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https://fuoco.cpa/cares-act-business-tax-moves-to-make-before-year-end/

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https://fuoco.cpa/cares-act-business-tax-moves-to-make-before-year-end/
Written by William Roof, JD, CPA, of Counsel

Written by William Roof, JD, CPA, of Counsel The IRS emperor is not naked,** he still has both clothes and teeth. The IRS may have taken a national emergency break along with the rest of us, but is waking up. Regardless of your political leanings, we are all going to have to pay for COVID. It would be imprudent to think otherwise. The Fuoco Group stands ready as your tax advisor, and we have three very important items to share in this newsletter. Two of these have been underscored with the 2017 Tax Cuts and Jobs Act (TCJA). The last has been with us a long time, but overlooked---well, no longer. We will use the K.I.S.S. principle and keep it simple and brief. For our S corporation clients: 1. For your advantage, we must compute and document shareholder basis in the S corporation each and every year. The TCJA strongly implies that in the case of shareholders claiming a loss, basis be calculated. In your best interest, Fuoco Group believes this should not be limited to a loss year. It is to our S Corporation owner’s advantage to be well aware of his/her basis in their S entity. We firmly believe that the honeymoon period (if it existed) is over. Give us a call and we will explain more. 2. For AGES, it has been a requirement that S Corporation owners need to pay themselves “reasonable” W-2 compensation. Following “K.I.S.S.,” we have no intent to dive into that description in this blurb. Put simply, if you’re making money, you’d better be giving yourself a paycheck. And hidden in the TCJA is a latent license for the IRS to go hunting for this. As your tax advisor partner, Fuoco Group simply cannot let you ignore this. Therefore, this needs to be resolved, and resolved quickly. Call us. Get on the schedule. As most payroll companies need about two weeks to work in a new payroll, this has a very short fuse. For our Partnership clients: 3. It’s hot off the IRS presses. Each year, partner capital accounts have to be presented on a tax basis. “Your capital account = your tax basis in the partnership,” and the IRS wants to see it. That’s a bit simplified, but please bear in mind--- that’s an IRS official release. Your Fuoco Group tax advisor CANNOT release the tax return without the calculation. Call us now on this. In summary, for the not so good, the emperor is awake, clothed and will be on a mission. For the good, Fuoco stands by its clients ready to help. You may email CPA@fuoco.com, or call toll free for an appointment: 855-542-7537. **The Emperor’s New Clothes, by Hans Christian Andersen, 1837: Two swindlers arrive at the capital city of an emperor who spends lavishly on clothing at the expense of state matters. Posing as weavers, they offer to supply him with magnificent clothes that are invisible to those who are stupid or incompetent. The emperor hires them, and they set up looms and go to work. A succession of officials, and then the emperor himself, visit them to check their progress. Each sees that the looms are empty but pretends otherwise to avoid being thought a fool. Finally, the weavers report that the emperor's suit is finished. They mime dressing him and he sets off in a procession before the whole city. The townsfolk uncomfortably go along with the pretense, not wanting to appear inept or stupid, until a child blurts out that the emperor is wearing nothing at all. The people then realize that everyone has been fooled. Although startled, the emperor continues the procession, walking more proudly than ever.The IRS emperor is not naked,** he still has both clothes and teeth. The IRS may have taken a national emergency break along with the rest of us, but is waking up. Regardless of your political leanings, we are all going to have to pay for COVID. It would be imprudent to think otherwise.

The Fuoco Group stands ready as your tax advisor, and we have three very important items to share in this newsletter. Two of these have been underscored with the 2017 Tax Cuts and Jobs Act (TCJA). The last has been with us a long time, but overlooked—well, no longer.

We will use the K.I.S.S. principle and keep it simple and brief.

For our S corporation clients:

1. For your advantage, we must compute and document shareholder basis in the S corporation each and every year. The TCJA strongly implies that in the case of shareholders claiming a loss, basis be calculated. In your best interest, Fuoco Group believes this should not be limited to a loss year. It is to our S Corporation owner’s advantage to be well aware of his/her basis in their S entity. We firmly believe that the honeymoon period (if it existed) is over. Give us a call and we will explain more.

2. For AGES, it has been a requirement that S Corporation owners need to pay themselves “reasonable” W-2 compensation. Following “K.I.S.S.,” we have no intent to dive into that description in this blurb. Put simply, if you’re making money, you’d better be giving yourself a paycheck. And hidden in the TCJA is a latent license for the IRS to go hunting for this. As your tax advisor partner, Fuoco Group simply cannot let you ignore this. Therefore, this needs to be resolved, and resolved quickly. Call us. Get on the schedule. As most payroll companies need about two weeks to work in a new payroll, this has a very short fuse.

For our Partnership clients:

3. It’s hot off the IRS presses. Each year, partner capital accounts have to be presented on a tax basis. “Your capital account = your tax basis in the partnership,” and the IRS wants to see it. That’s a bit simplified, but please bear in mind— that’s an IRS official release. Your Fuoco Group tax advisor CANNOT release the tax return without the calculation. Call us now on this.

In summary, for the not so good, the emperor is awake, clothed and will be on a mission. For the good, Fuoco stands by its clients ready to help. You may email CPA@fuoco.com, or call toll free for an appointment: 855-542-7537.

**The Emperor’s New Clothes, by Hans Christian Andersen, 1837: Two swindlers arrive at the capital city of an emperor who spends lavishly on clothing at the expense of state matters. Posing as weavers, they offer to supply him with magnificent clothes that are invisible to those who are stupid or incompetent. The emperor hires them, and they set up looms and go to work. A succession of officials, and then the emperor himself, visit them to check their progress. Each sees that the looms are empty but pretends otherwise to avoid being thought a fool. Finally, the weavers report that the emperor’s suit is finished. They mime dressing him and he sets off in a procession before the whole city. The townsfolk uncomfortably go along with the pretense, not wanting to appear inept or stupid, until a child blurts out that the emperor is wearing nothing at all. The people then realize that everyone has been fooled. Although startled, the emperor continues the procession, walking more proudly than ever.

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