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Tax Home

Posted on February 14, 2021 at 2:25 PM Comments comments (8581)

Your tax home isn’t always where you live. A self-employed attorney

who had law practices in D.C. and Minn. divided his time between the two locales.

He lived in Minn., and he stayed in a hotel or temporary apartment while in D.C.

In general, your tax home is where your principal place of business is located.

The Tax Court said the lawyer’s tax home is in D.C. He spent more days working

in D.C., most of his business and income was derived from his D.C. practice,

and his work in D.C. was indefinite or indeterminate…not temporary.

His write-off for the cost of his D.C. lodging is toast (Soboyede, TC Summ. Op. 2021-3).

Early Withdrawal of 401-K etc.

Posted on February 14, 2021 at 2:20 PM Comments comments (13775)

The 10% additional tax on early withdrawals is a tax, the Tax Court decides.

A 42-year-old woman who took a distribution from her workplace retirement plan

argued that she wasn’t liable for the 10% levy because it was a penalty or other amount

that required prior written supervisory approval. The Court rejected her claim,

saying the levy is a tax and not a penalty, addition to tax or additional amount.

As a result, prior written supervisory approval is unnecessary (Grajales, 156 TC No. 3).

Stimulus Payments

Posted on February 14, 2021 at 2:15 PM Comments comments (12234)

Be sure to properly account for the stimulus payments you received.

You should have gotten a letter from IRS stating the amount of your first payment.

IRS hasn’t yet sent a notice for the second payment, but it says it intends to do so.

You can also go to to set up a Secure Access account

with multifactor authorization to check the payments IRS says that it sent to you.

Accidentally doubling up on the tax break can slow down any tax refund

that you are otherwise entitled to and increase IRS scrutiny of your entire return.

Self Employed 2020 Update

Posted on February 14, 2021 at 2:15 PM Comments comments (3852)

Schedule SE has been revised to allow for deferral of self-employment taxes.

Self-employeds can defer a portion of their SECA tax on earnings from self-employment from March 27 to Dec. 31, 2020, with half of the deferred amount due Dec. 31, 2021, and the rest on Dec. 31, 2022. Figure the maximum deferral on Part III of Schedule SE.

Include the total SECA tax on line 4, Schedule 2 of the 1040. The deferred amount goes on line 12e of Schedule 3. Opting for deferral doesn’t prevent self-employeds from taking an above-the-line deduction for 50% of their total SECA tax for the year.

Innocent Spouse

Posted on January 31, 2018 at 2:30 PM Comments comments (39926)

A not-so-innocent spouse gets innocent spouse relief in this case.

A couple who later divorced failed to report on their jointly filed return

taxable payouts from the wife’s retirement account, a portion of which was deposited

into the couple’s joint checking account. She claimed on audit that her ex-husband

should be liable for half the deficiency. IRS and the Tax Court let him off the hook

because, although all sides agreed that he should have known about the distribution,

there was no proof that he had actual knowledge of it (Bishop, TC Summ. Op. 2018-1).

Business Losses Write Off

Posted on January 31, 2018 at 2:25 PM Comments comments (17471)

Taking your C corporation’s losses on your individual return is a no-no.

Two brothers who were the sole shareholders in a regular C corporation

that operated a cattle business deducted the firm’s losses on their 1040 returns.

The brothers, who owned the livestock, claimed that the firm acted as their agent.

But its overall business purpose was to manage and run the cattle operation.

It hired and paid employees, took out workers’ comp and other insurance policies,

purchased equipment and feed, and bought and sold cattle in its own name. The losses

belong to the corporation…not its stockholders (Barnhart Ranch Company, 5th Cir.).

Employers are required to file W-2s with the federal government by Jan. 31.

Posted on January 16, 2018 at 1:05 AM Comments comments (2211)

Employers are required to file W-2s with the federal government by Jan. 31.

This deadline matches the due date for sending copies of the forms to employees. The Jan. 31 date also applies to 1099 forms reporting nonemployee compensation.

The Service acted quickly to rein in prepayments of real property taxes.

Posted on January 16, 2018 at 1:00 AM Comments comments (19535)

The Service acted quickly to rein in prepayments of real property taxes.

Prepayments are deductible only if the property tax was assessed in 2017,

IRS says. For example, a county assesses 2017-18 property taxes on July 1, 2017, and bills the taxes in two installments, with the second due Jan. 31, 2018. Individuals who prepaid the second installment in 2017 can take a 2017 deduction for the amount.

But people aren’t able to write off 2017 prepayments of 2018-19 property taxes that won’t be assessed until July 1, 2018, even if the county accepted the prepayments.

Nine Facts About the Adoption Credit

Posted on January 11, 2018 at 10:30 PM Comments comments (27600)

Adoptive parents around the country may qualify for a tax credit. Parents who either adopted a child or tried to adopt a child may claim the adoption credit. Here are nine things you should know about this credit.

Credit. The credit is nonrefundable. This means the credit may only reduce a taxpayer’s tax liability to zero. If the credit is more than the tax owed, the taxpayer can’t receive an additional amount as a refund.

Credit carryover. Taxpayers can carry any unused credit forward to the next year. This happens when the credit is more than the tax owed. In other words, taxpayers who have an unused credit in tax year 2017 can use it to reduce their taxes for 2018. Taxpayers can carry any remaining credits for up to five years, or until they fully use the credit, whichever comes first.

Exclusion. If the taxpayer’s employer helped pay for the adoption through a qualified adoption assistance program, the taxpayer may qualify to exclude that amount from tax.

Eligibility. An eligible child is an individual under age 18. It can also be an individual of any age who is physically or mentally unable to care for themselves.

Special needs child. Special rules apply to taxpayers who adopted an eligible U.S. child with special needs. The taxpayers may be able to take the exclusion even if they didn't pay any qualified adoption expenses.

Qualified expenses. Adoption expenses must be directly related to the adoption of the child. The expenses must also be reasonable and necessary. Types of expenses that can qualify include adoption fees, court costs, attorney fees and travel.

Domestic or foreign adoptions. In most cases, taxpayers can claim the credit whether the adoption is domestic or foreign. However, the rules for which year a taxpayer can claim qualified expenses differ between these two types of adoption.

No double benefit. Depending on the adoption’s cost, taxpayers may be able to claim both the tax credit and the exclusion. However, they can’t claim both a credit and exclusion for the same expenses.

Income limits. The credit and exclusion are subject to income limitations. The limits may reduce or eliminate the amount a taxpayer can claim depending on the amount of their income.

Employers: ACA and Holiday Workers

Posted on December 4, 2016 at 11:15 PM Comments comments (1899)

Employers that hire Holiday Help: Understand the Health Care Law’s Rules Around Seasonal Workers


As an employer, your size – for purposes of the Affordable Care Act – is determined by the number of your employees. If you hire seasonal or holiday workers, you should know how these employees are counted under the health care law.


Employer benefits, opportunities and requirements are dependent upon your organization’s size and the applicable rules. If you have at least 50 full-time employees, including full-time equivalent employees, on average during the prior year, you are an ALE for the current calendar year. However, there is an exception for seasonal workers.


If you have at least 50 full-time employees, including full-time equivalent employees, on average during the prior year, your organization is an ALE. Here’s the exception: If your workforce exceeds 50 full-time employees for 120 days or fewer during a calendar year, and the employees in excess of 50 during that period were seasonal workers, your organization is not considered an ALE. For this purpose, a seasonal worker is an employee who performs labor or services on a seasonal basis.


The terms seasonal worker and seasonal employee are both used in the employer shared responsibility provisions, but in two different contexts. Only the term seasonal worker is relevant for determining whether an employer is an applicable large employer subject to the employer shared responsibility provisions. For information on the difference between a seasonal worker and a seasonal employee under the employer shared responsibility provisions see our Questions and Answers page.