Things I Learned About Taxes this Week: September 4, 2020

I have decided to make this a running feature on my blog, to show just how hard taxes are. I am regarded as a “tax expert” and present CPE courses to other tax pros almost every day. 

Yet I learn new things multiple times a day, EVERY DAY (even on days I choose to check out mentally and not look at taxes!).

In this post I admit to my own vulnerability as a tax pro by showing the things I learned in the past week.

This week, I learned about:

  1. Debt basis in LLCs taxed as partnerships (I already knew about this but had to dig much deeper than ever before).
  2. Qualified recourse debt for an LLC that owns rental property
  3. The ins and outs of at-risk basis (another thing I knew about already but had to dig deeper into).
  4. Researching numbers 1 through 3 caused me to have a panic attack about at-risk basis and S-corp shareholder loans; after 90 minutes of panicked research that started when this popped into my head at 9 PM on a Monday night, I determined that shareholders do get ask-risk basis from loans, as long as the source of the funds is their own money and not non-recourse financing (i.e. if the shareholder takes out a nonrecourse loan themselves and then loans the money to the S-corp, there would NOT be at-risk basis). Having fun yet?
  5. Two days later I had another panic attack on #4 and so pulled even more resources to put my mind at ease (temporarily). This nags at my mind still.
  6. I had to present on the Paycheck Protection Program and so spent over an hour looking at the August 27th “interim final rules” and then presented for 2 hours on it.
  7. I learned far more about sales tax nexus and software as a service than I ever thought I would need to know.
  8. #7 led me down the path of looking at state income tax nexus and remote sales, with no good answer but a nagging “something may be horribly wrong” feeling in my mind; I am certain I will wake up at 3 AM and be panicked about this one repeatedly.
  9. I dipped my toes into the IRS’s web page devoted to partnerships and how to make adjustments on partnership returns under the new “partnership audit regime”; my mind could only take a little bit of this so I have it flagged to review some more. Partnership returns are by far my least favorite type of return to prepare, so numbers 1, 2, 3 and this one cause me a lot of consternation.
  10. Based on a blog post from someone else, I started reading about Form 8621 and foreign investments, got sick to my stomach and thankful I now turn away anything involving foreign investments, and moved on.
  11. A question from a client caused me to re-review the nanny tax requirements; I am happy to say I actually know this subject pretty well.
  12. The IRS released recent additional guidance on cryptocurrency involving “convertible virtual currency from microtransactions.” I teach a course on cryptocurrency so I have that flagged for further review but my brain just can’t right now so I haven’t looked at more than the brief writeup in the Checkpoint daily tax review.
  13. I learned more about a stupid, pointless form called Form 966 that S-corps (and C-corps) are theoretically supposed to file when they terminate (unless they’re an LLC taxed as a corporation) but there is no penalty for not filing the form and apparently many tax pros simply don’t have their client file it and nothing ever happens, which begs my question of why does this stupid form and pointless reporting requirement exist to begin with? The form asks for nothing that isn’t already on the corporate return, asks for no numbers at all, and is supposed to be mailed separately (not e-filed) to the IRS. Why? Because Section 6043 says so. But again there’s no penalty for not filing and apparently it doesn’t get filed very often in the real world. What does the IRS do with this form? Who knows? Why do they need it? Who knows? My desk reference guide says something along the lines of “apparently” this form is supposed to be filed. And people wonder why I say I question my life choices about continuing to do this stuff!