Textbook Tax

Textbook Tax presents its weekly tax news update. The following tax articles cover the week of July 22, 2019 through July 28, 2019. The tax articles presented represent my favorites in tax news for the week. Please comment any tax news stories you found interesting for the recent week. Tax News for July 2019 This week in tax news focuses on cryptocurrency tax deficiencies, carbon tax bill momentum, the tax-free holiday season, and President Trump's efforts to stop the release of his tax return!  Period: July 22- July 28 Article Title: The IRS is going after some cryptocurrency holders for back taxes Summary:  More than 10,000 taxpayers will receives letters from the IRS indicating tax deficiencies relating to virtual currency transactions The type of tax on cryptocurrency depends on the manner in which you interact with the virtual currency For those who mine the cryptocurrency, you must report the FMV at date of receipt in gross income For those who t...

The gig economy influences great growth and popularity in independent contractor opportunities. Many people work both full time and part time as independent contractors. Some popular independent contracting opportunities include ride-share driving, freelance work, and much more! If you work as an independent contractor (or simply self-employed), it is important to understand the tax implications and requirements faced by independent contractors because when it comes to taxes, the independent contractor has full responsibility for withholding and payment! Related Posts: Do you qualify for the QBI Tax Deduction? Why & Apply To begin, I like to start my posts off by introducing the topic and discussing those who may benefit from the information provided. So, why discuss taxes specific to independent contractors? Well, as an independent contractor or self-employed person, you are fully responsible for withholding taxes and making the estimated tax payments. Therefo...

Sec. 351 covers nontaxable contributions between the shareholders and the corporation. In order to qualify as a nontaxable event, the transaction must meet the Sec. 351 requirements: Transferred property, transferred property in exchange for stock, and the shareholders contributing property (transferring group) own 80% of the corporation's stock immediately after the exchange. It is important to note that the Sec. 351 nontaxable contribution rule applies to new corporate formations as well as contributions to existing corporations as long as the three requirements are met. Lets begin with defining the above terms: Transferred property refers to both tangible and intangible property exchanged for stock property does not include services; if the shareholder exchanges services for stock, the shareholder recognizes ordinary income (FMV) "In exchange for stock" anything other than stock is NOT stock; therefore, any property other than stock is called b...

If you have not read my initial post on the Sec. 199A QBI deduction, please do so now. Follow the link HERE . If you were directed from the original post, please continue to read on. TCJA enacted the Sec. 199A QBI deduction. The deduction allows eligible taxpayers to deduct up to 20% of their qualified business income. Sec. 199A places several limitations on the deduction based several factors, including taxable income and business category type (QTB vs. SSTB). The purpose of this post is to explain and provide an example relating to taxpayers with taxable income between the threshold amounts. Depicted below are the 2019 single and married filing jointly taxable income thresholds relating to the QBI deduction: For 2019, the depicted taxable income thresholds will apply for the QBI deduction calculation. For taxable incomes between the threshold amounts (if single, $160,700 – $210,700), special and complex rules apply. In my previous Sec. 199A QBI post, I grouped taxpaye...

The Tax Cuts and Jobs Act (TCJA) of 2017 enacted the IRC Sec. 199A qualified business income (QBI) deduction. The QBI deduction allows a deduction of up to 20% of qualified business income for eligible flow-through entities. The deduction is available to all taxpayers other than regular C Corps. The QBI deduction is taken from AGI. What is qualified business income? QBI is ordinary, trade & business income minus ordinary deductions earned by flow-through entities (sole proprietorship, S Corp, LLC, or partnerships). Compensation (wages, guaranteed payments, etc.) and separately stated items (dividends, interest, capital gains) are not includable in QBI. What flow-through entities are eligible? Sec. 199A classifies two types of eligible flow-through entities: Qualified Trade or Business (QTB) and Specified Service Trade or Business (SSTB). The IRC defines QTB as any other business other than a SSTB (real helpful!). Examples of QTB include engineering businesses and ...