Federal Tax News – July

By Team HRH | September 6, 2017

Employer is found liable for penalty. If employers fail to ensure that payroll taxes are collected and paid to the IRS, the employers may be liable for a trust fund recovery penalty equal to 100% of the unpaid taxes — even if they pay others to handle these tasks. In one case, a CEO and 50% owner claimed no liability after the COO (also a 50% owner) allowed payroll tax become delinquent. But the U.S. District Court for the Eastern District of Michigan found the CEO had significant financial control and could have paid the payroll taxes “if he wished to do so.” Calling his actions “reckless” and “willful,” the court found him liable for the penalty. (Hartman, DC MI, 120 AFTR 2d 2017-5091)

Treasury is ending the myRA program. The U.S. Department of the Treasury announced that it will begin to wind down the myRA (my Retirement Accounts) program after it was found not to be cost effective. The decision was the result of a review that Treasury undertook as part of the Trump administration’s effort to assess existing programs. It found that while demand for these accounts has been low, the cost to taxpayers for managing the accounts has been nearly $70 million. A MyRA is a government-administered Roth IRA authorized to hold one type of investment, a U.S. Treasury security which earns interest at the same variable rate as investments in the government securities fund for federal employees. Visit https://www.myRA.gov if you have questions.

The Trump administration sets an “aggressive” timeline for tax reform. White House Legislative Affairs Director Marc Short outlined the planned schedule for passing a tax reform law before year end, which he termed “aggressive.” The bill would be drafted under the reconciliation process, so it could pass in the Senate with a simple majority. Under the plan, a 2018 budget resolution would be agreed upon in September or October; a markup and hearings would take place after Labor Day; the House would pass the bill in October; and the Senate would pass it in November.

No innocent spouse relief for wife who knew her husband was financially unreliable. In general, married taxpayers who file a joint federal income tax return are jointly and severally liable for the tax reported or reportable on the tax return. In one case, the U.S. Tax Court held that innocent spouse relief didn’t apply to a wife who either knew, or had reason to know, that the liabilities shown on the joint tax returns she’d filed with her husband wouldn’t be paid. Before marrying, she knew that her spouse had poor credit and tended not to pay his debts. The wife also didn’t show that she would suffer economic hardship if relief was not granted. (TC Memo 2017-144)

Nail down the details when writing off business expenses. Generally, taxpayers can deduct “ordinary and necessary” expenses incurred in the course of a trade or business, if they prove the expenses. One taxpayer ran a courier corporation and also delivered packages as an independent contractor. The U.S. Tax Court denied deductions for vehicle-related expenses for his independent contractor work, because the invoices didn’t show which vehicles were worked on or whether they were paid. Some invoices appeared to be mere estimates, and some listed his corporation as the customer. (TC Memo 2017-149)

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