loan cancellation will be taxable on the state return?

• This is an evolving issue. Based on what I could find online the following states of:

Arkansas, Indiana, Minnesota, Mississippi, North Carolina, and Wisconsin may tax this issue.

Once the debt is forgiven, please contact your state on the tax situation.

Q7:

When taking substantially equal periodic payments from a retirement account/plan, can you switch one time from RMD to amortization?

No, see the discussion below.  IRS Notice 2022-6 January 18, 2022.

The RMD method is the easiest to calculate but generally provides the smallest annual payout among the three approved methods. Once selected, you cannot change to one of the other two methods.

Methods:

Required Minimum Distribution (RMD) Method – Payments are calculated in the same manner as lifetime RMDs; thus, payments fluctuate from year to year. This method requires an account owner to use one of the tables provided by the IRS, which include “Single Life Expectancy,” “Uniform Life Expectancy,” and “Joint Life and Last Survivor Expectancy” tables. Payments fluctuate yearly since distributions are recalculated annually using updated life expectancy factors and account values. The RMD method is the easiest to calculate but generally provides the smallest annual payout among the three approved methods. Once selected, you cannot change to one of the other two methods.

2. Amortization Method – Unlike the RMD method, § 72(t) payments determine using the amortization or annuitization methods remain the same annually. Payments made using the amortization method are determined by amortizing an individual’s balance over several years (based on their life expectancy using an IRS approved table) and a “reasonable” interest rate.
3. Annuity Method – This method is like the amortization method in that it uses an interest rate and life expectancy, but it also introduces a mortality table prescribed by regulations to pay out the IRA account as if it were an annuity. Like the amortization method, the annual payout is fixed at the time distributions commence and does not vary from year to year.

Payments are calculated by dividing the account balance by an annuity factor beginning at the individual’s age and continuing for the life of the individual. The annuity factor is derived using mortality rates set forth in Treas. Reg. § 1.401(a)(9)-9(e) of the Income Tax Regulations and a reasonable interest rate. Under this method (like the amortization method,) payments remain fixed, and you can switch to the RMD method after the first year.

Once selected, an individual can make a one-time switch from the amortization or annuitization method and change to the RMD method. In other words, an individual who begins their § 72(t) payment schedule using either the amortization or annuitization method can make a one-time switch to the RMD method. However, there is no possibility to revert back to their original method) for the remainder of the § 72(t) schedule.

Q8:

Did you write the Virtual Tax Book?  I’ve got the 2020 book.  Does the newer book have significant changes?

• Amy’s answer: Actually, yes, there’s a 2022 version…there are indeed changes and I have even been thinking about a 2023 book since SO MUCH has changed since that last book! I just contacted my layout person and committed to writing a 2023 version, which will be a SERIOUS update, so wait and buy that one, not the 2022.

Q9:

What if you have a roof replaced due to hail damage which is only partially damaged?

• If they put a whole new roof on it should be capitalized.

Q10:

Since crypto value changes on a real time basis at what point is the valuation established when making a payment, when purchased or when paid?

• Taxpayers must report their virtual currency transactions in U.S. dollars. Thus, in order to calculate gross income, gain, loss, or basis for virtual currency transactions, taxpayers must determine the fair market value of virtual currency in U.S. dollars as of the date of payment with or receipt of the virtual currency.
• It is relatively easy to determine the fair market value for popular virtual currencies, such as bitcoin, ethereum or litecoin, because they are generally listed on an exchange, and the exchange rate is established by market supply and demand. The client can simply convert the virtual currency into U.S. dollars at the exchange rate, as of the date of the virtual currency transaction, in a reasonable manner that is consistently applied. If the virtual currency is converted into a different real currency, then that amount must also be converted into U.S dollars.

The interest then becomes the basis for selling that crypto, correct?

• If the interest is reported as income, only then will it be considered as part of basis upon sale.

Q11:

Is the Form 8300 requirement for receipts of crypto effective for transactions starting 1/1/23?

• Starting January 1, 2023, a crypto transaction may trigger a Form 8300 filing when any “person” (including an individual, company, corporation, partnership, association, trust or estate) receives digital assets in the course of a trade or business with a value exceeding $10,000. Valuation is done on the day of receipt, and as with all things crypto, valuation matters a lot. Again, structuring transactions into smaller receipts to avoid reporting is a felony. And since receipts must be aggregated if they are related in a series of connected transactions, virtually any receipt of digital assets is potentially reportable, regardless of dollar value.
• § 6050I requires trades or businesses receiving more than $10,000 in cash in one transaction or in two or more related transactions to file Form 8300. § 80603 of the IIJA amends § 6050I(d) to expand Form 8300 reporting requirements to include digital asset transactions.  Under the new rules, for example, if an individual purchases a single nonfungible token (NFT) directly from an artist for $15,000 in bitcoin, the seller will be required to file Form 8300 within 15 days to report the receipt of the cryptocurrency.  To accurately complete Form 8300, the seller will be required to gather information such as the purchaser’s name, taxpayer identification number, birth date and address.
• For purposes of the $10,000 threshold, all transactions between the parties that occur within a 24-hour period will be considered related transactions. In addition, transactions between the parties that occur within a 12-month period will be considered related transactions to the extent they are part of a connected series of transactions (i.e., the same sale broken into multiple transactions).
• Failure to comply with the rules under § 6050I(d) carries the risk of substantial penalties. Negligent failure to file Form 8300 may result in penalties of up to $280 for each occurrence, which may not exceed a maximum of $3,302,000 per calendar year.  Intentional or willful failure to disclose a covered transaction under § 6050I(d) may result in both civil and criminal penalties, as well as felony prosecution.  Intentionally disregarding Form 8300 reporting may result in civil penalties equal to the cash value received in the transaction, which applies to each intentional failure to comply.  Intentionally disregarding the reporting requirements also carries potential criminal penalties of $25,000 for individuals and $100,000 for corporations, and/or five years in prison.
• There are also penalties for individuals and corporations who cause or attempt to cause a trade or business to fail to file a required report, cause a trade or business to file a required report containing a material omission or misstatement of fact, or attempt to structure transactions in a way to avoid the reporting requirements of § 6050I(d). These violations may be subject to criminal penalties up to $100,000 for individuals and $500,000 for corporations and/or three years in prison.

Q12:

When re-purposing the building, do you continue to depreciate the old building use, or do you add the leftover depreciation to the new basis?

• You continue to depreciate.

Q13:

With regards to the Employee Retention Credit, should you amend the past returns or claim the income in the current year?

• You will need to amend but be very careful if you are using an outside consultant. The IRS is gearing up to challenge ERC claims that are not in compliance with the law.

Q14:

Does the RMD chart on page 84 NOT apply to IRA’s since they are not ‘qualified plans’?

• Applies to IRA’s and qualified plans.

Q15:

How many years do we have to retain printed client tax returns?

• Must not fail to maintain a copy of any tax return prepared for a customer for four years from the later of the due date of the return or the completion date of the return.

Q16:

What is the best way to get the FMV for inherited items you want to sell years later?

• The basis of property inherited from a decedent is generally: The fair market value (FMV) of the property on the date of the decedent’s death (whether or not the executor of the estate files an estate tax return (Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return)). FMV shall be the higher of the cost of acquisition of the property or the price that the property shall ordinarily sell for if sold in the open market. There is no fixed formula to calculate FMV of a property.
• Once you determine the FMV at death – this will be important when determining any gain or loss on the property you are selling.
• If selling inherited assets use online vendors to search for the item. Input the item into a search engine and generally you will get several hits. Be careful in valuing due to the condition of the assets. If in poor condition, the asset will not bring as much in a sale.
• Property values can also be determined by probate records and county records in some cases.

Q17:

We have heard locally from wind turbine operators that some of the Federal Renewable credits may be “Transferrable”.  Have you guys heard anything about this?

I mean transferrable similar to Iowa’s Wind Tax Credits under § 476C where they could be transferred or sold to outside individuals/businesses.

• I was able to find this new information but am not sure it addresses the question. I would advise we wait for further guidance.
• The Inflation Reduction Act (IRA) extends the § 45 PTC to wind projects that begin construction before the end of 2024. This three-year extension to the Production Tax Credit (PTC) for wind projects comes with other qualification requirements not previously included under § 45. The wind industry will need to adapt and accommodate these new PTC qualification requirements. The PTC for wind projects is further extended through at least 2033 under a new § 45Y. This credit applies to, Wind facilities, closed- and open-loop biomass facilities, landfill gas facilities, trash facilities, and qualifying hydropower, marine, and hydrokinetic facilities that begin construction before January 1, 2025.
• The IRA eliminates the PTC phaseout for any wind project placed in service after Dec. 31, 2021; however, the current PTC phaseout would continue to apply for any wind project placed in service before Jan. 1, 2022. Accordingly, wind projects placed in service after Dec. 31, 2021, are eligible to receive tax credits at full value, rather than the reduced values under the old law.
• The IRA added a provision to permit project owners (other than tax-exempt entities) to make an election to transfer the PTC or the ITC to a third party.
• The amount the third party paid for the tax credit must be in cash, is not included in the gross income of the transferee and is not deductible to the transferor. An election to transfer the tax credits must be made on or before the due date for the tax return in the year the credits were determined, so credits that are carried forward cannot be later transferred. Also, once a credit is transferred, the credit cannot be further transferred by the transferee.
• The election to transfer PTCs to a third party applies to credits determined after 2022, regardless of when the wind project was placed in service. This means operating wind farms with remaining years of PTC eligibility could take advantage of the PTC transfer rules for operating years 2023 and later.
• These direct transfer rules likely will have a significant impact on wind project financing, as sponsors might elect to simply monetize the PTC each year rather than bringing in tax equity partners. The simplified transfer rules could avoid cumbersome governance and ongoing compliance matters that affect operating wind farms. However, the tax credit market may seek indemnities from sponsors and parent guaranties related to the tax credits’ original determination and qualification. This could have a separating effect in a tax credit market between creditworthy sponsors and the rest of the industry. Expect tax insurance to play a large role in the new tax credit transfer market.

Q18:

A farmer uses a cheaper old truck for a lot of farm work/travel.   Since part of mileage is allocated to depreciation could there ever be an issue where the deemed depreciation exceeds the value of the asset if the truck were ever to be sold and how would the recapture of that deemed depreciation in excess of purchase price be handled?

• Basis cannot be reduced below 0. It is not our belief that that would impair the client’s ability to deduct the full standard mileage rate.

Q19:

Do we have to file any form or election with the IRS to do the swap to RMD payments?  Change of method, etc.?

• We are unaware of a form currently.

Q20:

To utilize the larger de minimis amounts there needs to be certain things in writing ahead of time, right?  Otherwise, you are capped at lower amounts, correct??

Or has that requirement gone away?

For some reason I was thinking it also had a written policy portion required.

• You need to have an Applicable Financial Statement (AFS) to use the $5000 de minimis.
• Whether you can use $5000 or $2500 is determined whether you have an AFS or not.
• When the rules came out there was more of an emphasis on a written policy-if you did not have a written policy to write off expenses maybe you could not do it. At our firm we encouraged all clients to adopt a policy. You need to make sure if you write off for taxes you must have written off for book purposes. Review Notice 2015-82.

Q21:

Would simply re-grading be allowed to be capitalized or would it actually be forced to be increased basis in the land itself and not allowed as a deduction?

• Definitely, added to the basis of the land.

Q22:

Are a Non-Fungible Token (NFT) going to fall under the “Digital Asset” category?

• Yes. An NFT is a type of tradeable digital asset stored on a blockchain. These digital assets can be bought, sold, and traded between cryptocurrency wallets.

Q23:

• If the interest paid on the Crypto paid out as Fiat, why is it not reported as Interest on a 1099-B like it would be for an investment account that earns interest?
• Generally, crypto-related interest and staking rewards should be reported as ‘Other Income’ on Schedule 1. If you sold or disposed of any of the cryptocurrency interest rewards you received, you can report your capital gain or loss on Form 8949.

Form 1099-MISC is used to report certain payments you receive from a business other than nonemployee compensation. You may receive one or more 1099-MISC forms reporting payments made to you during the year.

Form 1099-MISC is often used to report income the client earned from participating in crypto activities like staking, earning rewards or even as a promotional incentive from a broker or crypto exchange.

Even if you do not receive a 1099-MISC from the entity which provided you a payment, you still need to report this income on your tax return.

How do I report my cryptocurrency trading on my taxes?

As this asset class has grown in acceptance, many platforms and exchanges have made it easier to report your cryptocurrency transactions.

You might receive Form 1099-B from your trading platform for capital asset transactions including those from crypto. Regardless of whether or not you received a 1099-B form, you generally need to enter the information from the sale or exchange of all assets on Schedule D. You can use Form 8949 if you need to provide additional information for, or make adjustments to, the transactions that were reported on your 1099-B forms. You will also need to use Form 8949 to report capital transactions that were not reported to you on 1099-B forms. If more convenient, you can report all of your transactions on Form 8949 even if they do not need to be adjusted. Sometimes it is easier to put everything on the Form 8949.

If you are using Form 8949, you first separate your transactions by the holding period for each asset you sold and then into relevant subcategories relating to basis reporting or if the transactions were not reported on Form 1099-B. Assets you held for a year or less typically fall under short-term capital gains or losses and those you held for longer than a year are counted as long-term capital gains and losses.

After entering the necessary transactions on Form 8949, you then transfer the information to Schedule D. Schedule D is used to report and reconcile the different types of gains and losses and determine the amount of your taxable gains, deductible losses, and amount to be carried over to the next year. The information from Schedule D is then transferred to Form 1040.

How do I report my cryptocurrency earnings and rewards on my taxes?

After calculating all of your capital gains or losses on Schedule D, you need to report any cryptocurrency income from non-trade or exchange related activities that you’ve received during the course of the tax year. This can be from services performed as an independent contractor, rewards received from a crypto exchange or brokerage, income earned through mining cryptocurrency, and more.

If you were working in the crypto industry as a self-employed person, then you would typically report your income and expenses on Schedule C. This form has areas for reporting income received, various types of qualified business expenses that you can deduct and adding everything up to find the net income or loss from your work.

You will need to add up all of the self-employment compensation from the crypto work and enter that as income on Schedule C, Part I. This section has you list all the income of the business and calculate gross income.

Part II is used to report all of the business expenses and subtract them from gross income to determine net profit or loss. If you have expenses that do not seem to fit into one of the categories provided on the form, you can create your own category and list it with the amount in Part V, Other Expenses.

Several of the fields found on Schedule C may not apply to your work. You do not need to complete every field on the form.

Use crypto tax forms to report your crypto transactions

When accounting for your crypto taxes, make sure you file your taxes with the appropriate forms. When you dispose of the crypto by trading, exchanging, or spending it, you’ll need to report these transactions on Form 1040, Schedule D. You may also need to report this activity on Form 8949 in the event information reported on Forms 1099-B needs to be reconciled with the amounts reported on your Schedule D.

If you earned income as a freelancer or through other crypto-related activity, you may receive Forms 1099-MISC or 1099-NEC. Even if you do not receive 1099s from crypto exchanges, brokers or other companies who paid you for crypto activities, you will need to report this income on the tax return.

The IRS has stepped up enforcement of crypto tax enforcement, so you should make sure you accurately calculate and report all taxable crypto activities.

You are probably right.  The brokerage firms has the expanded Form 1099-B where they report all types of income items associated with investments (i.e., interest, dividends, capital gains and losses, foreign tax withholding associated with interest and dividends, etc.).

Q24:

Is the grandparents scam a deductible loss on Schedule D. Loss is $14,000.

If it is a theft – no deduction anywhere on the return is currently allowed.  Suspended from 2018 thru 2025.

Q25:

What is an acceptable reason to get the late filing relief when doing an S Corp Election?

This is a hard one to answer as it depends on the facts and circumstances surrounding the election. I have included a summary of the Revenue Procedure.  If IRS has accepted the S Corporation returns for several years and then suddenly the module will not accept the e-filing as the designation dropped off – it happens – then I have been successful in getting the S Corporation election reinstated.

Have all the shareholders reported income?

How was it reported?

Did the client qualify for the election?

Was it due to practitioner error?

Misunderstanding between shareholders?

Lack of communication or understanding among shareholders.

Rev. Proc. 2013-30 facilitates the grant of relief to late-filing entities by consolidating numerous other revenue procedures into one revenue procedure and extending relief in certain circumstances. This procedure provides guidance for relief for late:

• S corporation elections.
• Electing Small Business Trust (ESBT) elections.
• Qualified Subchapter S Trust (QSST) elections.
• Qualified Subchapter S Subsidiary (QSub) elections, and
• Corporate classification elections which the entity intended to take effect on the same date that the S corporation election would take effect.

Generally, the relief under the revenue procedure can be granted when the entity fails to qualify solely because it failed to file the appropriate election under Subchapter S timely with the applicable IRS Campus and all returns reported income consistently as if the election was in effect. For purposes of this guidance, the “effective date” is the date the election is intended to be effective and cannot be more than 3 years and 75 days from the date relief is requested.

The following requirements must be met to qualify for late S corporation election relief by a corporation or entity classified as a corporation:

• The entity intended to be classified as an S corporation, is an eligible entity, and failed to qualify as an S corporation solely because the election was not timely.
• The entity has reasonable cause for its failure to make the election timely.
• The entity and all shareholders reported their income consistent with an S corporation election in effect for the year the election should have been made and all subsequent years; and
• Less than 3 years and 75 days have passed since the effective date of the election (See the Exception to the 3 Years and 75 Day Rule section below).

In addition, if the electing entity is requesting a late corporate classification election to be effective on the same date that the S corporation election was intended to be effective, the requesting entity must also meet the following additional requirements:

• The entity is an eligible entity as defined in Treas. Reg. § 301.7701-3(a).
• The entity failed to qualify as a corporation solely because Form 8832 was not timely filed, and
• The entity timely filed all required federal tax returns consistent with its requested classification as an S corporation.

If the entity qualifies and files timely in accordance with Rev. Proc. 2013-30, the Campus can grant late election relief.  If the entity does not qualify under the provisions of the Revenue Procedure, its only recourse is to request a private letter ruling.

Exception to the 3 Years and 75 Days Rule

Certain entities can qualify for the exception to the 3 years and 75-day rule when:

• The entity is a corporation (i.e., not an LLC seeking an entity classification election).
• The entity failed to qualify as an S corporation solely because the election was not timely field.
• The corporation and all its shareholders reported their income consistent with S corporation status for the year the S election should have been made and for every subsequent taxable year (if any).
• At least 6 months has elapsed since the date on which the corporation filed its tax return for the first year the corporation intended to be an S corporation.
• Neither the corporation nor any of its shareholders was notified by the IRS of any problems regarding the S corporation status within 6 months of the date on which the Form 1120S for the first year was timely filed; and
• The completed election form includes the statements as described in the revenue procedure.

Although this exception exists, it is unlikely many situations will qualify since the current system is set up to notify the corporation of the problem with its filing requirement when the return rejects in processing. It could apply to a case where it did not go through normal processing.

Q26:

Can you discuss getting client consents when buying and selling a CPA firm, consent forms to transfer the client’s financial information when buying and selling a CPA practice.

This is cover under Treas. Reg. 1.7216. Below is a standard statement that should be used in notifying clients of the sale.

• Statement:
• Federal law requires this consent form be provided to you. Unless authorized by law, we cannot disclose, without your consent, your tax return and other financial information to third parties. If you consent to the disclosure of your tax return information, Federal law may not protect your tax return and other financial information from further use or distribution.

You are not required to complete this form. If we obtain your signature on this form by conditioning our services on your consent, your consent will not be valid. If you agree to the disclosure of your tax return and other financial information, your consent is valid for the amount of time that you specify. If you do not specify the duration of your consent, your consent is valid for one year.

Q27:

I’m receiving many partnerships K-1’s that state that the entity is not subject to § 163(j).  Then, in the footnotes, they give you an amount for business interest expense and annual gross receipts for the last 3 years.  Do I have to enter any of this in Form 8990?

• I would review the Form 8990 instructions. If you enter the K-1 information into the software, it will populate the Form 8990 accordingly.  Often this information is in the explanation section of the K-1 and needs to be entered into the software.  I noticed this year there was several pieces of information detailed in the explanation section of the K-1 associated with QBI. The explanation section over the years has expanded to include more information but may not always be required to include on the return.
• If there is no available area, then I would discuss with my software provider as to how to handle.

Q28:

Partnership Schedule K-1 Box W.  The description is for the former 2% miscellaneous deductions.  Do I have to enter these amounts anywhere?  Do you reduce the ordinary income as shown on Line 1 ordinary income?

• Again, check your software capabilities. But, since this area of law is suspended from 2018-2025 there may not be anywhere to enter the information. Also, check your state rules, not all states coupled with the Tax Cuts and Jobs Act.

Q29:

I had an attorney turn down a potential new C-Corp Client looking to start a Meta related business.  The corporation will have foreign partners.  The attorney turned down the work citing concerns of lack of knowledge with SEC rules and risk with private companies.  Are you seeing attorneys advise SEC representation with private corporation clients??

• I can only speak for myself, but just like the IRS, the SEC has many areas where there is lack of guidance. I am not surprised that an attorney would not want to be involved.  It could also be a case of “lack of experience” of that particular attorney and they did not want to take an engagement that they were uncomfortable with handling.

Q30:

I am a bit confused on the FINCEN requirement for reporting the beneficial owners. If we have a small LLC with $100,000 gross receipts and 1 employee, they need to report the ownership?

The rule will require most corporations, limited liability companies, and other entities created in or registered to do business in the United States to report information about their beneficial owners—the persons who ultimately own or control the company, to FinCEN.

The Corporate Transparency Act (CTA) establishes uniform beneficial ownership information reporting requirements for certain types of corporations, limited liability companies, and other similar entities created in or registered to do business in the United States. The CTA authorizes FinCEN to collect that information and disclose it to authorized government authorities and financial institutions, subject to effective safeguards and controls.

• Under the rule, a beneficial owner includes any individual who, directly or indirectly, either (1) exercises substantial control over a reporting company, or (2) owns or controls at least 25 % of the ownership interests of a reporting company. The rule defines the terms “substantial control” and “ownership interest.” In keeping with the CTA, the rule exempts five types of individuals from the definition of “beneficial owner.”
• In defining the contours of who has substantial control, the rule sets forth a range of activities that could constitute substantial control of a reporting company. This list captures anyone who is able to make important decisions on behalf of the entity. FinCEN’s approach is designed to close loopholes that allow corporate structuring that obscures owners or decision-makers. This is crucial to unmasking anonymous shell companies.
• The rule provides standards and mechanisms for determining whether an individual owns or controls 25 % of the ownership interests of a reporting company. Among other things, these standards and mechanisms address how a reporting company should handle a situation in which ownership interests are held in trust.
• These definitions have been drafted to account for the various ownership or control structures reporting companies may adopt. However, for reporting companies that have simple organizational structures it should be a straightforward process to identify and report their beneficial owners. FinCEN expects the majority of reporting companies will have simple ownership structures.

There is a good fact sheet that covers the key points at the website below.  I suggest you print out.

https://www.fincen.gov/beneficial-ownership-information-reporting-rule-fact-sheet

Q31:

Any feeling that the RMD max distribution age will increase this year?

• It very well may – we are waiting to see what happens with SECURE 2.0! The Secure 2.0 has a provision; however, the phase in ages are into the 2030s.

Q32:

What page in the text is the phone number list again?

• Page 179 in textbook.

Q33:

We have lots of foreign owned clients so are filing Form 5472’s each year with the Form 1120’s. Can you describe more the information needed to be filed with the FinCen?

• This question is to broad to be addressed fully. There are many resources online which may address questions you may have.

https://www.fincen.gov/resources/filing-information

https://www.fincen.gov/boi

Q34:

I was reading in a tax newsletter that if you are working for a company that you are not a Paid Preparer?  Do you agree with this statement?

• I believe you are referring to a rule which clarifies the requirements for a PTIN. If an employee of a business which is not a tax preparation business prepares business tax returns as part of their job responsibilities, that employee is not considered a tax preparer and does not need a PTIN. They should not be signing the returns unless they are an officer or owner of the entity.

Q35:

Your handouts state beneficial ownership needs to be reported – direct stock owners are not beneficial, correct? Beneficial is stock held through a broker.

• Please refer to Question 34, 35, and 40. I have provided links to the current FINCEN information. As always it may not address all questions we may have.

Q36:

When does the small business have to report to FINCEN? Are they ready for us to report?

• It was announced that the regulation will take effect beginning January 1, 2024. On September 29, 2022, the Financial Crimes Enforcement Network (FinCEN) issued final regulations implementing the reporting requirements of the Corporate Transparency Act of 2020 (CTA) which will become effective on January 1, 2024.
• That gives the agency time to complete the database interface with the various states and to address other issues where we may not have guidance.

Q37:

When do these SEPPS take affect?  For 2022?

• Notice 2022-6 Section 4 – Effective Date and Transition Rules
• The guidance in this notice replaces the guidance in Rev. Rul. 2002-62 and Notice 2004-15 for any series of payments commencing on or after January 1, 2023, and it may be used for a series of payments commencing in 2022. In the case of a series of payments commencing in a year prior to 2023 using the required minimum distribution method, if the payments in the series are calculated by substituting the Single Life Table, the Joint and Last Survivor Table, or the Uniform Lifetime Table described in § 3.02(a) of this notice for the corresponding table that was used under Rev. Rul. 2002-62, then the substitution will not be treated as a modification within the meaning of § 72(t)(4) or § 72(q)(3).

Q38:

Does this only apply to IRAs not 401K’s?

• Notice 2022-6 Section 1 – Purpose
• This notice provides guidance on whether a series of payments from an individual account under a qualified retirement plan is considered a series of substantially equal periodic payments within the meaning of § 72(t)(2)(A)(iv) of the Internal Revenue Code. This guidance also applies for purposes of determining whether a distribution from a non-qualified annuity contract is part of a series of substantially equal periodic payments within the meaning of § 72(q)(2)(D).
• This means that IRAs qualify for SEPP treatment. However, for qualified plans, the plan must provide for distributions prior to 59 ½ if the individual is an active participant in the plan.  If the participant has separated from service, then they might be able to take distribution using the SEPP treatment if the plan provides for such distributions.

Q39:

I still have a client waiting for a refund from filing their 2020 1040-SR form. They had to paper file the return. Do others have the same problem?

• Yes, there are still 2020 returns that have not been processed. At this date I would get a power of attorney and check on e-services to make sure the return was received.  If you have no access to e-services, I would have your client make an appointment with an IRS walk-in to check on status.  To find the closest IRS walk-in go to irs.gov.  In the search engine type TAC and then click on Contact your Local IRS office, then click on the blue box as shown below.
• Enter the zip code and the locations will appear. The general phone number for appointments is 844-545-5640.

Q40:

Can you explain what the TCC is?

• If you use a third-party provider to transmit the forms listed later, you do not need a TCC number. The third party generally will already have the TCC application and number on file. Here is more information on the system.
• If you are transmitting yourself as a practitioner, you will need to apply for the TCCC number. Use Form 4419, Revise Existing Transmitter Control Code (TCC) for Filing Information Returns Electronically (FIRE).
• I would recommend that you look at the Social Security Business filing for Forms W-2.
• Currently, for Forms 1099, if filed by you electronically would need a TCC number.
• We are awaiting IRS to develop their own 1099 filing online.
• Also, of note that the threshold for e-filing “required” for 1099’s is 250, IRS wants to reduce that gradually, and we are awaiting final regulations on that issue.
• Applying to File Information Returns Electronically (FIRE)
• All transmitters who file information returns electronically through the Filing Information Returns Electronically (FIRE) system are required to request authorization to file electronically by requesting a Transmitter Control Code (TCC) via the online Information Returns Application for TCC. Submit the request by November 1st of the year before information returns are due and allow 45 days for processing. If your application is approved, a five-character alphanumeric TCC is assigned to your business.
• To transmit files electronically through FIRE, you must have software, a service provider, or an in-house programmer that will create the file in the proper format per the requirements and record layouts. A scanned or PDF copy will not be accepted.
• The IRS encourages transmitters who file for multiple payers to submit one application and use the assigned Transmitter Control Code (TCC) for all payers. The purpose of the TCC is to identify the transmitter of the file. You may transmit files for as many companies as you need under the one TCC.
• For more information, refer to FIRE or Publication 1220, Specifications for Electronic Filing of Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G.

SSA

Electronic filers of Form W-2 must contact the Social Security Administration for all information, forms, and publications relating to the filing of Form W-2; visit SSA.gov/employer or call 800-772-6270.

Q41:

Do you have information on how to apply for the student loan forgiveness? On the student loan sites they want you to apply to put the loans all together, should we do this?? I have different loans that have different interest rates.

• https://studentaid.gov/debt-relief/application
• As of this date, due to a court order, the site is temporarily blocked from processing debt discharges. People are still encouraged to apply, and the organization will review the applications. Note the Supreme Court as of this date has refused to address the issue.
• Therefore, we have a moving target and awaiting additional guidance.
• As for combining loans, this would be a personal decision.

Q42:

Are the SEP contributions allowed against self-employment income or just federal tax? Is a sole proprietor allowed a business so called deduction that the Sch C?

• Schedule C sole proprietor cannot take SEP against self-employment income, it’s an adjustment on Schedule 1.
• If an employer contributes for an employee, that’s deductible against self-employment tax, but I do not know of any way for an owner to deduct it from self-employment tax.
• But what you COULD do is hire the spouse and pay into the spouse’s retirement income and take the deduction against self-employment taxes that way, but it has to be a real job.

Q43:

For cost segregation study for rental apartment units, can you take § 179 on 15 yr. property and less or just bonus on those assets?

Generally, the personal property from a cost segregation report is eligible for the § 179 expensing.  However, it may not be eligible for § 179 expensing for residential properties owned by passive taxpayers.

In the past, § 179 could not be used to deduct personal property used in residential rental property. However, the Tax Cuts and Jobs Act eliminated this restriction starting in 2018. This means that landlords can now use § 179 to deduct the cost of personal property items they purchase for use inside rental units—for example, kitchen appliances, carpets, drapes, or blinds. For example, if you spend $3,000 for a new stove and refrigerator for a rental unit, you may deduct the entire amount that year with § 179.

You can also use § 179 to deduct property not located inside the rental buildings. This can include:

• computers
• telephones and cell phones
• office equipment
• office furniture you use in your office or other place of business
• cars and other vehicles
• software, and
• maintenance equipment such as lawnmowers.

However, you can’t use § 179 to deduct the cost of:

• land
• land improvements, including swimming pools, paved parking areas, and fences
• permanent structures attached to land, including buildings and their structural components, fences, swimming pools, or paved parking areas, or
• property used outside the United States.

Q44:

I have a client that buys tons of stuff at sales, goodwill, auctions, and sells online via eBay.  He has so much in little things that he buys in bulk, and it is not feasible to have an inventory so can he just expense it all??

Does he have to have inventory? What happened to the rule we did not need to have inventory? Are those all reported on Schedule D then?

Do they have to create a corporation or S Corporation? Do you need an attorney for that?

• Businesses generally must use inventories for income tax purposes when necessary to clearly reflect income. To clearly reflect income, businesses must take inventories at the beginning and end of each tax year in which the production, purchase or sale of merchandise is an income-producing factor. This means that inventories are necessary in most manufacturing, wholesale and retail sales businesses, and in service businesses that charge for parts, materials or components.
• Businesses that only provide services generally do not need to keep inventories. In addition, small businesses may not need to account for inventories (and may be able to use the cash method of accounting instead of the accrual method).
• The Tax Cuts and Jobs Act (TCJA) of 2017 changed the inventory rules to some extent.
• The simplifying provisions, which apply to small business taxpayers, expand the use of the overall cash method of accounting and grant exemptions from inventory methods under § 471, uniform capitalization (UNICAP) rules under § 263A, and the use of the percentage-of-completion method for certain long-term construction contracts under § 460.
• These simplified tax accounting rules apply to taxpayers with average annual gross receipts of $25 million (adjusted for inflation) or less for the three-tax-year period ending before the current tax year (the gross receipts test; § 448(c)(1)).
• The inflation-adjusted ceiling is $26 million for tax years beginning in 2019, 2020, and 2021. Changes to any of these simplified methods generally require filing one or more Forms 3115, Application for Change in Accounting Method, with the IRS.
• The final regulations generally retain the existing rules related to the computation of the gross receipts test, including the definition of gross receipts, the requirement to aggregate gross receipts with certain other persons (§ 448(c)(2)), and the proration of amounts for short tax years.

Under § 471 and Regs. § 1.471-1, inventories are required to be used in a tax year in which the production, purchase, or sale of merchandise is an income-producing factor. The TCJA permitted taxpayers that meet the gross receipts test and that are not tax shelters under § 448 to be exempt from § 471 and to use either of the following methods:

• Treat inventory as nonincidental materials and supplies (NIMS inventory method) or
• Conform to the inventory method used in its applicable financial statement (AFS) (AFS § 471(c) inventory method) or to the method in the taxpayer’s books and records prepared in accordance with its accounting procedures if it does not have an AFS (non-AFS § 471(c) inventory method).

It is important for small taxpayers to note that being exempted from keeping inventory under § 471 does not necessarily translate to an immediate tax write-off for all inventoriable costs.

For taxpayers that choose to use the NIMS inventory method, the final regulations clarify that even though these amounts are treated as nonincidental materials and supplies, they still retain their character as inventory. The final regulations do not change the position that inventory treated as nonincidental materials and supplies is “used and consumed” in the tax year the taxpayer provides the inventory to a customer, and costs are recovered through costs of goods sold in that year or the tax year in which the costs are paid or incurred (in accordance with the taxpayer’s method of accounting), whichever is later.

The final regulations retain the general rule from the proposed regulations that the “used and consumed” threshold for NIMS is met only when the taxpayer sells the inventory. As such, manufacturers that convert raw materials into a work in progress or finished goods by year end but have not yet sold the inventory will not be able to deduct the costs under the final regulations.

The final regulations clarify that taxpayers may determine the amounts of the costs of inventory by using either a specific identification method, a first-in, first-out method, or an average cost method, but may not use the last-in, first-out, or any other method described in § 471 or the regulations thereunder, including the lower-of-cost-or-market methods. Furthermore, inventory treated as nonincidental materials and supplies is not eligible for the Regs. § 1.263(a)-1(f) de minimis safe-harbor election, since that election specifically scopes out inventory.

For taxpayers without an Applicable Financial Statement (AFS) that decide to follow the non-AFS § 471(c) inventory method, if a physical count is taken but not actually used to capitalize and allocate costs to inventory, then such amounts may be deductible in the year paid or incurred.

However, if a taxpayer uses a physical count to allocate costs to inventory and then makes a journal entry to expense these costs in its financial statements, this journal entry would be ignored for tax purposes, thus requiring the taxpayer to capitalize the costs in accordance with the physical count allocation.

The rules apply for tax years beginning on or after the date the final regulations were published in the Federal Register, January 5, 2021.

Now, how will IRS look at this issue in an audit.  The most important issue is the tax return must clearly reflect income and a determination of the sale of the inventory is an income producing factor. When you deduct all cost of items purchased in one year, it generally does not clearly reflect income as you have many items in inventory as yet unsold. Therefore, future years are somewhat out of sync with the correct income reporting.

It is beneficial for the client to track inventory to give themselves a better understanding of the actual cost of the items sold.  It assists with better operation of the business and future business decisions.

When determining whether they should choose to be a corporation or S Corporation, you have to be careful to not engage in the practice of law, which is typically defined by the state!

In general, the cash method of accounting cannot be used by:

• C corporations.
• Partnerships that have one or more C corporations as a partner or partners, and
• Tax shelters.

However, the cash method can be used:

• For certain farming and timber businesses;
• By qualified personal service corporations, and
• By a corporation or partnership that meets a $25 million gross receipts test, adjusted for inflation ($26 million for 2019, 2020, and 2021, $27 million for 2022 and $29 million for 2023) for tax years beginning after December 31, 2017, or a $5 million gross receipts test for tax years beginning on or before December 31, 2017.

If they have issues with tracking inventory, choosing to be a corporation or S corporation where the client would be required to be an employee, may be an issue you need to address. As the rules for a sole proprietorship, where they can pull money out as needed, are very different with the corporation entities.

Q45:

For the carry back electric car credit, what if the carryback year is above the AGI limit?

Are the limits rigid or phase-out?

I assume you were discussing the new law under the Inflation Reduction Act. Based on the limited information, no carryback provision for the credit is mentioned. This is what I have been able to find.  More guidance is expected as we move forward.

This tax credit is nonrefundable and will only offset your tax liability for a given tax year. Additionally, the tax credit does not carryover or carry forward if you do not use it in the year, you purchased the vehicle. In other words, if you did not use the part of the personal portion of the EV tax credit, then the unused credit is lost.

I have included other information available.

Clean Vehicle Credit (§ 30D)

• Maintains the existing $7,500 consumer credit for the purchase of a

qualified new clean vehicle, including electric vehicles, plug-in hybrids, and

hydrogen fuel cell vehicles.

• Credit is reduced or eliminated if a certain percentage of the critical

minerals utilized in battery components are not extracted or processed in

the U.S. or a Free Trade Agreement country or recycled in North America.

The percentage required increases from 40% in 2024 to 80% in 2026.

• Credit is reduced or eliminated if EV is not assembled in North America

or if the majority of battery components are sourced outside of North

America. The percentage increases from 50% in 2024 to 100% in 2028.

• Implements a maximum of $80,000 per vehicle for vans, SUVs and pickups

and $55,000 for other vehicles.

• Implements an income eligibility limit of $150,000 or $300,000 for

joint filers.

• Eliminates the previous manufacturer quota, which phased out the tax

credit for manufacturers as they neared 200,000 clean vehicles sold.

• Some models of Tesla, General Motors, and the most popular EV brands

would now qualify for the tax credit.

New Previously Owned Clean Vehicle Credit (§ 25E)

• Creates a consumer tax credit for the purchase of previously owned clean

non-commercial vehicles, including electric vehicles and plug-in hybrids.

Credit is equal to the lesser of $4,000 or 30% of the vehicle cost.

• Sets a maximum sale price of $25,000. Model must be at least 2 years older

than the year of sale.

• Implements an income eligibility limit of $75,000 or $150,000 for

joint filers.

New Commercial Clean Vehicle Credit (§ 45W)

• For class 1-3 (under 14,000 lbs.) vehicles for commercial use, creates a

$7,500 tax credit tax for the purchase of electric vehicles or other qualified

clean vehicles.

• For class 4 and above (over 14,000 lbs.) vehicles for commercial use,

increases the credit to $40,000.

The act modified the $7,500 § 30D credit for electric vehicles in several ways. First, it changes the name of the credit to the clean vehicle credit. It also imposes a requirement that the final assembly of the vehicle must occur in North America (effective Aug. 16, 2022). The act also removes the limitation on the number of vehicles eligible for the credit, so electric vehicles purchased from manufacturers that had formerly reached their cap will now be eligible for the credit. However, there are price caps, so the credit is not allowed for cars with a manufacturer’s suggested retail price over $55,000 or for vans, SUVs, or pickup trucks with a manufacturer’s suggested retail price over $80,000.

However, the act imposes a new requirement that a percentage of critical minerals used in the car must have been extracted or processed in the United States or in a country with which the United States has a free trade agreement or recycled in North America. This requirement phases in and applies to 40% of such minerals before 2024 and to 80% after 2026. A percentage of the battery components for the vehicle must also be manufactured or assembled in North America. This requirement applies to 50% of a battery’s components before 2024 and phases in until it applies to 100% of a battery’s components after 2028.

The credit is allowed once per vehicle (and includes a requirement that the taxpayer include the vehicle identification number on the return). Also, the credit is not allowed for taxpayers whose modified adjusted gross income (MAGI) exceeds certain thresholds ($300,000 on joint returns, $225,000 for heads of household, and $150,000 for single taxpayers).

The changes to § 30D are generally effective for vehicles placed in service after Dec. 31, 2022 (the final assembly requirement, as noted, was effective when the law was enacted). The credit will expire after 2032. Taxpayers who purchased a clean vehicle or entered into a written binding contract to purchase a clean vehicle between Jan. 1 and Aug. 15, 2022, but placed it in service on or after Aug. 16, can elect to have the former Sec. 30D credit rules apply to that vehicle.

The act also creates a new credit for used clean vehicles (new § 25E). Qualified buyers can claim a credit of up to $4,000. Their MAGI must be under $150,000 on joint returns, $112,500 for heads of household, and $75,000 for single taxpayers. The sales price for the used vehicle must be $25,000 or less. The used clean vehicle credit applies to vehicles acquired after Dec. 31, 2022.

The act also creates a new credit for qualified commercial clean vehicles (new § 45W). The credit equals the lesser of 15% of the basis of the vehicle or the “incremental cost” of the vehicle. For commercial clean vehicles with no gasoline or diesel engine, the credit amount is the lesser of 30% of the basis of the vehicle or the “incremental cost.” The incremental cost is the amount the cost of the commercial clean vehicle exceeds the cost of a comparable gasoline or diesel-powered vehicle. The credit cannot exceed $7,500 for vehicles with a gross vehicle weight under 14,000 lbs. and cannot exceed $40,000 for all other vehicles. The commercial clean vehicle credit is effective for vehicles acquired after Dec. 31, 2022.

The § 30C alternative fuel vehicle refueling property credit is extended through 2032 and modified. The maximum credit is increased from $30,000 to $100,000. The changes are effective for property placed in service after Dec. 31, 2022.

Q46:

Concerning a Power of Attorney, do you have to send a copy to the client?

POA after withdrawn.

No, you can just withdraw. However, I sent letter to client explaining the process and why and that they will receive something from IRS on it.

Lately, I have been reviewing my 2848’s and dropping those folks I no longer do.  Revoking is a better word; notifying both the client and the IRS.

Q47:

If you had $50,000 in crypto and lost the access codes, and do you have a 50,000-capital loss?

• No deduction, l Losing keys is equivalent to losing property. No deduction.

Q48:

Does a loss on crypto in an IRA considered a distribution?

• Loss on crypto held in an IRA is not a tax event.

Q49:

We have been seeing that parents who have tried to claim the college student however they had already claimed themselves that even with amending the kids return to remove the exemption the parents return will still not thru electronically. Have you seen this?

• Yes, until the amended return has been processed, you will not be able to e-file the parents return. Amended returns were taking 6-8 months to process. We have had to send the return on paper.

Q50:

Are you allowed to hold e-filing a return until payment is received if a client continues to pay late or pay less than charge to assist in motivating them to pay?

• Technically no. Once client signs, you have 3 days to transmit. There are exceptions, such as client signs and mails later or signs and forgets to drop back off to your office.  Once you receive in your hands and 8879 is signed, than 3 days to transmit.

Q51:

Meaning we could require a retainer prior to saying we’ll prepare, would that work?

• When I have clients that are slow on paying, I require that they pay in advance. I do not consider this to be unethical. Retainer is perfect for these types of clients.
• You just state that office policy is payment is required at time of signing or before and have it posted nearby where they sign the return. I would also include information on payment in the engagement letter.
• Retainers for representation; new clients must pick up returns at office and payment is required at that time.

Q52:

What are your thoughts on ERC and qualifications.?  We represent funeral homes all across US and have done our research believing that without decline in sales they would not qualify.  However, some of our clients have been approached by 3rd parties convincing them they could qualify.  Thoughts?

• I am always wary when firms center on one issue and claim they can get their client refunds. I have read the regulations and determined what qualifies. There are many groups that are using certain sections of the code and claim they can get the clients huge refunds.  I tend to interpret the law, run it by senior owners and go from there.
• A good example is the research credit which IRS is auditing extensively and revised the regulations. Organizations have utilized this credit just to get clients and many of these credits have been audited and overturned.  I believe the ERC will be audited extensively. I would be wary, do your research and proceed from there. You do not want to expose my client to potential audit issues.

Q53:

Does crypto go on sch C? Including 1099-k?

• It depends on if it qualifies as a trade or business. We’d use those 9 factors to separate hobby from business, just as with any other activity.

Q54:

Back to the CTA, is it revenue only that determines who has to comply? If so, what is the amount?

Please refer to Question 34, 35, and 40. I have provided links to the current FINCEN information. As always it may not address all questions we may have.

The Corporate Transparency Act (CTA) requires “reporting companies” to file a report with the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) containing personal identifying information about the company’s beneficial owners and applicants. The information collected will be kept in a private database maintained by FinCEN with access limited to federal agencies, state agencies with a court order, and financial institutions with the consent of the company.

The details for how this reporting obligation will be implemented were left for FinCEN to provide through rulemaking. On September 29, 2022, FinCEN issued a final rule implementing the beneficial ownership (BOI) reporting requirements. The rule describes who must file a BOI report, what information must be reported, and when a report is due. The effective date for the final rule is January 1, 2024. Below is a summary of some of the major issues addressed by the final rule.

A domestic reporting company is defined as any entity that is a corporation, a limited liability company, or is created by the filing of a document with a Secretary of State or similar office under the law of a state or Indian tribe.

A foreign reporting company is defined as any entity that is a corporation, a limited liability company, or other entity formed under the law of a foreign country and registered to do business in any state or tribal jurisdiction by the filing of a document with a Secretary of State or similar office under the law of a state or Indian tribe.

There are 23 exemptions. Most are for companies that are already subject to substantial federal or state regulation under which their beneficial ownership may already be known. This includes, among others, entities that file reports with the SEC, governmental authorities, banks, credit unions, money services businesses, investment advisors, securities brokers and dealers, tax exempt entities, entities assisting tax exempt entities, insurance companies, state-licensed insurance producers, pooled investment vehicles, public utilities, inactive entities, subsidiaries of certain exempt entities, accounting firms, and large operating companies.

Information must be provided about the reporting company, its beneficial owners, and its company applicants.

1. Information about the reporting company:

(1) its full legal name,

(2) any trade or “doing business as” names,

(3) a complete current address consisting of: (i) in the case of a reporting company with a principal place of business in the United States, the street address of the principal place of business, and (ii) in all other cases, the street address of the primary location in the United States where the reporting company conducts business,

(4) the state, tribal or foreign jurisdiction of formation,

(5) for a foreign reporting company, the state or tribal jurisdiction where the company first registers, and

(6) the IRS Taxpayer Identification Number (TIN) (including an Employer Identification Number) or where a foreign reporting company has not been issued a TIN, a tax identification number issued by a foreign jurisdiction and the name of that jurisdiction.

1. Information about each of the individuals who are the company’s beneficial owners and applicants:

(1) full legal name,

(2) date of birth,

(3) complete current address consisting of: (i) in the case of a company applicant who forms or registers an entity in the course of the company applicant’s business, the street address of the business, or (ii) in any other case, the individual’s residential street address,

(4) unique identifying number and the issuing jurisdiction from one of the following documents: (i) a non-expired passport issued to the individual by the United States government, (ii) a non-expired identification document issued to the individual by a State, local government, or Indian tribe for the purpose of identifying the individual, (iii) a non-expired driver’s license issued to the individual by a State, or (iv) a non-expired passport issued by a foreign government to the individual, if the individual does not possess any of the other documents described, and

(5) an image of the document from which the unique identifying number was obtained.

Q55: New client needs to file 10 years of form corporate (1120) returns.  Returns all have NOLs.  Mail all together at once or file separately?

• File all separately.

Q56:

AJ, would you use a Form 8275 to clarify your position with NOLs? Wouldn’t the filing of Form 8275-R automatically be considered taking a position without substantial authority since the position taken is adverse to the Regulations?

You might be taking a stance because there is conflicting substantial authority.

• When there is a question of disclosure which contradicts the code or the regulations, I would file the Form 8275 or 8275R.

Q57:

Took a class from ZenTracker, who stated they can recover crypto currency from a locked account.  What do you think?

• I’ve heard this before, but I have no experience with the issue.

Q58:

Is an 18-year-old who files their own return more likely to be able to qualify for $10,000 of student loan discharge?

• Refer to question # 45. This website has all the information currently available on this issue.

Q59:

Do income tax returns need to be amended when ERCs are received?

• Yes, if an ERC is received you must reduce the wages by the amount of the credit with an amended return.
• FAQ # 85 – Does the Employee Retention Credit reduce the expenses that an Eligible Employer could otherwise deduct on its federal income tax return?
• Yes. § 2301(e) of the CARES Act provides that rules similar to § 280C(a) of the Internal Revenue Code (the “Code”) shall apply for purposes of applying the Employee Retention Credit. § 280C(a) of the Code generally disallows a deduction for the portion of wages paid equal to the sum of certain credits determined for the taxable year.

Accordingly, a similar deduction disallowance would apply under the Employee Retention Credit, such that an employer’s aggregate deductions would be reduced by the amount of the credit as result of this disallowance rule.

Q60:

Are there late filing penalties for FBAR’s?

• A person who willfully fails to file an FBAR or files an incomplete or incorrect FBAR, may be subject to a civil monetary penalty of $100,000 or 50% of the balance in the account at the time of the violation, whichever is greater. Willful violations may also be subject to criminal penalties.

Q61:

Mom formed a living trust in 2010.  Funded with all assets.  Filed no returns and reported all activity on 1040.  At death, attorney filed SS-4 with original formed date.   IRS responds with request for all past returns.  How would you handle that?

• This is a common issue due to the date the attorney placed on the Form SS-4. It was a grantor trust until she died, and no filing was needed. Once she died it became irrevocable and needed and EIN#. When the attorney applied for the EIN, they stated that the trust started in 2010, that is why they are requesting all the returns.  But the trust was required to file returns only after she died. Attorney will need to correspond with IRS to clarify the date of the death and the date an EIN was required.