Monthly News: December 2019

The IRS is focusing on tax compliance and increasing enforcement actions in 2020. 

The first area of emphasis is payroll tax abusers.  Companies that withhold Social Security and Medicare taxes and use these to pay other creditors or personal expenses instead of remitting these to the IRS are receiving a great amount of attention from the IRS and DOJ.  Businesses with large outstanding payroll tax withholdings will be visited by IRS Revenue Officers(RO) unannounced.  The IRS will also be sending teams to areas that have very few RO’s to visit businesses, located in these areas, to attempt to resolve their payroll tax issues.

The second area of focus is conservation easement donations.  These schemes offer investors charitable write offs equal to at least 250% of their investment.  The IRS is targeting promoters and taxpayers who participated in these schemes.  There is more than 80 of these cases on the court dockets right now and more to come.

The third area of focus is cryptocurrency.  The IRS has been mailing letters to taxpayers they believe have virtual currency accounts.  Most of the names of the people receiving these notices, were obtained from a summons to Coinbase (a virtual currency exchange).  This exchange was ordered by the courts in 2017 to release the names of US customers who bought and sold Bitcoin.  Virtual currency owners are also an increased focus area for auditors.  The IRS is using teams of agents to perform these audits.

If your employer is offering a health flexible spending account in 2020 consider funding it.  You can put up to $2750 pretax earnings to pay for out of pocket medical expenses.  These include deductibles for copays, dental and vision services and more.  Usually these flexible spending accounts have to be used by the end of the year but check with your employer since some employers have eased these rules so you can carryover any remainder to the next year.

If you have rental property, the IRS may allow you to claim the 20% qualified business income(QBI) deduction.  There are hoops to jump through but these are not too hard to achieve.  If you devote at least 250 hours a year of qualifying time you can treat the rental as a business for QBI write off.  This includes hours you have a repair person such as a plumber, HVAC, electrician, etc.  work on your rental but be sure you keep thorough records of the dates and time.  If you pay the repair person, other than corporations, more than $600 you may have to give them a 1099 and send a copy to the IRS.