T&K Tax Knowledge

Choose Your Partnership Representative Wisely

Posted by Abbey Garber and Jessica Kirk

The Bipartisan Budget Act of 2015 (“BBA”) introduced a centralized partnership audit regime which replaced the Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”).  The BBA streamlined partnership audits (including audits of limited liability companies taxed as partnerships) by providing for the assessment and collection of tax at the partnership level.  

For tax years after 2017, the BBA replaced the “tax matters partner” with the “partnership representative.”  The partnership representative would represent the partnership in an audit or IRS examination and has the sole authority to act on the partnership’s behalf.  Unless a partnership is able to elect out of the BBA procedures, each year a partnership must designate a partnership representative and, if applicable, a designated individual, on its partnership tax return Form 1065, U.S. Return of Partnership Income. 

Because of the broad authority given to partnership representatives under the BBA and because of the limited circumstances under which such designation can be changed, partnerships should carefully consider who they will appoint as the partnership representative on their 2019 and subsequent tax returns.  The extended deadline for filing a 2019 partnership tax return is September 15, 2020.

Employers Beware: The IRS Is Ramping Up Employment Tax Enforcement

Posted by Abbey Garber, Mary McNulty, Lee Meyercord, Jessica Morrison, and Neely Munnerlyn

Approximately 72% of all revenue collected by the IRS is from withheld employment taxes.  As a result, the IRS has increased its focus on employment tax audits, recently reporting that there are 530,000 employment tax audits pending.  As explained in our recent client alert, employers should understand the potential consequences of an employment tax audit and take steps to ensure they are properly prepared for an audit.  If you have any questions, please contact the Thompson & Knight attorney with whom you regularly work or one of the authors listed above.

Proposed Legislation Would Increase Above-the-Line Charitable Contribution Deduction

Posted by David Rosenberg, Tyree Collier, Lee Meyercord, Katie Gerber, and Jana Wight

Proposed legislation with bipartisan support would increase the $300 above-the-line deduction to over $4,000 for individuals and $8,000 for married couples for charitable contributions made in 2020. As explained in a prior post, the CARES Act provided a new above-the-line deduction (i.e., reduces taxable income dollar-for-dollar) for up to $300 of charitable contributions beginning in 2020. This deduction is available to all individual donors, including those who utilize the standard deduction.

IRS Offers to Settle Tax Court Syndicated Conservation Easement Cases

Posted by Mary McNulty, Abbey Garber, Lee Meyercord, and Katie Gerber

 

The IRS recently announced a time-limited settlement offer to taxpayers with pending Tax Court cases involving syndicated conservation easements. The IRS encourages taxpayers who receive a settlement offer letter to consult with their own independent attorney (i.e., an attorney who was not involved in promoting the transaction or recommended by the promoter of the transaction) to evaluate the litigation risks and the settlement offer. Our recent client alert provides additional details on syndicated conservation easements and the settlement offer. Please contact one of the above authors or the Thompson & Knight attorney with whom you regularly work if you have any questions.

IRS Wealth Squad Targets High-Wealth Taxpayers and Their Entities

Posted by Mary McNulty, David Rosenberg, Bill Mureiko, Abbey Garber, Lee Meyercord, Meagan Horn, & Jessica Kirk

     

   

As IRS employees return to their offices and resume audits and collection enforcement efforts, the IRS’s Global High Wealth Industry Group (commonly referred to as the “Wealth Squad”) will embark on an aggressive enforcement campaign targeting high-wealth individuals and the pass-through entities and foundations they control. Targeted taxpayers should understand how the enforcement campaign can impact them and take steps to ensure they are properly prepared for an audit by the Wealth Squad. Our recent client alert provides additional details on the enforcement campaign and steps you can take now to prepare for a potential Wealth Squad audit. Please contact one of the above authors or the Thompson & Knight attorney with whom you regularly work if you have any questions.

IRS Expected to Agressively Target Non-Filers

Posted by Abbey Garber, Mary McNulty, Lee Meyercord, Meagan Horn, and Jessica Kirk

The Treasury Inspector General for Tax Administration (TIGTA) recently released a report finding nearly 880,000 high-income non-filers cost the U.S. government more than $45 billion in lost tax revenue over the years 2014-2016. Now, Congress is demanding answers and action and, in response, the IRS is expected to divert resources to aggressively pursue such noncompliance. A taxpayer who has failed to timely file past tax returns or pay past taxes should take steps now to correct past noncompliance.  More information is available in our recent client alert on this development.  Please contact one of the above authors or the Thompson & Knight attorney with whom you regularly work if you have any questions.

 

IRS Issues Updated Guidance on Employee Retention Credit

Posted by Neely Munnerlyn

    

The IRS has expanded its informal FAQ guidance on the employee retention credit (the “ERC”) which was enacted as part of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The ERC is a refundable payroll tax credit for employers equal to 50% of qualified wages (including allocable qualified health plan expenses) that eligible employers pay their employees after March 12, 2020 and before January 1, 2021. The maximum amount of qualified wages that may be taken into account with respect to each employee is $10,000 (for a maximum credit of $5,000 per employee). 

Employers Should Consider Equity Compensation in Lieu of Cash

Posted by Jason Loden

   

In the current economic climate, employers should consider granting equity compensation to officers and employees in lieu of cash compensation. Subject to the terms of any existing employment agreements or similar contracts, employers may be able to reduce cash compensation paid to employees in exchange for equity incentives. While equity incentives are not typically a replacement for an employee’s base salary, they may be used as a replacement for bonuses and other cash incentives and potentially a portion of an executive’s base salary.

IRS Issues Guidance on Payroll Tax Deferral Provisions in the CARES Act

Posted by Neely Munnerlyn

 

The Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) allows employers and self-employed individuals to defer payment of the employer share of the 6.2 percent social security tax that they are otherwise responsible for paying for the period beginning on March 27, 2020 (the date of enactment of the CARES Act) through December 31, 2020. It requires that the deferred taxes be paid over the following two years, with half of the amount required to be paid by December 31, 2021 and the other half to be paid by December 31, 2022.

Partnerships Can Amend 2018 and 2019 Tax Returns for COVID-19 Relief

Posted by Abbey Garber, Lee Meyercord, and Jessica Kirk

     

Earlier this week the IRS released an advanced version of Rev. Proc. 2020-23, which allows partnerships subject to the centralized audit regime to file amended tax returns and take advantage of retroactive tax relief provisions in the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).