Passive Activity – New in 2010 – An Overview of Internal Revenue Code 469

According to Revenue Procedure 2010-13 starting in 2010: A written statement is required to group similar business/activities. Managing LLC members must pass any of 7 tests for material participation the most popular of which is the 500 hours per year of work. Reg. 1.469-5t(a) A real estate agent is now considered to be a real…

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Stop messing around, take it to IRS Appeals

My mantra lately is becoming …. ‘take it to appeals. Stop messing around.’ The Appeals function offers an additional forum for taxpayers to resolve conflicts and mediate disputes with all operating divisions inside the IRS. The IRS Appeals function should be viewed as an asset to the tax payer. The IRS Appeals function is substantially…

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Partial Payment IRS Installment Agreement PPIA

The PPIA is an installment agreement that pays back less than what is owed to the IRS because of the expiration of the statue of limitations for collection. It is requested by filing out  IRS form 433. The PPIA was formally authorized in the American Jobs Creation Act of 2004 which amended Internal Revenue Code…

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When to File Collection Appeal Request (CAP) IRS form 9423

A Collection Appeal Request (CAP) –  IRS Form 9423 – is filed in response to the IRS enforcing collection against an accrued amount they believe they are owed by you or the denial or termination of an installment agreement. Except in specific cases involving asset seizure, a conference with the collections function manager is required in…

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Top Passive Loss Issues for the IRS

The following are the top issues for the IRS regarding passive losses: Airplane Leasing Farm loss – particularly when the taxpayer lives out of state Rental Real Estate Real Estate Professionals demonstrating ‘material participation’ Equipment leasing losses 1120S and 1065 losses on the Schedule ‘E’ in the non-passive column Remember Passive Losses are only deductible…

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Examples of Income that is NOT Passive

Rental Income from a building leased to a business where the tax payer works – Reg 1.469-2(f)(6) Rental income from leased land – Reg. 1.469-2T(f)(3) Income from land, a building or other property held for investment IRC 469(e)(1)(A)(ii)(II) Gains on stocks or bonds – IRC 469(e)(1)(A)(ii)(II) Royalties – IRC 469(e), Reg 1.469-2T(c)(3)(i)(A) Covenant Not to…

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Certificate of Lien WITHDRAWAL

A certificate of lien withdrawal will remove the tax lien from the taxpayer’s credit report. The IRS has discretionary authority to withdraw a lien if one of the four criteria is met according to the 1996 Taxpayer Bill Of Rights The lien filing was premature or not in accordance with the IRS procedures. The taxpayer and the IRS entered…

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Field Audit Tests for Sole Proprietor CASH Income Require More Teeth

This audit was initiated by the Treasury Inspector General for Tax Administration (TIGTA) to determine whether minimum probes for unreported income during sole proprietor audits are conducted in accordance with IRS policies and procedures.  This audit was conducted as part of the Fiscal Year 2010 Annual IRS Audit Plan and addresses the major management challenge of…

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3.8% Medicare Tax Post 2012 is not limited exclusively to real estate transactions

A recent Congressional Research Service (CRS) Report sheds some light on the misconception that the 3.8% Medicare contributions tax on unearned income, which was added by the Health Care and Education Reconciliation Act of 2010, and effective for tax years beginning in 2013, is a “home sales tax” or a “real estate tax.” The CRS…

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