Michael Gray, CPA's Tax and Business Insight
October 5, 2021
© 2021 by Michael C. Gray
ISSN 1539-395X
A monthly report to help you prepare for your financial future, keep more of what you earn by minimizing your taxes, and build an extraordinary business!
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Table of Contents
- Boo! The year is almost over!
- Family celebrations.
- Individual and C corporation tax returns due October 15.
- Some business owners can still set up retirement plans for 2020.
- Will there be major tax legislation this year?
- IRS sets user fee for estate tax closing letters.
- IRS provides tax relief for farmers and ranchers affected by droughts.
- IRS closes Fresno paper return processing center.
- District Court includes buy-sell insurance in estate tax value.
- California Franchise Tax Board requires property managers to withhold California tax for California nonresident owners.
- Do you sell services or software to CPAs?
- Do you love Disney?
- Attention Accountants! Speed up processing your 2020 business closings!
- Attention business owners with remote workers or remote customers!
- Check my blog for coronavirus-related tax developments.
- Please share your good experiences with Michael Gray, CPA.
- Financial Insider Weekly past episodes.
- Visit our new book review: The Power of Impossible Thinking
- Follow me on social media!
- Check out my blogs.
- PS Marché Aux Fleurs
- Subscribe/Remove from Michael Gray, CPA's Tax & Business Insight
Janet celebrates her 70th birthday at Ensalada's restaurant in San Anselmo. Boo! The year is almost over!
Halloween is already almost here! And after Halloween, the year roars to a close with the holiday season.
Did you know Halloween is the second most popular holiday in the United States? It's a great one for business promotions and just having fun! Some daring families will go ahead with trick or treating, this year. Some will celebrate with virtual parties. Hope your family has some fun.
Family celebrations.
My wife, Janet Gray, celebrates her birthday during October. Janet is a great blessing to me and our family. Happy birthday!
Individual and C corporation tax returns due October 15.
The due date for 2020 individuals and calendar year corporations for which timely extensions were filed is October 15, 2021.
Some business owners can still set up retirement plans for 2020.
Businesses with extended due dates for their income tax returns can retroactively set up qualified retirement plans or a SEP-IRA for 2020 and make a retirement plan contribution for 2020 up to the extended due date of the business's income tax return. See your tax advisor.
Will there be major tax legislation this year?
I've written before about President Biden's ambitious tax reform plans. There is some good news relating to the negotiations in Congress on Biden's two major initiatives. Carryover basis would not be repealed. Instead, the estate tax exemption limit would be cut in half, as if the increase in Trump's Tax Cuts and Jobs Act terminated early at the end of 2021. The proposal to tax appreciation in asset values at death isn't currently included in the plan. The tax rates for long-term capital gains for high-income taxpayers aren't as draconian as Biden's initial proposals.
At this point, discussion is academic. Congress is at a stalemate. Progressive and moderate Democrats can't agree on the size of the proposed $3.5 trillion American Families Plan.
Only time will tell if tax reform legislation will be enacted. Some of the provisions are proposed to be retroactive to earlier in 2021. Based on past experience, an agreement might be passed close to December 31, 2021.
IRS sets user fee for estate tax closing letters.
The IRS has established a $67 fee for requesting an IRS estate tax closing letter. The letter indicates the IRS has accepted a Federal estate tax return and doesn't intend to audit the return. Most estate attorneys prefer that their clients receive this letter before distributing and estate or trust. Otherwise, the executor or trustee could be held personally responsible for any deficiency.
(T.D. 9957, September 27, 2021.)
IRS provides tax relief for farmers and ranchers affected by droughts.
The IRS has announced that farmers and ranchers who were forced to sell livestock due to drought may have an additional year to replace the livestock and defer the tax from forced sales from an involuntary conversion. Livestock generally must be replaced within a four-year period. The IRS is authorized to further extend the replacement period if the drought continues. See your tax advisor for details.
(Notice 2021-55, September 24, 2021.)
IRS closes Fresno paper return processing center.
The IRS has permanently closed its Fresno center for process paper income tax returns as of September 30, 2021.
Taxpayers located in Alaska, California, Hawaii, Ohio and Washington state who previously filed their federal income tax returns in Fresno should mail their income tax returns to the Ogden, Utah processing center.
The address for individual income tax returns is Department of the Treasury, Internal Revenue Service, Ogden, UT 84201-0002.
(IR 2021-185, September 14, 2021.)
District Court includes buy-sell insurance in estate tax value.
A Missouri federal district court has ruled in a summary judgment the value of life insurance received after death to fund a buy-sell agreement should be included in the fair market value of corporate stock reported on a decedent's federal estate tax return. The court refused to follow an Eleventh Circuit Court of Appeals precedent which held such insurance should be excluded in Estate of Blount v. Commissioner, 428 F.3d 1338 (11th Circuit, 2005). The district court also held a buy-sell agreement between two brothers doesn't control the estate tax valuation for the stock. The court said the agreement (1) wasn't a bona fide business arrangement, (2) was a device to transfer wealth to a family member, (3) wasn't comparable to other agreements, and (4) was an impermissible substitute for a testamentary disposition.
The case illustrates the difficulty of relying on a buy-sell agreement between family members for estate tax valuation.
In this situation with two owners, having a cross-purchase agreement with each owner getting life insurance on the life of the other owner would have avoided having the proceeds included in the value of the corporation. There can be practical difficulties in that type of arrangement, especially with multiple owners.
Business continuity is a critical issue to work through with an estate planning team, including attorneys, tax advisors and life insurance agents.
(Connolly v. U.S., U.S. District Court, Missouri, September 21, 2021.)
California Franchise Tax Board requires property managers to withhold California tax for California nonresident owners.
The Franchise Tax Board has been assessing 100% penalties for failure to withhold California income taxes on rental payments received and paid to nonresident owners of the properties they manage. The withholding is 7% of gross rents, less the property manager's fee. The Franchise Tax Board says withholding is required even if the property manager collects checks made to the owner. Reduced withholding can be requested using FTB Form 588, Nonresident Withholding Waiver Request, and FTB Form 589, Nonresident Reduced Withholding.
See your tax advisor for details.
(Spidell's California Taxletter, October, 2021, p. 12, "Watch out for property manager withholding audits".)
Do you sell services or software to CPAs?
Maybe I can help with writing promotional material and marketing ideas. Call me, Michael Gray, at 408-918-3161 or email mgray@taxtrimmers.com.
Do you love Disney?
I have created a Facebook group, called Disney Magic, for members to share Disney photos, experiences and tips. I am also posting developments for Disney films, television shows, and amusement parks there. If you are on Facebook, you can use this URL to join: https://www.facebook.com/groups/2006739209578437/, or search "Groups" on Facebook. You have to use the "join" button to join the group. This is a private group, and I will approve your membership.
Attention Accountants! Speed up processing your 2020 business closings!
Do you still have 2020 business income tax returns on extension that need to be done? Check out this trial balance software, EZ Trial Balance, that's super-easy to set up and use. There is a desktop version and an online version. The online version includes consolidations and ratio analysis for analytical review. http://www.eztrialbalance.com
Attention business owners with remote workers or remote customers!
Are you concerned about protecting your conversations and communications from hackers? Now there is a secure collaboration application including (unlimited) team member assignments, video conferencing (no Zoom bombing!), text messaging, voice messaging, PDF capture, electronic signature and large file transfer. Remote computer access feature is almost complete. Communications take place in a secure envelope. Cloud application so no installation is required on your computer network. Meets IRS security standards. http://www.securelycollaborate.com
Check my blog for coronavirus-related tax developments.
We have been sending most of my blog posts relating to coronavirus-related tax developments to you. You can find them at www.michaelgraycpa.com.
Please share your good experiences with Michael Gray, CPA.
As you know, more and more people are going to the internet to find information about service providers. We hope you will share some good words about experiences that you have had with our firm<. Some of the sites where you can share your experiences include yelp.com and siliconvalley.citysearch.com.
We use Angie's List to assess whether we're doing a good job keeping valued customers like you happy. Please visit AngiesList.com/Review/4258970 in order to grade our quality of work and customer service.
Financial Insider Weekly past episodes
After eight years of production, I have discontinued producing new interviews for Financial Insider Weekly. Doing the show has been a rewarding experience and I consider back episodes to be my legacy of financial literacy education to our community. Back episodes available at https://www.youtube.com/user/financialinsiderweek.
Michael Gray regrets he can no longer personally answer email questions. He will answer selected questions in this newsletter.
For your questions about dependent exemptions, see IRS Publication 501 at www.irs.gov.
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Check out my blog.
I have also started a blog at www.michaelgraycpa.com. Check it out!
P.S.
My daughter and her husband, Holly and Dan Baker, have a Southern French Restaurant at 23 Ross Common, Ross, California, about 15 minutes north of the Golden Gate Bridge. The name of the restaurant is Marché Aux Fleurs and their website address is marcheauxfleursrestaurant.com. For the best meal of your life, call 415-925-9200 for a reservation and give them a try! For directions, visit our website at www.taxtrimmers.com/directions.shtml.
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Michael Gray, CPA2482 Wooding Ct.San Jose, CA 95128(408) 918-3162FAX: (408) 938-0610email: mgray@taxtrimmers.comHours: 8am - 5pm PDT Monday - FridayFind us on Facebook
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