Don’t Be Taken in by Phony IRS Requests

The phone rings. The caller says they are from the Internal Revenue Service and they claim you owe taxes and must submit payment through a wire transfer or prepaid debit card. Or you receive an email supposedly from the IRS asking you to share your bank account, credit card or Social Security number.  What should you do?

The sad truth is that many scammers pretend to be IRS agents as part of identity theft or other criminal activity. If you receive a surprising or suspicious communication purportedly from the IRS, we would urge you to call us immediately. We can help you identify a bogus request for information and work with you to respond to a legitimate IRS contact.  You can also call the IRS directly at 800-829-1040 to verify any communication you receive.

Reference: Clark v. Rameker (June 12, 2014) US Supreme Court, Case No. 13-299.

The US Supreme Court has ruled that inherited IRA accounts are not protected from bankruptcy from creditors, as are non-inherited retirement accounts. Traditional IRAs and other retirement accounts will continue have creditor protections.

The full Court opinion is found at www.supremecourt.gov/opinions/13pdf/13-299_mjnO.pdf.

Reference: CA UIC Sections 984, 2116, 2601, 2613, 2708 and 3254

Starting July 1, 2014, the CA paid family leave (PLF) program aka Family Temporary Disability Insurance program has been expanded to cover workers who take time off to care (up to six weeks) for a seriously ill:

Parent – in –  law

Grandparent

Grandchild OR

Sibling

This program is administered by the CA State Disability Insurance program.

Thank you to the men and women who sacrificed their lives in the defense of our country. Our freedom, our way of life, rested on your shoulders. To all of the veterans, we salute you!

Many clients have inquired about the “CGMA” designation that I earned a couple of years ago:

CGMA stands for “Chartered Global Management Accountant.” It is a proprietary designation for management accountants issued by the American Institute of CPAs (AICPA) and the Chartered Institute of Management Accountants (CIMA).

Emphasis: This designation stresses management accounting services that I have provided to clients including: Product costing analysis, cash budgeting, expansion planning, overhead rate calculations, ratio analysis, and others.  Essentially, offering management accounting services to emerging businesses that large companies have in-house in their accounting departments.

Qualifications: In addition to the education, examination and internship requirements of the CPA license (often a seven year process), the CGMA certification requires an additional three years of management accounting experience.  As of 2014… I have thirty years of post-university experience. I have continually practiced in the area of management accounting in addition to my licensed areas of attestation and taxation under my CPA license.

Citation: Revenue Ruling 2014-2. 

Background: In 2012, the US government and 49 states reached a settlement with five major bank mortgage servicers to place $1.5 billion in a fund in order to pay out settlements to homeowners who had lost homes to foreclosure where improper banking practices had taken place.

Summary: The IRS has determined that the recipients of these payments should treat them as amounts received on the deemed sale of the residence.  This will require amending the return where the foreclosure was originally reported.

Note: Many times, such deemed sales result in no tax assessment due to the Code Section 121 gain exclusion on the sale of a principal residence.  If you have received such a settlement, contact us for proper reporting and possible amendment of your prior return.

Citation: Chief Counsel Advice 200121070 (3/19/01)

Common question: As the sole shareholder and employee of my S corporation, can I deduct my home office?

Short answer: Yes, partially.

This CCA goes into much detail as to the IRS’ position here after IRC Section 280A(c)(6) was added to the tax code as Congress’ answer to Feldman v. Commissioner, 84 T.C. 1 (1985).

IRS preferred treatment: Shareholder/employee completes form 8829 with his/her individual return and (assuming that all home office tests are met) takes the deduction as a miscellaneous itemized deduction of Schedule A of the individual return.

Alternative treatment discussed: The shareholder/employee is paid fair rental for the home office and reports this income on Schedule E as rental income on his/her individual return. However, deductions are limited to only mortgage interest and property taxes (i.e., those items already fully deductible on Schedule A). Essentially, this treatment goes nowhere. The deduction on the S corporation return becomes pure income for the same amount on the individual return.

Planning: Be sure that expenditures 100% traced to the S corporation are paid directly by the corporation. Examples include: Separate internet line, office computer and furniture, window treatment for the office space, etc.

Please call or email for further discussion here.

-Dalton, Mathias & Deever, CPAs, LLP