federal tax alert the - nstp · pdf filethe biggest individual and business tax cut in...

The Federal Tax alerT [email protected] MaY / JUNe 2017 1

In This IssueIn The newsWhite house Tax reform Fact Sheet ............................1

Changes to the NSTP hotline ........................3

PRACTICe MAnAGeMenTUnderstanding Transactions that allow for exclusion of Federal Income Tax ...............8

FRoM The BenChare legal Fees deductible? ....6

are Income Taxes dischargeable In Bankruptcy? .........................5

eTCeTeRAa Timely Tip from ennis T. Pea: IrS: Is it really you? .............10

InFoRMATIonTax helpline .........................2NSTP Member Benefits ..........3NSTP Calendar .....................3

NaTIONal SOCIeTY of Tax PrOFeSSIONalS

Federal Tax AlertMAy / JUNE 2017

the

continued on page 7

Goals for Tax Reform• Grow the economy and create millions

of jobs.

• Simplify our burdensome tax code.

• Provide tax relief to American families—especially middle-income families.

• Lower the business tax rate from one of the highest in the world to one of the lowest.

Individual Reform • Tax relief for American families, especially

middle-income families: Reducing the 7 tax brackets to 3 tax brackets of 10%, 25% and 35%.

Doubling the standard deduction.

Providing tax relief for families with child and dependent care expenses.

• Simplification: Eliminate targeted tax breaks that mainly benefit the wealthiest taxpayers.

Protect the home ownership and charitable gift tax deductions.

Repeal the Alternative Minimum Tax.

Repeal the death tax.

• Repeal the 3.8% Obamacare tax that hits small businesses and investment income.

Business Reform • 15% business tax rate. • Territorial tax system to level the playing

field for American companies. • One-time tax on trillions of dollars held

overseas. • Eliminate tax breaks for special interests.

The Office of Management and Budget (OMB) released President Donald Trump’s proposed FY 2018 budget for the federal government on May 23rd. Included in the proposals are several tax items, including a proposal to authorize the IRS to regulate all paid tax return preparers.

The budget proposal calls for giving the IRS “statutory authority to increase its oversight of paid tax return preparers.” The proposal would be effective upon enactment. The OMB’s “Analytical Perspectives” on the budget says that this will decrease the “need for after-the-fact enforcement of tax laws and increase the amount of revenue that the IRS can collect.” It estimates that the proposal will increase revenue by $259 million in the years 2018-2027. An attempt by the IRS to regulate unenrolled tax return preparers was struck down by a federal court in 2013, on the grounds that the Service lacks statutory authority to impose rules on return preparers who are not practicing before

Tax Reform Fact sheet handed out at white house Press Briefing The White House has proposed radical changes to the tax code which includes both

individual and business reform. This proposal would eliminate the estate tax and the alternative minimum tax (AMT). Corporations would not have to pay taxes on their foreign profits and would be able to take advantage of a special, one-time opportunity to bring back cash into the U.S. that is currently retained overseas. While the next days and months will see significant discussion and changes to the initial proposal this is the first effort at tax reform put forward by the Trump Administration.

The following is the fact sheet that was handed out at the White House press briefing that unveiled President Trump’s tax reform plan on April 26, 2017.

Tax Reform for Economic Growth and American Jobs The Biggest Individual and Business Tax Cut in American History

The Ugly 1040

• Las Vegas

More information on page 12

Special Topics

Workshops

• Williamsburg

• Napa Valley

More information on page 11

UPCoMInG evenTs:

ReGIsTeR ToDAY!

2 MaY / JUNe 2017 [email protected] The Federal Tax alerT

Technical Tax advice provided by NSTP Helpline staff is based upon specific information conveyed by the member. Members should take special care in relying upon recommendations and opinions that reflect the understanding of the Helpline staff member. NSTP and the Helpline staff are not responsible for misapplication of information given. Members are responsible for the ultimate verification and application of any information provided by NSTP.

NOTICe • TAX heLPLIne • dIreCT lINe: 360-695-0556

JAnUARY 16 – JAnUARY 31

Monday–Friday

9:00 AM – 2:00 PM PST 10:00 AM – 3:00 PM MST 11:00 AM – 4:00 PM CST 12:00 PM – 5:00 PM EST

FeBRUARY 1 – APRIL 15

Monday, Tuesday & Thursday

6:00 AM – 2:00 PM PST 7:00 AM – 3:00 PM MST 8:00 AM – 4:00 PM CST 9:00 AM – 5:00 PM EST

February 2 – 5, 2016

wednesday & Friday


February 2 – 15, 2016

saturday

8:00 AM – 12:00 PM PST 9:00 AM – 1:00 PM MST 10:00 AM – 2:00 PM CST 11:00 AM – 3:00 PM EST

APRIL 16 – JAnUARY 13

Monday, wednesday & Friday


The Federal Tax Alert is published 6 times a year by the National Society of Tax Professionals.

MAILInG ADDRess: The Federal Tax Alert 11700 NE 95th St., Suite 100 Vancouver, WA 98682

TeLePhone: 800-367-8130

eDIToRs:

Paul La Monaca, CPA, [email protected]

Nina Tross, MBA, EA [email protected]

sUBsCRIPTIon seRvICes:

Delta [email protected]

Opinions expressed in The Federal Tax Alert are those of the editors and contributors.

Refer 3 and Get One Year FREE!Refer 3 new Full Members to NSTP and receive your next year’s dues absolutely FREE! When you refer a new member, make sure they mention your name as their referral so that we can give you credit. When you have referred three new Full Members, you will receive your next year’s membership FREE.

from the eDIToRs

when you call the nsTP heLPLIne, either you will reach a live person or you will be placed on hold in the queue. The system will disconnect after 5 minutes and you will be prompted to leave a message. within 24-48 hours after submitting your question, a nsTP heLPLIne worker will contact you. Please leave your message — YoUR CALL wILL Be ReTURneD.

Nina Tross, MBA, EAnina Tross, MBA, eA

Paul La Monaca, CPA, MSTPaul La Monaca, CPA, MsT

It’s summertime and the IRS is getting busy. The IRS Tax Forum locations have been set, the topics announced and the

full schedule will be announced shortly at irstaxforum.com. Your NSTP instructors, Paul La Monaca (NSTP Treasurer and Director of Education) and Nina Tross (NSTP Executive Director), will be presenting 3 topics at the IRS Tax Forums covering C Corporations, the Schedule C and Substantiating Business Deductions. NSTP will also have a booth in the National Tax Forum Exhibit Hall and we invite those of you at the Forums to come by and visit with us. The membership promotion to bring in three members gets you your next year free is ongoing so we encourage you to bring by your friends, colleagues and staff to ask about membership in the NSTP.

On page 3 is a listing of your membership benefits. Check out the discounts available with our Affinity Partners which can be found on the Members Only page of our website. Also in the Members Only section is an archive of the past editions of the Federal Tax Alert with a directory of topics available alphabetically by title.

And as always you have access to the Tax Helpline (formerly the Tax Hotline) which is debuting a new name with some changes in the program policies (see page 3). NSTP promotes and offers the best choices of education in various formats. The Helpline is designed to supplement your knowledge after you have exhausted the limits of your own education and research resources.

We are tracking what is happening with the Trump administration and Congress as they consider the budget and changes to tax legislation. On page 1 we have introduced the first draft of the budget proposed by the administration and will continue to monitor

the actions of Congress and the President on tax reform.

The NSTP schedule of Fall Update classes is now available; check our website (NSTP.org) to see when we will be in your area. In this issue of the FTA we are also announcing the addition of a special workshop in Las Vegas —preceding the Las Vegas IRS Tax Forum— covering “The Ugly 1040” (see page 12). Many of you have requested a comprehensive program covering the vagrancies of the Form 1040—we will be presenting a 12 hour seminar to answer your questions. The location of the special seminar will be in the Gold Coast Hotel and Casino which is next to the Rio Hotel.

One of the most rewarding classes we offer is the EA Bootcamp which just concluded in Atlanta and will be offered again in October in Las Vegas. We have already heard from 2 students, who scheduled the exams immedi-ately after the class, that they had passed all parts of the Special Enrollment Exam to be-come an Enrolled Agent. As instructors Isaac and I are thrilled to be a part of the success our students realize when they have tried various study venues and end up in our class-room for the guidance we provide to pass the exam. For the first time the regulation of the tax professional has been addressed in the budget proposed by the President. Now is the time to protect your right to practice by earning the Enrolled Agent designation.

The staff, Board of Directors and your editors are dedicated to providing you the best expe-rience as a member of the NSTP. We encour-age you to submit your ideas, suggestions, and complaints to the [email protected]. We love hearing from you about what we are doing right, where we could improve and any challenges you may have encountered.


• Tax Helpline: (see article at right).

• NSTP Dividend Reward Points: Dividend reward points are earned each time you make a purchase with NSTP whether membership, live events, self-study or materials. Dividend points are automatically deposited into your rewards account and accumulated for you. One dividend point is earned for every dollar spent with NSTP. The dividend points never expire as long as your membership in NSTP continues. Your dividend points can then be “spent” on CPE courses and other educational materials. When you don’t have enough points to qualify to receive your entire course for free, you can purchase the rest of the credits at a specified per credit hour rate. This purchase also earns dividend reward points and your rewards account keeps growing!

• Federal Tax Alert technical newsletter (6 Issues)

• Tax Client Newsletter (3 Issues). Brand with your own logo and send to your customers

• Weekly Update email (52 issues) keeps you current and up-to-date

• Federal Tax Update Seminars across the country at member rate to prepare for the upcoming tax season, including ACA information

• Webinars with CE credits: members get reduced price

• Member rate for Ethics, Special Topics and Executive Session Workshops in Williamsburg, VA and Napa, CA

• NSTP Tax Research Service: member rate for expanded research services. You will be provided with a written report including tax sources, tax code and tax law cites as appropriate

• Professional Liability Insurance at group rates

• Beautiful Membership Certificate (suitable for framing) acknowledging your membership in the National Society of Tax Professionals

Are You Aware of Your

nsTP Member Benefits?

For information on NSTP classes and events, go to nsTP.org and click ‘Education’.

June 28 – 30, 2017 summer Classic workshop Williamsburg, VA

July 11 – 13, 2017 IRs Tax Forum • Orlando, FL

July 17 – 19, 2017 west Coast Classic workshopNapa, CA

July 25 – 27, 2017IRs Tax Forum • Dallas, TX

August 22 – 24, 2017IRs Tax Forum National Harbor (DC), MD

August 27 – 28, 2017The Ugly 1040Las Vegas, NV

August 29 – 31, 2017IRs Tax ForumLas Vegas, NV

september 12 – 14, 2017IRs Tax ForumSan Diego, CA

october 23 – 27, 2017eA Bootcamp Las Vegas, NV

2017 nsTP CALenDAR

On May 18, 2017, Paul La Monaca announced that there are new policies in place concerning the operation of the Hotline effective June 1, 2017 as follows:

1. NSTP’s telephone assistance for tax questions has been renamed as the NSTP Helpline.

2. Beginning with each member’s next dues renewal date, each member will now be able to call the NSTP Helpline up to 12 times during each annual dues renewal period with one question permitted with each call to the Helpline. Therefore, each member will receive assistance with 12 free questions each year. Multiple questions on each call will no longer be permitted.

3. Members who have a need for more then 12 questions per each annual dues period can have access to unlimited calls to the Helpline by paying in advance for 10 CPE Credit hours of Education with NSTP. So for example, if a member attends the Annual Fall Update and Review Course which is 8 hours and takes 2 hours of NSTP Webinars, then that member will have unlimited access to the NSTP Helpline.

* Those members who attend any of the NSTP Special Topic Events and Destination Education Seminars will automatically have unlimited access to the Helpline because each of those sessions are at least 12 hours of CPE.

** Executive Members already have unlimited education and assistance for Education!

4. Members who have a need for more than 12 questions per each annual dues period can have access to unlimited calls to the Helpline by paying $29.95 for each additional call above 12 calls, or pay $99 for an additional 6 calls or an additional $149 of annual dues for unlimited access to the NSTP Helpline.

5. Associate Members will also be subject to the same rules as Full members therefore there will be an additional $29.95 for each call above 12 calls, or pay $99 for an additional 6 calls or an additional $149 of annual dues for unlimited access to the NSTP Helpline.

NSTP Helpline hours are posted on the website at NSTP.ORG

Updates & Changes to nsTP hotlineEffective June 1, 2017

Register today at nsTP.org


from the BeNCh

Are Income Taxes Dischargeable in Bankruptcy? It Depends.

It may not be common knowledge but income taxes can be discharged in bankruptcy if certain rules are met.

Not all debts are dischargeable, it de-pends on the chapter under which the case was filed and the nature of the debt. Legal counsel must be retained to assist with the filing of the bankruptcy and the appropriate action to be taken by the tax-payer.

Payroll trust fund taxes, however, are not dischargeable in bankruptcy. Trust fund taxes include payroll taxes that the em-ployer withholds from an employee’s pay and fails to pay the withheld taxes to the appropriate taxing agency. The individual business owner may be assessed the li-ability for trust fund taxes if the business entity is unable or fails to pay the withheld funds to the appropriate taxing agency. (In a separate discussion, an offer in com-promise may be submitted to reduce the liability for the payroll trust fund taxes.)

The Bankruptcy Code sets out specific time periods that determine if the tax-payer can include the tax liability in the bankruptcy, commonly referred to as the “3-2-240 rules.” The taxpayer must meet the requirements of all three rules in order to discharge back income taxes.

To begin with, in order to be discharge-able taxes must meet the three-year rule. That is, they may not be discharged prior to three years after the due date of a return including extensions. Typically, federal and most state income taxes be-come due on or around April 15th of each year. In most cases, it is simply a matter of adding three years to this due date to determine the earliest date you can file for bankruptcy and still discharge your taxes.

ExAMPLE: Joe’s 2008 federal income taxes are due on April 15, 2009. If Joe owes taxes for that year and wants to dis-charge them, the earliest he can file for bankruptcy is April 15, 2012 (April 15, 2009, plus three years).

However, if you get an extension of time to file, the three-year period runs from the date that the taxes are due under the ex-tension.

Example: Joe files for and receives an ex-tension of time in which to file his 2008 taxes to October 15, 2009. The tax due date is now October 15, 2009, rather

than the original due date of April 15th, 2009. If Joe wishes to discharge those taxes, he must wait to file for bankruptcy until October 15, 2012.

The second rule relating to discharging income taxes in bankruptcy is the 2-year rule. This rule in particular applies to late filed tax returns. If a tax return is filed more than 12 months after its due date, two years after the date the return was filed must pass before the tax may be dis-charged. The IRS claims that in certain cases, if they assess liability prior to the taxpayer filing a return, it should not be dischargeable in bankruptcy.

ExAMPLE: Jill’s 2008 income taxes are due on April 15, 2009. She does not get an extension, and she does not get around to filing her tax forms until June 1, 2010. If Jill wants to discharge her 2008 taxes, she cannot file for bankruptcy until June 1, 2012 (two years from the date she filed her tax return and more than three years from the date her taxes were due).

And finally, in order to be discharged in bankruptcy, taxes must also meet the 240-day rule. If the taxes sought to be discharged stem from an audited or amended return, 240 days must pass af-ter the date of assessment prior to dis-charging the tax.

ExAMPLE: Craig files his 2008 tax return on April 15, 2010. The IRS assessed the taxes the same day. Craig met the require-ments of the 3-2-240 rules on April 15, 2013. (This example is a bit simplified. You should always check the actual as-sessment date and not assume it is the same as the filing date.)

AMENDED OR CORRECTED RETURNS AND AUDITS. If the taxpayer files a cor-rected return, or if a change results from an IRS audit, the assessment date may be substantially later. §507 (a)(8)(A)(ii). For that reason, if the taxpayer is in a dis-pute with the IRS regarding how much is owed and plans to file for bankruptcy, the bankruptcy lawyer should be aware of the dispute.

ExAMPLE: Joe files his original return on April 15, 2010. The taxes, along with some penalties and interest, are assessed on December 31, 2010. Joe then files a corrected return on June 1, 2011, show-ing that he owes additional taxes. Based

on this amended return, the IRS assessed new taxes, penalties, and interest on January 1, 2013. Joe must now wait to file for bankruptcy until August 28, 2013 (January 1, 2013, plus 240 days) to dis-charge the entire tax debt. If Joe files for bankruptcy before this new 240 day pe-riod are complete, the taxes assessed in 2010 would still be dischargeable, but the new taxes, penalties, and interest would not be dischargeable.

ExAMPLE: Jill files her 2008 tax return on time on April 15, 2009, and her taxes are assessed shortly after that. However, the IRS audits Jill’s taxes and finds that Jill made a mistake. Unbeknownst to Jill, she owes a few hundred dollars more than the amount shown on her original tax form. The IRS assesses the additional taxes along with some penalties and interest on March 1, 2012. If Jill wants to discharge the newly assessed taxes, penalties, and interest), she will have to wait until Octo-ber 27, 2012, to file for bankruptcy (240 days from the IRS’s new assessment).

Smith v. IRS, No. 14-15857 (9th Cir. 2016…In 2002 a U.S. taxpayer (Smith) failed to file his 2001 tax return by the prescribed due date. In fact, it was not until 7 years following that the taxpayer filed a delin-quent return. At the time the return was filed, approximately 3 years had already passed since the IRS assessed liability against the taxpayer for the 2001 tax year in the form of a Substitute for Return (“SFR”). Subsequent to filing the late return and allowing the two-year period to pass, the taxpayer petitioned for the 2001 taxes to be discharged. The bank-ruptcy court initially granted the taxpayers request.

Unfortunately for the taxpayer however, the IRS contested the ruling by appealing the case to the U.S. District Court. The U.S. District Court found in favor of the IRS. Subsequently, the taxpayer appealed the case to the U.S. Court of Appeals. In their decision, the U.S. Court of Appeals sided with the U.S. District Court and determined that the late filed return was not discharge-able under 11 U.S.C. 523(a)(1)(B)(i). They claimed that a return filed 7 years after its due date and 3 years after an IRS assess-ment was not an “honest and reasonable” attempt to comply with the tax code.

continued on page 5


It depends. continued from page 4

The US Court of Appeals made their de-cision based upon what they determined was and was not an “honest and reason-able” attempt to comply with the tax code. There is some subjectivity in the court’s decision. The take-away here is that even if your clients cannot afford to pay their taxes when they are due, they should still file a tax return and the return should be

filed timely. No one enjoys facing the pos-sibility of needing to file for bankruptcy, but should it become necessary, it is nice to know that one’s taxes will be wiped away with all of their other dischargeable debt.

By filing one’s returns timely, the ability to discharge the tax becomes more black and white. If you have a client who cannot

afford to pay their tax liability, be sure to let them know that not filing their returns limits their options in dealing with their tax issues in the future.

This article is not intended to cover bankruptcy law in general, or to provide detailed discussions of the tax rules for the more complex corporate bankruptcy reorganizations or other highly technical transactions. If you need more guidance on the bankruptcy or tax laws applicable to your situation, you should seek professional legal advice.

The IRS has created a special new page on www.irs.gov to help taxpay-

ers determine if a person visiting their home or place of business claiming to be from the IRS is legitimate or an imposter. With continuing phone scams and in-person scams taking place across the country, the IRS reminds taxpayers that IRS employees do make official, sometimes unannounced, vis-its to taxpayers as part of their routine casework. Taxpayers should keep in mind the reasons these visits occur and understand how to verify if it is the IRS knocking at their door.

Visits typically fall into three categories:

• IRS revenue officers will sometimes make unannounced visits to a taxpayer’s home or place of business to discuss taxes owed or tax returns due. Revenue officers are IRS civil enforcement employees whose role involves education, investigation, and when necessary, appropriate enforcement.

• IRS revenue agents will sometimes visit a taxpayer who is being audited. That taxpayer would have first been notified by mail about the audit and set an agreed-upon appointment time

A TImEly TIp from EnnIS T. pEA

IRs:is it really you?

etCeterA with the revenue agent. Also, after mailing an initial appointment letter to a taxpayer, an auditor may call to confirm and discuss items pertaining to the scheduled audit appointment.

• IRS criminal investigators may visit a taxpayer’s home or place of business unannounced while conducting an investigation. However, these are federal law enforcement agents, and they will not demand any sort of payment. Criminal investigators also carry law enforcement credentials, including a badge.

How to know it’s really the IrS calling or knocking on the doorThe IRS initiates most contacts through regular mail delivered by the United States Postal Service. However, as outlined above, there are special cir-cumstances in which the IRS will call or come to a home or business. Even then, taxpayers will generally first receive sev-eral letters from the IRS in the mail.

Note that the IRS does not call to de-mand immediate payment using a spe-cific payment method such as a prepaid debit card, gift card, or wire transfer. Generally, the IRS will first mail a bill to any taxpayer who owes taxes. Tax pay-ments should be made payable to the “United States Treasury.” Specific guide-lines on how to make a tax payment are also listed at www.irs.gov/payments.

The IRS also does not demand that the individual pay taxes without the oppor-tunity to question or appeal the amount the IRS says is owed. The IRS should also advise the taxpayer of his or her rights. The IRS will never threaten to bring in local police, immigration of-ficers, or other law enforcement to have the individual arrested for not paying. The IRS also cannot revoke an individ-ual’s driver’s license, business licenses, or immigration status. Threats like these are common tactics scam artists use

to trick victims into buying into their schemes.

IRS Pub. 1, Your Rights as a Taxpayer, states taxpayers have the right to retain an authorized representative, such as an Enrolled Agent, CPA, or an Attorney to represent them in their dealings with the IRS. This right of representation includes unannounced visits by IRS employees. If a taxpayer is not sure whether someone claiming to be from the IRS is legitimate, the taxpayer should call an authorized representative for help. A quick way to find an authorized representative is to type the taxpayer’s zip code into the online lookup tool at https://irs.treasury.gov/rpo/rpo.jsf. If an IRS criminal inves-tigator shows up at the taxpayer’s door, call an Attorney.

If an IRS representative does visit a taxpayer, he or she will always provide two forms of official credentials called a pocket commission and a HSPD-12 card. HSPD-12 is a government-wide standard for secure and reliable forms of identification for federal employees and contractors. A taxpayer has the right to see these credentials when an IRS em-ployee visits a taxpayer in person.

private debt collectionIRS collection employees may call or come to a home or business unan-nounced to collect a tax debt. They will not demand that the taxpayer make an immediate payment to a source other than the “United States Treasury.” The IRS can also assign certain cases to pri-vate debt collectors but only after giving the taxpayer and his or her representa-tive written notice. Private collection agencies will not ask for payment on a prepaid debit card or gift card. Taxpayers can learn about the IRS payment options on www.irs.gov/payments. Payment by check should be payable to the “United States Treasury” and sent directly to the IRS, not the private collection agency.


In a notice of deficiency respondent determined deficiencies with respect to petitioners’ 2010 and 2011 Federal income tax of $7,166 and $14,189, respectively. The issue for decision is whether the amounts of $25,000 and $55,798 that petitioners deducted as legal fees for 2010 and 2011, respectively, should have been claimed as miscellaneous itemized deductions subject to limitation under section 67(a) as respondent determined.

Background

In 2008 Seattle Bank hired Ms. Sas as president and chief executive officer. On or around July 9, 2010, Ms. Sas received a “change of control” bonus of $612,000. Petitioners reported the bonus as wage income on their 2010 Form 1040, U.S. Individual Income Tax Return. On September 14, 2010, Seattle Bank terminated Ms. Sas’ employment. On November 3, 2010, Seattle Bank filed a complaint against Ms. Sas alleging breach of fiduciary duty and attempting to recover the $612,000 bonus. On January 3, 2011, Ms. Sas filed her answer and counterclaims. Her counterclaims included a claim of employment discrimination.

All parties involved signed a settlement agreement and mutual releases effective May 17, 2011. The settlement agreement and mutual releases provide that Seattle Bank and Ms. Sas each pay nothing and release and dismiss all claims against each other. Petitioners paid $25,000 and $55,798 in legal expenses associ-ated with this lawsuit in 2010 and 2011, respectively.

During 2010 and 2011 petitioners maintained an accounting and consulting business although the record is unclear as to whether there was more than one business and as to Ms. Sas’ role. Petitioners filed a Schedule C, Profit or

Loss From Business, with their 2010 Form 1040, reporting Mr. Jones as the sole proprietor. Petitioners’ 2011 tax return is not part of the record, and their transcript for tax year 2011 indicates they reported no income on Schedule C and $293,385 on Schedule E, Supplemental Income and Loss. We assume for purposes of our analysis, and therefore find, that petitioners coowned an accounting and consulting business in 2011 and reported income from their business on their 2011 Schedule E.

On petitioners’ Forms 1040 for 2010 and 2011 they reported “other income” in the negative amounts of $25,000 and $55,798, respectively, for the legal fees paid for the lawsuit with Seattle Bank. The notice of deficiency disallowed these expenses as negative other income but allowed them as miscellaneous itemized deductions subject to the limitation in section 67(a), reducing the deductible amounts to $4,525 and $50,579 for 2010 and 2011, respectively. Petitioners timely petitioned the Court for redetermination while residing in the State of Washington.

Discussion

Ordinarily, the burden of proof in cases before the Court is on the taxpayer. Rule 142(a)(1); Welch v. Helvering, 290 U.S. 111, 115 (1933). Under section 7491(a), in certain circumstances, the burden of proof may shift from the taxpayer to the Commissioner. Petitioners have not claimed or shown that they meet the specifications of section 7491(a) to shift the burden of proof to respondent as to any relevant factual issue.

Deductions are a matter of legislative grace, and a taxpayer must prove his or her entitlement to a deduction. IN-DOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934).

Analysis

The parties do not dispute the amounts of legal fees incurred or their deductibil-ity; the only dispute is whether the legal fees are miscellaneous itemized deduc-tions subject to limitation under section 67(a). Petitioners offer two theories for deducting the legal fees without limita-tion. First, they claim that the legal fees are deductible under section 62(a)(20) as legal fees paid in connection with an action involving a claim of unlawful dis-crimination. Alternatively they argue that the legal fees are deductible under sec-tions 62(a)(1) and 162 as ordinary and necessary business expenses.

A. Section 62(a)(20): Generally, when a litigant’s recovery constitutes taxable income, that income includes the portion of the recovery paid to the litigant’s attorney. Commissioner v. Banks, 543 U.S. 426 (2005); Johnson v. Commissioner, T.C. Memo. 2009-156. Section 62(a)(20) allows a deduction for the litigant’s legal fees and court costs in connection with any action involving a claim of unlawful discrimination as defined under section 62(e). In addition to requiring a claim for unlawful discrimination, section 62(a)(20) provides that the section “shall not apply to any deduction in excess of the amount includible in the taxpayer’s gross income for the taxable year on account of a judgment or settlement resulting from such claim.”

Petitioners attempt to fit their claimed deductions within this limitation by arguing that Ms. Sas included the bonus as income when it was received and was able to retain the bonus because of her counterclaims. Therefore, they reason, Ms. Sas’ bonus was included in petitioners’ gross income on account of a judgment or settlement relating to her action. Contrary to petitioners’ view,

from the BeNCh

Are Legal Fees Deductible?The answer is—it depends! Generally, it depends on the nature of the expense. Legal expenses incurred for business purposes are generally deductible as ‘ordinary and necessary’ expenses of the business entity. However, most legal fees paid for personal reasons are not deductible. There are situations, though, where legal fees may be incurred that affect both business and personal matters such as a divorce or in dealings related to a business activity. For instance, under a special tax law provision, an individual may deduct expenses paid in connection with a claim of unlawful discrimination.

EllEn m. SAS AnD roGEr A. JonES, petitioners v. CommISSIonEr of InTErnAl rEVEnUE, respondent Docket no. 14447-14S.

continued on page 7


the “amount includible in the taxpayer’s gross income” cannot reasonably be interpreted to include prevention of potential loss of income that would be includible in the absence of any claim. Ms. Sas’ bonus was received and includible in petitioners’ gross income because of her employment with Seattle Bank. Under the settlement agreement between Ms. Sas and Seattle Bank, neither party received any amount includible in gross income. Assuming arguendo that Ms. Sas’ counterclaims were in connection with unlawful discrimination, Ms. Sas did not receive, and petitioners did not include in gross income for 2010 or 2011, any amount because of the settlement of her claims. Because the entire amount of petitioners’ legal fees was “in excess of the amount includible in * * * [their] gross income for the taxable year on account of” the settlement, petitioners may not deduct any of the legal fees under section 62(a)(20).

B. Section 162: Petitioners argue, in the alternative, that the legal fees are deductible as ordinary and necessary business expenses under section 162. Expenses are deductible under section 162 if the taxpayer establishes that they were ordinary, necessary, and paid or incurred during the tax year and were directly connected with, or proximately resulted from, a trade or business of the taxpayer. See Commissioner v. Lincoln Sav. & Loan Ass’n, 403 U.S. 345, 352 (1971); Kornhauser v. United States, 276 U.S. 145, 153 (1928); O’Malley v. Commissioner, 91 T.C. 352, 361, 362 (1988).

The deductibility of legal fees under section 162 depends on the origin and character of the claim for which the legal fees were incurred and whether

Tax Reform continued from page 1

the IRS (Loving, 742 F.3d 1013 (D.C. Cir. 2/11/14), aff’g 917 F. Supp. 2d 67 (D.D.C. 1/18/13)).

The budget also calls for giving the IRS more flexible authority to address correctable errors. The proposal would expand the IRS’s authority to correct errors on a return to include cases where (1) the information provided by the taxpayer does not match information the IRS has in its databases; (2) the taxpayer has exceeded the lifetime limit for claiming a particular

credit or deduction; or (3) the taxpayer has failed to include with the return required documentation.

IRS fundingThe budget also calls for $10.975 billion in funding for the IRS. (This compares with $11.2 billion in funding for FY 2017 in the recently enacted Consolidated Appropriations Act, 2017, P.L. 115-31.) This amount includes $2.2 billion for taxpayer services, $4.7 billion for enforcement, and $3.9 billion for

operations support. The proposal would also give the IRS $110 million for business systems modernization.

ProcessThroughout the month of May, the Trump administration will hold listening sessions with stakeholders to receive their input and will continue working with the House and Senate to develop the details of a plan that provides massive tax relief, creates jobs, and makes America more competitive—and can pass both chambers.

that claim bears a sufficient nexus to the taxpayer’s business or income-producing activities. See United States v. Gilmore, 372 U.S. 39 (1963). The Supreme Court stated that “the origin and character of the claim with respect to which an expense was incurred, rather than its potential consequences upon the fortunes of the taxpayer, is the controlling basic test”.

Petitioners do not argue that Ms. Sas’ claim was rooted in their accounting business; rather, they argue that the lawsuit would have an adverse effect on Ms. Sas’ professional reputation which in turn could damage the reputation of their accounting business. Therefore, petitioners contend, the legal fees were necessary expenses of their business.

The Court in Test v. Commissioner, T.C. Memo. 2000-362, 2000 WL 1738858, aff’d, 49 F. App’x 96 (9th Cir. 2002), dealt with a similar issue. In Test the taxpayer pursued legal claims related to her employment with the University of California, San Francisco (UCSF) as director of the Center of Prehospital Research and Training in part because she feared harm to her reputation which, in turn, would harm a business, Save-a-Life Systems (SLS), that she operated independent of her position at UCSF. While she was launching SLS, the tax-payer’s UCSF department became the subject of a State audit. Before a draft of the audit report was released publicly, the San Francisco Examiner published several stories about the audit. During this time the taxpayer retained counsel to respond to the negative publicity and attempted to prevent the public release of the draft of the audit report, among other things. The taxpayer claimed that she did so primarily to maintain her professional reputation which was

important to the success of SLS. We held that we must look to the origin of the claim and that the taxpayer’s mo-tives were not relevant. Because the claim originated in her employment at UCSF, not with her operation of SLS, the legal fees could not be claimed as business deductions on Schedule C but rather were properly claimed as miscellaneous itemized deductions on Schedule A, Itemized Deductions.

While petitioners may have been right that the return of Ms. Sas’ bonus could harm her professional reputa-tion and in turn petitioners’ account-ing business, we must look to the origin of the claim, not the potential consequences of a win or loss. We find that Ms. Sas’ claims arose from her status as a former employee of Seattle Bank, not from petitioners’ accounting business, and petitioners hired an attorney because Seattle Bank was attempting to claw back a bonus Ms. Sas received in connec-tion with her employment at Seattle Bank. Therefore, petitioners are not permitted to deduct the legal fees as ordinary and necessary expenses of their business under section 162.

Conclusion Because we sustain respondent’s deter-mination that petitioners must deduct the legal fees as miscellaneous itemized deductions subject to the 2% limitation in section 67(a) rather than under either section 62(a)(20) or section 162, we also sustain the increase to petitioners’ alternative minimum tax of $12,888 for tax year 2011, which is a computational adjustment.

Decision will be entered for respondent.

Legal Fees continued from page 6

n

n


continued on page 9

PrACtICe mANAGemeNt

Understanding Transactions That Allow for exclusion of Federal Income TaxThe main goal in federal income tax is

to exclude as many items from being included in gross income as possible. As a tax professional it is most important that we remember that the preparation of the federal income tax return is a history lesson of the transactions which took place during a completed tax year which now must be reported. Once a tax year has closed, there is virtually little that can be done to unravel the tax that will be assessed on those transactions. This is why the tax professional needs to focus on the planning side of federal tax issues.

There are three main strategies in federal taxation. They are exclusion, deferral and capital gains. For exclusion transactions, the goal is that the tax is never paid. Although there may be a sale, exchange or disposition of property or the earning of income from some other source, the tax will never be paid.

For deferral transactions, the goal is that the tax is not paid in the current tax year but instead is pushed into a future tax year which could be the immediate subsequent year or 10 to 20 years from the current tax year.

For capital gain transactions, the goal is that if the tax must be paid, then it is paid at a rate that has preferential treatment. Under current law, the long-term capital gain rate has the possibility of being 0%, 15% and 20% which is substantially lower than the high marginal rates in our graduated rate system.

Tax professionals need to discuss these goals with their clients by reminding them of the opportunities of specified provisions in the law. The starting point in tax planning is in §61 of the Internal Revenue Code. §61(a) provides a general rule that gross income means all income from whatever source derived unless there is a specific exception exemption or exclusion. In this Federal Tax Alert (FTA) we are bringing a few provisions to your attention that addresses the exclusion of income from federal taxation. In future FTA issues we will discuss other tax provisions that allow for the deferral or reduction of federal tax liability.

Exclusion of Disability Income Benefits ReceivedThe first exclusion that we want to bring to your attention is §104 which is Exclusion of Disability Income Benefits Received. §104 provides that disability income, both short-term and long-term, are excluded from gross income if the individual paid the premiums on the disability policy or contributed (on an after-tax basis) to an employer-sponsored disability plan [§104(a)(3) and §105; Rev. Rul. 58-90; Ltr. Rul. 200305013]. It is important to understand that disability income is included in gross income if an employer contributes to a funded plan or pays the policy’s premiums for the employee.

In a Tax Court case, when a taxpayer reimbursed his firm for disability premiums paid by the firm by deducting the premium amounts from his shareholder loan account, the Tax Court ruled that disability benefits received by the taxpayer were excludable from his gross income under §104(a)(3). From the inception of the policy until the premiums were waived, the taxpayer treated the premiums as personal items and paid his share of the premiums through his loan account. The firm never deducted the premiums as a business expense (Cotler).

Disability exclusion issues are also addressed in §105. §105(c) provides that payments for the loss of use or function of the body (e.g., limb) are always excluded from gross income. Individuals receiving taxable disability income for permanent and total disability may be able to claim the credit for the elderly or disabled. Refer to IRS Publication 524, “Credit for the Elderly or the Disabled.”

The regulations under Reg. §1.105-1(d)(2) state that for group policies pur-chased with both employer and employee contributions, the taxable portion of any benefits received is determined by the ratio of premiums paid by the employer to total net premiums for the three most recent years for which net premiums are known. This three-year look back rule can cause a portion of benefits paid under group disability insurance to be included in gross income if the employer has paid

some or all of the premiums in the past, even if the employee paid all the premi-ums in the year the benefits are received. Employer sponsored plans that allow employees to annually elect whether dis-ability insurance is paid with employer or employee funds are not subject to the look back rule (Rev. Rul. 2004-55). If the employee becomes disabled in a year in which he or she has elected to have the coverage paid with his own funds (i.e., after-tax), then any resulting ben-efits are excluded from gross income.

On the flip side, any benefits attributable to a disability that occurs in a year the employee elected to have the coverage paid by the employer (i.e., pre-tax) are included in gross income. A plan that is amended to allow employees to make the annual election is considered a new plan. As a result, the look back rule does not apply to the amended plan. These rules apply to both short-term and long-term disability benefits.

Note that the Social Security Disability Income benefits are treated in the same manner as other Social Security benefits pursuant to §86. In Reimels vs. Commis-sioner (123 T.C. 245, No. 13) a veteran’s social security disability benefits could not be excluded from gross income even though the benefits resulted from exposure to Agent Orange during the Vietnam War.

Exclusion of Workers’ Compensation BenefitsAnother exclusion item that often needs to be addressed is Exclusion of Workers’ Compensation Benefits and the interplay of Social Security Benefits. §104(a)(1) provides that amounts received by an employee as compensation under state or federal workers’ compensation act for personal injuries or sickness incurred on the job are excluded from gross income, unless the amounts received offset previ-ously deducted medical expenses.

However, you must be aware that there are traps. To the extent the workers’ compensation benefits reduce or offset Social Security benefits, they are treated and taxed as Social Security benefits under §86(d)(3). (Mikalonis John M., (2000) TC Memo 2000-281).


In addition, amounts received under a private arrangement such as between a corporation and shareholder-employee, are includable in gross income since they are not received pursuant to a workers’ compensation statute (American Foundry 536 F. 2d 289 37 AFTR 2d 76-1373 9rh Cir.1976).

Pursuant to §86 of the Internal Revenue Code, a taxpayer may have to include either 50% or 85% of his Social Security benefits (or Tier 1 Railroad Retirement Act benefits) in gross income, depending on the amount of other income and the amount of the benefits themselves. §86(d)(3) provides that if a taxpayer’s Social Security benefit is reduced, under Section 224 of the Social Security Act (42 USC 424a) or Section 3(a)(1) of the Railroad Retirement Act of 1974 (45 USC 231b), to offset a benefit received under a workers’ compensation act, then the part of the workers’ compensation benefit received that equals the reduction is treated as a social security benefit. This was the result where the only social security benefits that a taxpayer was entitled to receive were Social Security Disability Income (SSDI) payments (treated as includable social security benefits). The taxpayer applied for the SSDI only because she was required to do so by her long-term disability plan. (Geiszler, Robert P. Jr., (2002) TC Summary Opinion 2002-141.)

ExAMPLE #1: Noel was entitled to $10,000 of SSDI payments, but got only $6,000 because he received $4,000 of workers’ compensation benefits. He is considered to have received $10,000 of social security benefits. (S. Rept. No. 98-23 (PL 98-21) P. 26).

ExAMPLE #2: Keith is entitled to Tier 1 railroad retirement benefits of $450 a month, but the benefit is reduced to $400 a month because of an offset from his $50 a month workers’ compensation benefit. He is considered to have received $5,400 of Tier 1 benefits during the year ($450 x 12 months). (See IRS Publication 925 p. 25)

This result is not affected by the fact that workers’ compensation benefits are

generally excludable from gross income. (Willis, George L., (1997) TC Memo 1997-290).

In a 2011 Tax Court case the taxpayer suffered two work-related injuries, endured 12 surgeries as a result, and received workers’ compensation. Taxpayer also applied for and received SSDI payments, which were offset by $30,663 of the workers’ compensation, resulting in an actual receipt of only a minimal amount of Social Security benefits. But the offset amount was still treated as Social Security benefits under §86(d)(3) so most of it was includable in gross income. If the taxpayer had not applied for Social Security benefits, then the workers’ compensation would not have been includible in gross income.

The Tax Court stated that it appreciated the taxpayer’s “dismay,” but was bound to apply the law. (Sherar, Kevin L., TC Summary Opinion.)

The taxpayer in Sherar ap-plied for SSDI payments on the advice of counsel. Tax-payers in the same position should consider not applying for Social Security disability benefits if they would result in only minimal amounts of

actual benefits and convert excludable workers’ compensation into taxable social security benefits.

In two separate Tax Court cases taxpayers’ Social Security Disability Income benefits were reduced or offset by their workers’ compensation benefits (about $34,000 in one case and about $36,000 in the other). The reductions or offsets were treated as a taxable Social Security benefits and not as excludable workers’ compensation. (Thompson, John Jr., (2016) TC Summary Opinion 2016-20; Carrancho, Tony (2015 ) TC Summary Opinion 2015-29).

The Form SSA-1099 that a taxpayer receives from the Social Security Administration (SSA) will reflect, in the Benefits Paid box, the total amount of benefits paid, including the workers’ compensation offset. The amount of the total that is attributable to the workers’ compensation offset also will be separately stated on the form. (See IRS Publication 915, page 25)

Certain Combat Zone Compensation of Members of the Armed Forces and Military Income and Related IssuesAnother exclusion item that tax professionals want to be aware of is §112, Certain Combat Zone Compensation of Members of the Armed Forces and Military Income and Related Issues. Active members of the U.S. Armed Forces are subject to special tax rules. An active member of the U.S. Armed Forces includes commissioned officers and enlisted personnel in all regular and reserve units under the control of the Secretaries of the Defense, Army, Navy and Air Force. The Armed Forces also include the Coast Guard, but not members of the U.S. Merchant Marine or the American Red Cross.

Active members of the U.S. Armed Forces receive many types of pay and benefits that are excludable from income, including certain pay received by members serving in designated combat zones, living and house allowances, family, moving and travel allowances, and in-kind military benefits (e.g., medical and dental care, legal assistance, dependent care and travel on government aircraft).

§112(a) provides exclusion rules for enlisted personnel. Gross income does not include compensation received for active service as a member below the grade of commissioned officer in the Armed Forces of the United States for any month during any part of which such member: served in a combat zone, or was hospitalized as a result of wounds, disease or injury incurred while serving in a combat zone. This exclusion shall not apply for any month beginning more than 2 years after the date of the termination of combatant activities in such zone.

§112(b) provides exclusion rules for commissioned officers. Gross income does not include the compensation that does not exceed the maximum enlisted amount received for active service as a commissioned officer in the Armed Forces of the United States for any month during any part of which such officer: served in a combat zone, or was hospitalized as a result of wounds, disease or injury incurred while serving in a combat zone. This exclusion shall not apply for any month beginning more than

Understanding Transactions that Allow for exclusion... continued from page 8

continued on page 10

There are three main strategies in federal taxation: exclusion, deferral and capital gains.


2 years after the date of the termination of combatant activities in such zone.

Note that §112(c)(1) provides that the term “commissioned officer” does not include a commissioned warrant officer.

§112(c)(2) provides that the term “combat zone” means any area which the President of the United States by Executive Order designates, for purposes of the law or corresponding provision of prior income tax laws, as an area in which Armed Forces of the United States are or have engaged in combat. §112(c)(3) provides that service is performed in a combat zone only if performed on or after the date designated by the President by Executive Order as the date of the commencing of combatant activities in such zone, and on or before the date designated by the President by Executive Order as the date of the termination of combatant activities in such zone.

The combat zone income exclusion in §112(a) is available only for compensation paid by the U.S. Armed Forces to members of the Armed Forces. A private U.S. citizen performing work in a designated combat zone is not eligible for the exclusion from income [Reg. §112-1(a)(4): Holmes, T.C. Memo 2011-26].

§112(c)(4) provides that the term “compensation” does not include pensions and retirement pay. §112(c)(5) provides that the term “maximum enlisted amount” means, for any month, the sum of: the highest rate of basic pay, payable for such month to any enlisted member of the Armed Forces of the United States at the highest pay grade applicable to enlisted members, and in the case of an officer entitled to special pay under §310, or paragraph (1) or (3) of §351(a), of title 37, United States Code, for such month, the amount of such special pay payable to such officer for such month.

It is important to note that there are special rules for filing returns for specified military personnel. The due date for filing returns, paying tax, or claiming a credit or refund is extended while taxpayers are serving in a combat zone or are deployed outside of the U.S. and participating in contingency operations. If a member of the Armed Forces dies while serving in a combat zone, or from wounds, disease or injury incurred while doing so, his or

her income tax liability is forgiven for the year of death. It is also forgiven for any previous tax year (still open under the statute of limitations) that ended on or after the first day the member was in active service in a combat zone. §692 provide that similar tax forgiveness applies to military or civilian U.S. employees who die from wounds or injury incurred in a terrorist or military action. See Rev. Proc 2004-26 for procedures for filing requests for credit or refund under these rules.

Designated combat zones can be identified at the IRS website (www.irs.gov) by entering the words “combat zone” in the search feature. For more information on these and other special issues that apply to members of the Armed Forces, see IRS Publication 3, “Armed Forces’ Tax Guide.” Also refer to IRS Notice 2002-17 for specific guidance on the tax relief provided for U.S. military and support personnel involved in military operations in Afghanistan, and Notice 2003-21 for tax relief guidance for military and support personnel involved in Operation Iraqi Freedom. In addition, the IRS website at www.irs.gov/Individuals/Military has a page called “Tax Information for Members of the U.S. Armed Forces” covering various tax-related military topics.

Of great importance is the Hospitalization Effect on Eligibility for Combat Zone Compensation Exclusion. Reg. §1.112-1(a)(1) states that hospitalized members of the armed forces, prisoners of war and members missing in action are entitled to the combat zone compensation exclusion. The exclusion is available if a member is hospitalized for a part of a month while the member was serving in a combat zone. Reg. §1.112-1(b)(3). If an individual is hospitalized for a wound, disease, or injury while serving in a combat zone, then the wound, disease, or injury is presumed to have been incurred while the individual was serving in a combat zone, unless the contrary clearly appears. In certain cases, however, a wound, disease, or injury may have been incurred while serving in a combat zone even though the individual was not hospitalized for it while so serving. In exceptional cases, a wound, disease, or injury will not have been incurred while serving in a combat zone even though the individual was hospitalized for it while so serving. (Reg. §1.1121(c)(1)) Reg. §1-

112-1(c)(2) states that an individual is hospitalized only until the date that he is discharged from the hospital.

ExAMPLE #1: A soldier is hospitalized in a combat zone for a specific disease after having served in the combat zone for three weeks. The incubation period for the disease is from two to four weeks. The disease is presumed to have been incurred while he was serving in the combat zone. (Reg. §1.112-1(c)(3) Example 1.)

ExAMPLE #2: The facts are the same as in Example #1 except that the incubation period is one year. The disease is presumed not to have been incurred while the member was serving in a combat zone. (Reg. §1.112-1(c)(3) Example 2.)

ExAMPLE #3: A soldier is hospitalized for a specific disease three weeks after having left a combat zone. The incubation period is two to four weeks. The disease is presumed to have been incurred while he was serving in the combat zone. (Reg. §1.112-1(c)(3) Example 4.)

ExAMPLE #4: An Air Force pilot stationed outside a combat zone is shot while flying over the combat zone. He is not hospitalized until he returns to his home base. The injury was incurred while he was serving in the combat zone. (Reg. §1.112-1(c)(4) Example 3.)

§112 provides that in the case of pay received while hospitalized, the exclusion does not apply for any month beginning more than two years after the end of combat activities in the combat zone, i.e., after the date of termination of the designation of the area as a combat zone. (Notice 2003-21 Q&A-5, 2003-17 IRB 817.)

A similar rule applies for a Qualified Hazardous Duty Area which is treated as if it were a combat zone (PL 104-117.) The hospitalization exclusion does not apply to pay received for any month beginning more than two years after the date of the termination of the qualified hazardous duty area designation. (Notice 96-34, Q&A-7, 1996-1 CB 379; Notice 2002-17, Q&A-5, 2002-9 IRB 567.)

All of these provision discussed will better equip you in planning with your clients and in the preparation of their tax returns.

Understanding Transactions that Allow for exclusion... continued from page 9

n


NSTP’S 2017 SPeciAl ToPicS WorkShoPFull course description, visit nstp.org

2017 Williamsburg, VASpecial Topics Workshop - June 28-30, 201715 cpe in the historic city of Williamsburg

Ethics Session: Wednesday, June 28, 2017Ethics for the Tax Professional in 2017 Including Circular 230 Issues and Practice Before the IRSCPe: 2 ethicsInstructor: Paul la Monaca, CPa, MSTSession Begins: 9:00 aM - Session Concludes: 10:40 aM

Executive Session: Wednesday, June 28, 2017Clergy Taxation, Benefits and CompensationCPe: 4 Federal Tax lawInstructor: James e. Ward, Sr. eaSession Begins: 1:00 PM - Session Concludes: 4:40 PM

Special Topics Workshop Day 1: Thursday, June 29, 2017Federal Income Tax Concepts Needed to Prepare Fiduciary Form 1041 and the Final Form 1040 of a DecedentCPe: 5 Federal Tax lawInstructor: Paul la Monaca, CPa, MSTSession Begins: 8:00 aM - Session Concludes: 12:40 PM

Special Topics Workshop Day 2: Friday, June 30, 2017The Tax Professional’s Guide to Understanding the Value of the Federal Income Tax Benefits of Qualified Higher Education Expensed and Investing in Educational Savings ProgramsCPe: 3 Federal Tax law & 1 Federal Tax UpdateInstructor: Paul la Monaca, CPa, MSTSession Begins: 8:00 aM - Session Concludes: 12:40 PM

Ethics Session: Monday, July 17, 2017Ethics for the Tax professional in 2017 Including Circular 230 Issues and practice Before the IrSCPe: 2 ethicsInstructor: Nina Tross, ea, MBaSession Begins: 9:00 aM - Session Concludes: 10:40 aM

Executive Session: Monday, July 17, 2017Introduction and Discussion of the Impact of 2017 Tax legislation of the Trump AdministrationCPe: 4 Federal Tax lawInstructor: Paul la Monaca, CPa, MST registration: 12:30 PM - Session Concludes: 4:40 PM

Special Topics Workshop Day 1: Tuesday, July 18, 2017The Tax professional’s Guide to Walking Down the Schedule CCPe: 4 Federal Tax law & 1 Federal Tax UpdateInstructor: Paul la Monaca, CPa, MSTSession Begins: 8:00 aM - Session Concludes: 12:40 PM

Special Topics Workshop Day 2: Wednesday, July 19, 2017Starting a non-profit: form 1023 and form 990CPe: 4 Federal Tax lawInstructor: Nina Tross, ea, MBaSession Begins: 8:00 aM - Session Concludes: 11:40 aM

2017 Napa Valley, CA Special Topics Workshop - July 17-19, 2017Explore Napa Valley & earn 15 cpe in 3 days

Take the time to explore Williamsburg!Classes end early on Thursday and Friday

so plan on enjoying the local area that is filled with history.

Explore Napa Valley with NSTPBalloons Above the Valley • Wine Country Tour Shuttle

Napa Valley Wine Train • Oxbow Public MarketThe hess Collection Winery and art Museum


2017 Las Vegas Special Topics Workshop | August 27-28, 2017

Cyber Coverage now included with Errors & Omissions policies at no additional premium.

how about a trip to

Las vegas? The irS announced that the irS Forum has returned to las Vegas and NSTP will be there! Join us for a 12 hour education session on “the Ugly 1040.” We will meet from 1:00PM to 5:00PM on Sunday and 8:00AM to 4:30PM on Monday at the Gold coast hotel and casino—conveniently located right behind the rio hotel where the irS Forum will take place.

COURSE DESCRIPTION: This course provides for the identification of critical issues which can arise when preparing the Form 1040. It discusses traps and surprises that the Tax Professional needs to be alerted to in order to properly prepare the return and provide proper planning and recommendations to clients. This course is for every tax professional no matter the level of experience.

LEARNING OBJECTIVES: At the completion of this course, participants will be able to:

Executive Rate: $ 0

Member Rate: $ 309.00

Non-Member Rate: $ 419.00

• Identify critical transactions which require specific reporting

• Properly explain critical issues and solutions to clients

• Carefully maneuver through the 1040 to avoid traps and pitfalls

• Better prepare the 1040 for audit proofing

• Outline compliance challenges and requirements

• Determine proper income, deduction, and credit issues

Ugly 1040 schedule: August 27, 2017 Registration: 12:30 PM

Session Begins: 1:00 PM

Session Concludes: 5:00 PM

schedule: August 28, 2017 Registration: 7:30 AM

(Continental Breakfast)

Session Begins: 8:00 AM

Lunch: 12:00 PM – 1:00 PM

Session Resumes: 1:00 PM

Session Concludes: 4:30 PM

the

For full course description or to register, visit NSTP.org.

Here’s a no-cost, policy endorsement designed to cover damages that would typically result from a cyber attack on your business. Identity theft damages, for example, could include expenses associated with crisis management, client notification and credit monitoring, cyber investigation, and much more.

This Network Security, Data Breach and Theft of Data coverage is yet one more reason to purchase your E & O insurance from the American Tax Preparers Purchasing Group (ATP). The ATP offers low, group rates to thousands of tax professionals across the U.S. (all states except AK, HI & LA). Coverage is provided by a national insurance company rated A+, and the program is administered by Target Professional Programs.

The ATP Program is endorsed by the National Society of Tax Professionals.

Target’s online application makes it easy to determine the cost of coverage for your firm. Visit www.TargetProIns.com and choose Tax Preparers under the Applications tab. Or contact Target and we’ll be happy to help.

Shelley Cvek 331-333-8240 [email protected]

© 2017 Target Professional Programs is a division of and operates under the licenses of CRC Insurance Services, Inc., CRC of CA Insurance Services, CA Lic No 0778135. No claim to any government works or material copyrighted by third parties. Nothing in this communication constitutes an offer, inducement, or contract of insurance. Financial strength and size ratings can change and should be reevaluated before coverage is bound. This material is for educational use only. It is not meant to be an offer of insurance directly to insureds or business owners. Equal Opportunity Employer – Minority/Female/Disabled/Veteran.

federal tax alert the - nstp · pdf filethe biggest individual and business tax cut in...

Documents