Michael R. Repoli, CPA,EA
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Senate tax writers on Capitol Hill continue to discuss bipartisan retirement savings bills as the House gears up for a vote on a related tax measure.


President Donald Trump and Democratic congressional leaders have agreed to develop a $2 trillion infrastructure plan, according to Senate Minority Leader Chuck Schumer, D-N.Y.


Highly anticipated proposed regulations have been issued on the withholding required with respect to the disposition of certain partnership interests. The proposed regulations affect certain foreign persons that recognize gain or loss on the disposition of an interest in a partnership that is engaged in a trade or business in the United States, and persons that acquire those interests. Also affected are partnerships that directly or indirectly have foreign partners.


Proposed regulations provide rules on the attribution of ownership of stock or other interests for determining whether a person is a related person with respect to a controlled foreign corporation (CFC) under the foreign base company sales income rules.


Final regulations have been issued on transactions of U.S. taxpayers that have qualified business units (QBUs) with functional currency other than the U.S. dollar.


Medicaid waiver payments were earned income, even though IRS Notice 2014-7 treated them as “difficulty of care” foster care payments that were excluded from gross income. The Tax Court held that excluding the payments from earned income would improperly deny the taxpayers’ earned income credit and the additional child tax credit.


Eleventh-hour votes in Congress in December renewed a package of tax extenders for 2014, created new savings accounts for individuals with disabilities, cut the IRS’ budget, and more. At the same time, the votes helped to set the stage for the 114th Congress that convenes this month. Republicans have majorities in the House and Senate and have indicated that taxes are one of the top items on their agenda for 2015.


The IRS is expected to shortly open the 2015 filing season and both the agency and taxpayers are preparing for some turbulence. The IRS is going into the filing season with a reduced budget, which could translate into fewer audits. Legislation passed by Congress in late 2014 could delay the start of the filing season, although to date, the IRS has not announced a delay. Taxpayers and the IRS are on alert for identity theft, a pervasive problem during filing season. Additionally, new requirements under the Patient Protection and Affordable Care Act kick-in.


Beginning January 1, 2014, the Affordable Care Act (ACA) required individuals to carry minimum essential health coverage or make a shared responsibility payment, unless exempt. Individuals will report on their 2014 federal income tax return if they had minimum essential health coverage for all or part of the year. Individuals who file Form 1040, U.S. Individual Income Tax Return, will indicate on Line 61 if they were covered by minimum essential health coverage for 2014, if they are exempt from the requirement to carry minimum essential health coverage or if they are making an individual shared responsibility payment.


The IRS has announced an increase in the optional business standard mileage reimbursement rate for 2015. The business standard mileage rate increased by one and a half cents, to 57.5 cents (up from 56 cents for 2014). The 2015 standard mileage rate for medical and moving expenses decreased slightly to 23 cents (down from 23.5 cents for 2014). The charitable mileage rate, however, is set by statute at a flat 14 cents per mile without inflation adjustment each year. The revised rates apply to deductible transportation expenses paid or incurred for business or medical/moving expenditures, or qualified charitable miles driven, on or after January 1, 2015.


The upcoming filing season is expected to be challenging for taxpayers and the IRS as new requirements under the Patient Protection and Affordable Care Act kick-in. Taxpayers, for the first time, must make a shared responsibility payment if they fail to carry minimum essential health care coverage or qualify for an exemption. At the same time, there is growing uncertainty over one of the key elements of the Affordable Care Act: the Code Sec. 36B premium assistance tax credit as litigation makes its way to the U.S. Supreme Court.


Under Code Sec. 6020, the IRS has the authority to prepare and file a substitute tax return for a taxpayer who fails to file a timely return. If a taxpayer does not file a return or cooperate with the IRS on a substitute return, the IRS can prepare and sign a substitute return based on the information it has.


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