Well-known-author-owes-190K-in-self-employment-tax-11TH-CIRC-confirms.jpg?time=1634317095
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


No-broad-Fifth-Amendment-Right-to-avoid-complying-with-IRS-summons.jpg?time=1634317095
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.


New-bill-would-simplify-tax-payment-deadlines.jpg?time=1634317095
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


Why-we-should-advise-clients-to-opt-out-of-monthly-child-tax-credits.jpg?time=1634317095
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.


To-discount-or-not-to-discount-that-is-the-question.jpg?time=1634317095
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?


Upcoming-June-2021-Tax-Deadlines.jpg?time=1634317095
01/Jun/2021

June

Day
10 Employees Who Work for Tips – If you received $20 or more in tips during May, you must report them to your employer (employees are required to keep a daily record of tips). All tips must be reported on your individual income tax return. You can use Form 4070.
15 Corporations – Deposit the second installment of estimated income tax for 2021. A worksheet, Form 1120-W, is available to help you estimate your tax for the year.
15 Employers – Nonpayroll withholding. If the monthly deposit rule applies, deposit the tax for payments made in May.
15 Employers – Social security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments made in May.
15 Individuals – If you’re a U.S. citizen or resident alien living and working (or on military duty) outside the United States and Puerto Rico, file Form 1040 or Form 1040-SR and pay any tax, interest, and penalties due. Otherwise, see Individuals under April 15, earlier. If you want additional time to file your return, file Form 4868 to obtain 4 additional months to file and pay what you estimate you owe in tax to avoid penalties and interest. Then, file Form 1040 or Form 1040-SR by October 15. However, if you’re a participant in a combat zone, you may be able to further extend the filing deadline.
15 Individuals – Make a payment of your 2021 estimated tax if you’re not paying your income tax for the year through withholding (or won\’t pay in enough tax that way). Use Form 1040-ES. This is the second installment date for estimated tax in 2021. You may be able to avoid having to pay estimated taxes by increasing your tax withholding. Penalties may be assessed if you do not pay enough tax through withholding and estimated tax payments or if your payments are late.

 

July

Day
12 Employees Who Work for Tips – If you received $20 or more in tips during June, you must report them to your employer (employees are required to keep a daily record of tips). All tips must be reported on your individual income tax return. You can use Form 4070.
15 Employers – Nonpayroll withholding. If the monthly deposit rule applies, deposit the tax for payments made in June.
15 Employers – Social security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments made in June.

 

August

Day
02 Certain Small Employers – Deposit any undeposited tax if your tax liability is $2,500 or more for 2021 but less than $2,500 for the second quarter.
02 Employers – Deposit the tax owed through June if more than $500.
02 Employers – If you maintain an employee benefit plan, such as a pension, profit-sharing, or stock bonus plan, file Form 5500 or 5500-EZ for calendar year 2020. If you use a fiscal year as your plan year, file the form by the last day of the seventh month after the plan year ends.
02 Employers – Social security, Medicare, and withheld income tax. File Form 941 for the second quarter of 2021. Deposit or pay any undeposited tax under the accuracy of deposit rules. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the quarter timely, properly, and in full, you have until August 10 to file the return.
10 Employees Who Work for Tips – If you received $20 or more in tips during July, you must report them to your employer (employees are required to keep a daily record of tips). All tips must be reported on your individual income tax return. You can use Form 4070.
10 Employers – Social security, Medicare, and withheld income tax. File Form 941 for the second quarter of 2021. This due date applies only if you deposited the tax for the quarter timely, properly, and in full.
16 Employers – Nonpayroll withholding. If the monthly deposit rule applies, deposit the tax for payments made in July.
16 Employers – Social security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments made in July.

Special-Healthcare-Enrollment-Period-Extended-to-August-15.jpg?time=1634317095
01/Jun/2021

The recently enacted American Rescue Plan Act (ARPA) may help reduce health insurance costs for millions of Americans in 2021. The law expands the Premium Tax Credit from the Affordable Care Act, which can reduce the cost of insurance premiums. Some taxpayers who did not previously qualify for the credit are now eligible, while many current recipients will see an increase in their credit amount this year.

In order to claim the Premium Tax Credit, you must purchase health insurance through the ACA Insurance Marketplace, sometimes called the Exchange. You can access the Marketplace by visiting healthcare.gov. The new rules will enable many Americans to improve their health insurance plan, lower their premiums or both. To give people time to explore options, the 2021 ACA Special Enrollment Period (SEP) has been extended through August 15.

Ordinarily, the SEP is only available for people who experience a qualifying life event (such as a job change) or do not currently have insurance. However, the extended 2021 SEP also allows those who are already insured through the Marketplace to explore new coverage options.

The U.S. Department of Health and Human Services estimates that about one in four current ACA enrollees will benefit from shopping for a new plan. They may be able to get more comprehensive coverage for the same premiums they currently pay, or pay significantly lower premiums for their current level of coverage.

A professional tax advisor can help you determine whether you qualify for the Premium Tax Credit. If so, comparing insurance plans during the 2021 SEP could bring you substantial savings, or the peace of mind offered by more complete coverage.


IRS-Begins-Issuing-Refunds-for-Eligible-Unemployment-Benefits-Recipients.jpg?time=1634317095
01/Jun/2021

The American Rescue Plan Act (ARPA) retroactively excluded some 2020 unemployment benefits from taxable income. Generally, taxpayers with modified adjusted gross incomes below $150,000 do not have to pay tax on their first $10,200 of 2020 unemployment compensation. Unfortunately, many people who qualify for this exclusion filed their 2020 federal tax returns before the new law took effect in mid-March.

If the filer overpaid as a result of paying tax on excluded unemployment benefits, the IRS will either issue a special refund or reduce the balance of tax owed.

The IRS has started with the simplest returns affected by ARPA rules for 2020 unemployment benefits. Most of these returns belong to single filers without dependents who did not claim any refundable tax credits. After correcting all these returns and issuing appropriate refunds, IRS personnel will move on to adjust more complicated returns, such as joint returns filed by married couples.

Refunds will be sent by direct deposit to those who provided banking information on their 2020 returns, and by paper checks otherwise. The refunds will be subject to offset rules, which allow the IRS to withhold refunds to cover past-due taxes, unpaid child support or other debts. Any taxpayer whose return is adjusted will also receive an IRS notice explaining the changes made.

IRS officials have projected that this process will continue throughout the summer. In the meantime, most taxpayers who may have paid tax on excluded unemployment benefits do not have to take further action. Calling the IRS or filing an amended return will not result in a faster refund, and could even delay processing due to the need to reconcile multiple returns.


IRS-Extends-Additional-2021-Filing-Season-Deadlines-to-May-17.jpg?time=1634317095
01/May/2021

The IRS previously moved the deadline for individuals to file 2020 federal income tax returns and pay any tax due from April 15 to May 17, 2021. Now, the same automatic extension applies to several other key tax deadlines, including:

2020 IRA Contributions:

If you have not reached your contribution limit for tax year 2020, you may continue to make 2020 contributions to traditional or Roth IRAs up until May 17. Taxpayers also have until May 17 to pay any tax due on 2020 IRA distributions, including the 10% penalty on non-exempt early withdrawals.

Claiming 2017 Tax Refunds:

If you are owed a federal tax refund for 2017, you have until May 17, 2021 to file any returns or amended returns necessary to claim the refund.

Filing Deadline for Certain Foreign Trusts:

Foreign estates and trusts that file Form 1040-NR have until May 17 to meet their federal tax filing and payment requirements.

Again, all of these deadline changes are automatic. You do not need to take any action in order to receive the extensions.


Tax-Waiver-for-2020-Unemployment-Benefits.jpg?time=1634317095
01/May/2021

The American Rescue Plan Act allows many Americans to exclude some or all of their 2020 unemployment insurance (UI) benefits from their taxable income. This exclusion is available to taxpayers with a modified adjusted gross income (MAGI) of less than $150,000 for 2020. The IRS recently explained how eligible taxpayers may claim the exclusion.

Eligible single taxpayers may exclude up to $10,200 of UI benefits that they received in 2020, which could significantly reduce their tax. Eligible married couples who file jointly may exclude up to $10,200 of UI benefits per spouse, for a total exclusion of up to $20,400.

If you qualify for the exclusion and have not yet filed your 2020 tax return, you can claim the exclusion when you file. You will need to report the full amount of UI benefits you received in 2020, and then use the new Unemployment Compensation Exclusion Worksheet to figure the amount of your exclusion. A tax professional can help you prepare and file the necessary forms.

In general, if you qualify for the UI benefits exclusion but already filed your 2020 tax return, you do NOT have to file an amended return. The IRS will automatically recalculate your taxable income, and issue a special refund if the exclusion lowers your tax. The special refund will be sent separately from any refund you already claimed on your return. The IRS expects to begin sending these special refunds in May, continuing into the summer.

There is one case when filing an amended return may benefit a taxpayer, however. The income exclusion will make some taxpayers eligible for credits that they did not originally qualify for, such as the Earned Income Tax Credit (EITC). A tax advisor can help you determine whether the exclusion qualifies you for a new credit, and if so, help you file an amended return to claim it.


Upcoming-May-2021-Tax-Deadlines.jpg?time=1634317095
01/May/2021

May

Day
10 Employees Who Work for Tips – If you received $20 or more in tips during April, you must report them to your employer (employees are required to keep a daily record of tips). All tips must be reported on your individual income tax return. You can use Form 4070.
17 Individuals – (Previously April 15th, 2021) File a 2020 Form 1040 or Form 1040-SR and pay any tax due. If you want an automatic 6-month extension of time to file the return, file Form 4868 and pay what you estimate you owe in tax to avoid penalties and interest. For more information, see Form 4868. Then, file Form 1040 or Form 1040-SR by October 15.
17 Employers – Nonpayroll withholding. If the monthly deposit rule applies, deposit the tax for payments made in April.
17 Employers – Social security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments made in April.

Return to Top

June

Day
10 Employees Who Work for Tips – If you received $20 or more in tips during May, you must report them to your employer (employees are required to keep a daily record of tips). All tips must be reported on your individual income tax return. You can use Form 4070.
15 Corporations – Deposit the second installment of estimated income tax for 2021. A worksheet, Form 1120-W, is available to help you estimate your tax for the year.
15 Employers – Nonpayroll withholding. If the monthly deposit rule applies, deposit the tax for payments made in May.
15 Employers – Social security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments made in May.
15 Individuals – If you’re a U.S. citizen or resident alien living and working (or on military duty) outside the United States and Puerto Rico, file Form 1040 or Form 1040-SR and pay any tax, interest, and penalties due. Otherwise, see Individuals under April 15, earlier. If you want additional time to file your return, file Form 4868 to obtain 4 additional months to file and pay what you estimate you owe in tax to avoid penalties and interest. Then, file Form 1040 or Form 1040-SR by October 15. However, if you’re a participant in a combat zone, you may be able to further extend the filing deadline.
15 Individuals – Make a payment of your 2021 estimated tax if you’re not paying your income tax for the year through withholding (or won\’t pay in enough tax that way). Use Form 1040-ES. This is the second installment date for estimated tax in 2021. You may be able to avoid having to pay estimated taxes by increasing your tax withholding. Penalties may be assessed if you do not pay enough tax through withholding and estimated tax payments or if your payments are late.

Return to Top

July

Day
12 Employees Who Work for Tips – If you received $20 or more in tips during June, you must report them to your employer (employees are required to keep a daily record of tips). All tips must be reported on your individual income tax return. You can use Form 4070.
15 Employers – Nonpayroll withholding. If the monthly deposit rule applies, deposit the tax for payments made in June.
15 Employers – Social security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments made in June.

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