IRS Offers "Sharing Economy Tax Center"

With the advent of Airbnb, Uber, Lyft and other aspects of the "sharing economy", the IRS has started a "tax center" with information on how to properly file profits and losses associated with these activities.

Among the following tax issues that may apply to those participating in the sharing economy:

You Must Waive NOL Carrybacks Before Carrying Losses Forward

Generally, if you have a business loss, such losses are first carried back to reduce previous taxes paid. However, if you waive the carry back, you can carry the loses forward.

However, according to a recent case, (Jasperson, 11th Cir.), the judgement stated that since the NOL (net operating loss) carry-back was not explicitly waived, the NOL could not be carried forward.

Filing Form 941 for Children in Your Sole Proprietorship

Employing your minor children in your sole proprietorship can make a lot of sense. It gives them experience, a bit of money, and can lower the average tax rate for your family.

You'll need to have them do "real" work, pay them a reasonable wage, and keep proper records and filings.

One filing you'll need to make is Form 941, "Employer's Quarterly Tax Return". If you ONLY employ your minor children in your sole proprietorship, they won't be subject to Social Security or Medicare taxes.

Use a Certified Payroll Processor to Avoid IRS Fines

If you outsource your payroll function, you should consider using a "certified" payroll processor.

If you do not use a "certified" payroll processor, you will be liable for unpaid taxes if the processor doesn't send your taxes withheld to the IRS.

Offshore Poker Accounts Not Subject to FBAR Reporting

The US Court of Appeals for the Ninth Circuit recently overturned a lower court ruling regarding FBAR (Foreign Bank and Financial Accounts Report -- Treasury Form TD F 90-22.1).

Essentially, "pure offshore poker accounts" are not reportable under FBAR, but offshore "money transmission" accounts are reportable.

From the judgement :

Qualifying for Foreign Earned Income Exclusion

In a recent US Tax Court case (Hirsch, TC Summ. Op. 2016-37), a US citizen who lived in Israel "for convenience" was not allowed to exclude his income which he "earned" in Israel.

From the judgment :

Estate (Death) Tax Portability

Good article discussing the "portability" aspect of the estate (death) tax.

The “portability election” refers to the right of a surviving spouse to claim the unused portion of the federal estate tax exemption of their deceased spouse and add it to the balance of their own exemption. Since in 2015 the federal estate tax exemption is $5.43 million per person (the exemption changes every year since it is indexed for inflation), this means that a married couple can potentially pass on $10.68 million to their heirs free from federal estate taxes.

Even Professional Real Estate Agent Can't Get "Active" Losses

Under US tax code, rental real estate generates "passive" income unless proven otherwise.

One way to turn "passive" losses into "active" (more generally useful) losses is by being a real estate "professional".

However, even a professional real estate agent was not able to turn her rental losses into "active" losses because she did not devote enough time on the rental properties in question.

MBA Expenses May Be Tax Deductible

In (Kopaigora, TC Summ. Op. 2016-35), the Tax Court found that tuition and other expenses incurred at an executive MBA program may be tax deductible.

Critical in this case is the fact that the student did not enter a "new' profession as a result of his MBA.

An Executor of an Estate Must Pay Decedant's Income Taxes First

If you're the executor of an estate, you must pay back income taxes owed by the decedant before you can disperse assets to beneficiaries.

This is the finding of United States v. McNicol, No. 15-2214 (1st Cir. 2016).

At the time decedant's death, the decedant owed over $340,000 in unpaid federal income tax liabilities. Since these liabilities exceeded the value of his estate, the estate was insolvent.

Nevertheless, the estate's executor distributed assets to herself. The IRS sued for payment of the back income taxes, and the executor lost on appeal.