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09/Aug/2021

When Karin Slaughter first signed her contract in 1999, she was not a “brand author” and her royalty income was modest.
She later began working on her brand. She hired a media coach, met with publishers, agents, media outlets, and
established a good relationship with booksellers. She used social media, websites, and newsletters to connect with her
readers. Now as a “brand author”, her advances has grown substantially, yet the amount of time she spends on writing a
book stayed about the same. Ms. Slaughter attributes her increase in earnings to building her brand and not her writing.
When she prepared her Form 1040, she reported her advances and royalties to Schedule E. She subtracted all the income
related to the trade or business of writing from Schedule E and reported it on Schedule C using a calendar-based
approach.

The Tax Court ruled the earnings from Ms. Slaughter’s brand were subject to self-employment tax given that she engaged
in developing her brand with continuity and regularity form the primary purpose of income and profit. Her brand and her
writing combined were monetized, first by selling books and second, by providing the leverage to negotiate for higher
advances and royalty rates.

Having all the income subject to self-employment tax was further influenced by the manner in with she deducted her
expenses. Ms. Slaughter lived in Georgia but rented an apartment in New York City to help ease with meetings and
conferences with agents, booksellers, and publishers. She then wrote the rent for her apartment and the advertising costs
on Schedule C even though she stated the income was purely related to the writing. The Court believed that if the
expenses related to brand were written off on Schedule C, then the income derived from the brand should be reported on
Schedule C, subject to self-employment tax.

The way expenses are reported against income impact both income and self-employment tax.

1 Slaughter v Commissioner, T.C. Memo 2019-65 (June 2019


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07/Aug/2021

On May 5, 2020, the United States District Court for the Eastern District of Texas signed an order holding that there is no
broad fifth amendment right to avoid being compelled to comply with an IRS summons.

Brian Torrance failed to comply with an IRS summons directing Torrance to appear before an IRS agent on a scheduled
date to testify and produce a variety of different records for examination. After the court ordered summons, Torrance
appeared and asserted a broad Fifth Amendment privilege, claiming that all responsive information is privileged because
“any of the information surrendered could be used against [him] criminally.”

Citing Doe v United States, 487 U.S. 201, 2017 (1998) that “the Fifth Amendment would not be violated by the fact alone
that [documents] on their face might incriminate the taxpayer… Accordingly, for a communication to be privileged under
the Fifth Amendment, it must be testimonial, incriminating, and compelled.”

The court found that Torrance failed to demonstrate any specific documents with privileged information and he did not
produce a privileged log identifying which documents were claimed to contain privileged information. “Rather, he has
simply made a blanket assertion of privilege without any particularized showing. Consequently, he has failed to meet his
burden of showing the specific communications are privileged under the Fifth Amendment.”

The court granted the government’s motion and dismissed Torrance’s motion to dismiss. Torrance was ordered to
produce all requested documents and information and produce a privilege log with descriptions of the nature of the
documents to allow the government to assess the privilege claims.

Taxpayers attempting to asset privilege in response to an IRS summons must be careful to properly invoke privilege.
They need to have a privileged log and be prepared to demonstrate which documents are privileged without revealing
privileged information


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05/Aug/2021

Last night I attended a networking happy hour. Nothing different than any other networking event. Mingle, have wine,
eat food, and try to get to know other business decision makers. However, when it came to going around the group to
introduce yourself, they asked that you say three things: your name, what you do, and one thing you can teach us. That
gave me pause. “One thing I can teach them”? Of course, I quickly go through all the tax stuff I could muster, thinking
that was the only thing I could teach them. And yes, when it came to my spot, I spoke about the ETC and how to opt-out.
But it was some of the other comments that really resonated with me. One of the teaching moments was to remember to
give back to the community you work in. How do we do that when our product is a tax return, tax planning, or IRS
representation? How could that help the community as a whole? Truthfully, I would rather take a weekend in a cabin at
Broken Bow over a free tax return!

So, what can we do to give back? Consider the following ideas:
– Sponsor an event. The local chamber of commerce in your area probably holds annual events and some of those events
may be quite large. For example, the Southlake Chamber has an annual awards banquet and this year my company is
their valet sponsor. With that sponsorship fee, not only does my business get blasted on the chamber website and their
Facebook ads, but I also get an ad in the program handed out to every attendee. Because it is valet, I am personally
putting a bag with my business name and logo, some goodies, a postcard about my firm, and a couple bottles of water in
each car. By doing this, not only am I recognized as a business in Southlake supporting my local chamber, but I my
information is going out to over 400 attendees at this event.

– Volunteer. Yes, time is a precious commodity, however for some of our local charities it is our time that they need the
most. Maybe you and your staff, wearing your company shirts of course, go and help at a local animal shelter. Take
pictures and post to your Facebook business page or website. Maybe your area hosts a local event every year. See what
you can do to volunteer for one of the local nonprofit organizations in your area or for the local schools.
– Gift Cards. Last night the president of Kids Matter International mentioned how much they love receiving gift cards.
She said that she could take some of the dinner gift cards they receive and hand it to the parents so they could go out and
have “date night” or they can take their children to a fun place for dinner. Sometimes the simplest of gestures mean the
most.

– Gift Baskets. Create a beautiful basket representing your business. For example, a travel agent advertised an Italy
destination, and her basket was filled with Italian wine, pasta, tomato sauce, and a gift card to a local Italian restaurant.
An estate planning attorney made a basket called “Death by Chocolate” and her basket was full of wonderful chocolates.
Take the opportunity to get very creative doing these things.

One of the women that attended the event mentioned that she had been going to her dentist for over 10 years but realized
that he and his business had never given anything back to their community. She left him and is now going to another
dentist who is very active in the community. These things can and do matter.

By giving back to the community you work in, you are helping these organizations with your time and money. In return,
you and your business are getting recognized. The more times you get recognized, the less times you are forgotten.


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03/Jul/2021

I don’t know about all of you, but my clients always think the second quarter estimated payment is due July 15th instead
of June 15th. It makes sense that the fourth month there is an estimated tax payment due. Well, so did Congress.
Congress introduced bipartisan legislation aimed at changing the estimated tax payment deadlines to make them more
uniformed. These deadlines would be set at the 15th day after each end of the quarter. Thus, the deadlines would be
January 15, April 15, July 15 and Oct 15. This would affect individuals, businesses, estates and trusts


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02/Jul/2021

f our clients didn’t opt out by June 28th, they should be receiving their first child care tax payment by July 15th. And, if
only one spouse opted out and the other did not by June 28th, then they will be receiving half of their child tax credit by
July 15th.

For some of our clients, receiving an advance of their child tax credit provides some immediate relief. But there may be
several reasons as to why it would be best that our clients unenroll from these advanced child tax credit payments.
Here are some of the reasons why our clients might want to unenroll from these payments.

1. They know their household circumstances (child turned 18 in 2021) or their income changed and they don’t want to
deal with updating their information in the portal.

2. They are concerned that the IRS will send them the credit that will result in an overpayment and they have to deal with
sending it back.

3. They just don’t need the money and prefer to take the larger credit come tax time.
How to opt out of the child tax credit payments:

1. Go to the IRS website and click the Manage Advance Payments button.
2. On the next page sign in using your IRS or ID.me account. If you don’t have either, the page will walk our clients
through setting up an ID.me account.
3. On the next page they will see their eligibility and option to opt out of enrollment from the monthly payments.
Our clients can opt out at any time but at this time they can’t reenroll. The IRS is saying that later this summer they
should be able to opt back in if they need to.


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01/Jul/2021

I remember when I first started my practice, I didn’t know a thing about how to get business in my door. Someone
recommended that I should discount my fees to show appreciation and to incentivize referrals. So I did just that. I
showed what the amount was for the service and then I put my discount, whether it was a “new client discount”, a
“referral discount”, or my all-time favorite “multiple service discount”. And I was getting business. I was getting
referrals. But was this a good idea? Not really.

Offering discounts seemed to be the logical choice to help bring new business into my practice but in reality, it hindered
my growth. Here are some of the reasons as why discounts are not the best solution for your practice:
1. It focuses on price. Price became the primary focus instead of the service I was providing. If our only advantage is
our price then our business is in trouble.

2. Wrong Impression. Every time we offer a discount we devalue our business. Our clients will get the impression that
the services we provide are not worth paying full price for.

3. Negative impact on quality. Instead of being known as the firm that offers an amazing service, we are being known
as the firm that offers “cheap pricing” or my favorite “reasonable pricing”.

There are other ways we can thank our clients for the referrals or loyalty that are more thoughtful. For example, I sent a
gift card for dinner for two at Perry’s Steak House to my client who has referred quite a bit of business to me. Why is this
better? Instead of my referral source saying “Monika pricing is reasonable”, I am referred based more on my expertise
and service.

Ask yourselves this question. Do you want to be known as the discount store of tax services? Or do you want to be
known as the high-end of tax services?


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18/Jun/2021

When I was in Corporate America, I remember these large corporations having well documented management systems
that knew exactly what their employees were doing and where in the process they are. They had these robust client
resource management (CRM) programs that you just typed the name of a vendor, department, or company and BOOM,
you had all the information at your fingertips. So, when I left Corporate America and branched out on my own, you
would have thought I knew the importance of these systems. WRONG! I thought I was too small to invest in a program
such as that and, boy, did this year prove me wrong. Having a proper document management or CRM system in place is
something I can do better for next year.
Never did I imagine that I would go from an office staff of 3, including myself, to an office staff of 9 in a year! When
you add this many employees, you have a lot more tasks to manage. Speaking about myself only, when you reach a
certain age, it can become difficult to remember everything that is going on in your office and there is a higher probability
that tasks may slip through the cracks. Unfortunately, in what we do, if one task slips, we can be on the hook for
penalties, interest, and the possibility of a losing a client.
When I was doing my research as to what was the best Document Management System (DMS) for me, the following were
some of the key components I was looking for:
– Tracking the life of a tax return from document receipt, questions to clients, completion, 8879 received, and electronic
filing acceptance confirmation.
– Tracking the life of bookkeeping from data entry, to financial statement review, to meeting with client.
– Tracking Franchise Tax reports, from the status of the respective tax return to how and when the report was filed.
– Tracking extensions on any reports or returns.
– Seeing my staff’s tasks and knowing exactly where they are and how far behind we may be.
Now everyone’s needs are different. The CPA Practice Advisor has a good article on how to choose a DMS solution that
fits best for your business. I have included the link to that article below.

 

Link to CPA


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17/Jun/2021

I remember when I decided to start my own tax practice, I thought that I could just put the shingle on the front door and
business would just flock to me. When that did not happen, I decided to do mass mailings to certain industries I wanted
to specialize in. Thousands of dollars in postage and only 2 clients later, I knew there had to be some better solution.
I used to think the only thing that “networked” was computers, not people. HAH, was I wrong! Networking has been the
most beneficial thing I have ever done for my business, and you can network your businesses in a multitude of ways. The
following is a brief list of some of those avenues:
1. Join a networking group such as BNI (Business Network International), MasterMind Groups, LeTip, Rotary, Kiwanis,
and Women in Business. The first group I ever joined was BNI. They taught me the importance of meeting with
prospective business owners on a weekly basis, giving my own informercial, and meeting with them outside of the normal
business meeting to better understand their business and how we may be able to help one another out.
2. Join a group that you are passionate about. A running group? Weightlifting? Crochet? You can use whatever hobby
or passion you have outside of work to make connections. One story I remember, by a high-powered mortgage broker,
talked of how he went to a networking event and talked about one of his passions, marathon running. Well, after the
meeting a gentleman came up to him and started talking about running and how he was currently in training to run his
first marathon and what tips could he offer. Turns out that man was a big developer in our area and he hired the mortgage
broker’s firm to do all the deals on that development. That connection started not from what the broker knew, but
because they had something a personal passion in common.

3. Join your local Chamber of Commerce and get involved! The chamber has been amazing for me and my business.
They truly want to help their local businesses be successful. However, like anything, you must work at it. You have to
show up and maintain an involved presence. I was so grateful for their guidance and the business that has come my way
through the chamber. I even went through the local leadership program and now I am serving on the board of my local
chamber.

4. Get involved with your professional organization – TxSEA! Two years ago, I attended my first education workshop
and somehow got roped into attending my first board meeting. And now, as the writer of the TxSEA newsletter, clearly it
was not my last! I am so grateful that I continued with TxSEA. Getting involved with my professional organization was
one of the better decisions I have made. It has afforded me the opportunity to help make our EA designation stronger and
I feel as if I have the support of hundreds.
“Networking is an investment in your business. It takes time and when done correctly can yield great results for years to
come” ~Diane Helbig


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16/Jun/2021

Do you remember what it was like when you were in college, and it was finals time? You stayed up all night cramming
through studies and living off caffeine. Then, when it was the end of finals week, you crashed… HARD. Maybe you got
sick, or maybe you slept for days. Well, for me, that is what it always feels like after a tax deadline. You have been in
the fight-and-flight mode for so long that when you finally stop, your body wants to stop too. How can one prevent that
from happening?
1. Set up boundaries. Set your hours of operations from 9:00 – 5:00 with a mandatory lunch time and stick with it.
2. Say no! You do not have to take on every client or help everyone out.
3. Get rid of the dead weight. Are there clients that are sucking up the air you breathe? Are they constantly questioning
your work? Are they fighting over your invoice or are they making passive-aggressive jabs at you? If so, you truly do
not need that. Get rid of them. Make room for the clients that will take up less of your time, pay you more to do that
work, and appreciate you.
4. Hire! This was the hardest thing for me to do. I was afraid that I would not have enough work to keep them busy and
continue to keep them employed. But once you have the staff, you can take on additional work to keep them busy and
employed.
5. Faith. Know that everything is going to be alright. The world will not stop spinning if you say “no” or setup some
strict boundaries. Your business will continue to grow even if you are trimming the fat.
“We need to do a better job of putting ourselves higher on our own to do list.” ~Michelle Obama, former First Lady


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15/Jun/2021

Congratulations to all of us for making it through one crazy tax season! Between staffing shortages and calling our
clients to see if they received their stimulus checks, if their 401K withdrawal was COVID related, or did they suffer
closures or illnesses that affected their self-employed business; I am surprised that not all of us have scheduled a vacation
to Bora Bora! And how many of you cannot wait for the 2021 tax season where, once again, we will be asking “did you
receive your stimulus check? Did you receive any advanced child tax credit payments? How much did you receive?”
Let us just hope that the government does not decide to extend the deadline again for the third year! I can tell you that
even if there is an extension, my firm is honoring the original March 15th and April 15th as my tax deadline.
Normally after the tax deadline I take time to reflect on how tax season went. The following are the questions I ask:
– What can I do better?
– How are my marketing efforts going? Do I need to change anything? Add anything?
– How can I improve my quality of life during tax time?
I think anyone that is in practice for themselves should take time for reflection. Change is a scary thing but is also so very
important. We are in a profession that is constantly changing and if we are not changing with it, we are going to find
ourselves behind and obsolete. How else are we going to keep relevant if we ourselves are not willing to change?


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03/Jun/2021

The Tax Court held that a taxpayer with a cattle and tree farm, but no cattle or any immediate trees could not use the
farm’s losses to offset other income. According to the court, this farm was not being conducted for profit.
Some of the facts: Sheepdog Farms, LLC was formed in 2004 by Stephen Whately, who is a successful banker.
According to the return, cattle was its primary product. In addition, maintenance of the property’s timber, which was not
expected to be harvested until 2021, with an expected future value, according to an expert’s testimony, of $332,000. The
farm had no cattle on the property until 2008. And, Mr. Whately did not establish a forest-management plan until the IRS
notified him of the audit.
Sec. 162(a) allows a deduction of all ordinary and necessary expenses paid or incurred during the tax year of carrying on
a trade or business. However, Sec. 183(b)(2) limits deductions to the amount of gross income derived from the activity if
the activity was not engagement in for profit.
The court stated “A cattle farm without cattle and a tree farm that doesn’t yet harvest timber is highly likely to produce a
bumper crop of losses”. ~Whatley, T.C. Memo 2021-11.


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02/Jun/2021

One of the reasons a person will use us to help them prepare their taxes is our expertise. Come on, our tagline is
“America’s Tax Experts”. How many times have you had a client that has come in and asked “what can you do to help
me save on taxes?” Or my favorite, “I don’t want to pay Uncle Sam a dime!” This is when strategizing with our clients
can add another profit line to our P&L. But we need to be careful when offering this advice. If it is too good to be true,
than it probably isn’t true. The following are some characteristics of “too good to be true” tax planning strategies.
1. A promoter is involved.
2. A signed confidentiality agreement is required to learn about the strategy.
3. If it runs amiss from one or more judicial doctrines.
4. Professionals associated with the strategy are paid a higher than normal fee.
5. The strategy is overly complex.
6. Contracts with the promoter attempt to limit damages.
One of the ways we can protect ourselves when providing advice is to not immediately do so. Advise the client or
prospect that you would like to setup a proper engagement to have time to research and mitigate any risk that may be
associated with said advice. Obtain a separate engagement letter, outlining the scope of the services. In this engagement
letter, be extremely detailed. Trust your gut!


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