Welcome to the Federal Tax Update Podcast, hosted by Lynn Nichols. This is presented as a member benefit by the South Carolina Association of CPAs. It is produced to provide current information about developments in U.S. tax law, such as cases, ruling, IRS pronouncements and expert comments on hot topics.

Nichols note: “The most important topics are the NOL carryback of 2020 losses to 2015, 2016, etc. and the warning on claiming inflated Domestic Production Activity Deductions in amended returns. It’s a promoted tax dodge that can only succeed if not audited.”

  1. District Court Affirms Debtor’s Taxes Were Not Dischargeable

A U.S. district court affirmed a bankruptcy court decision that held that a debtor’s tax liability for the 2008 tax year was not dischargeable because she did not file a timely return, finding that she waived her argument that she gave the return to the IRS and there was no evidence that she timely mailed or faxed the return to the IRS. [Patrice Lynette Harold; DC E Mi S Div, No. 2:20-cv-10514, 2/22/2021]

  1. NOL Relief Could Face Future Chopping Block

A net operating loss provision enacted in coronavirus relief legislation last year appears to be safe from the chopping block for now, but its future is far from certain. [Tax Notes Today; 2/25/2021, article by Jad Chamseddine]

  1. Car Salesperson’s Efforts to Throttle Tax Lien Stall Out

The Tax Court veered in the IRS’s favor in a collection due process action in which a car salesperson in Galloway v. Commissioner failed to successfully argue that he’d been wrongly barred from resuscitating an offer in compromise for a tax liability. [Tax Notes Today; 2/25/2021, article by Frederic Lee]

No IRS Abuse of Discretion in Upholding Tax Lien Filing

The Tax Court held that an IRS settlement officer did not abuse her discretion by refusing to consider an individual’s previously rejected offer in compromise and upheld the filing of a notice of federal tax lien against him. The court noted that the individual is free to submit to the IRS a collection alternative in the form of an OIC or installment agreement. [Craig L. Galloway; T.C. Memo. 2021-24, 2/24/2021]

  1. IRS Issues Warning on Questionable DPAD Refund Claims

The IRS has instructed examiners to consider imposing penalties for excessive refund claims and referring practitioners to the Office of Professional Responsibility for unsupported domestic production activities deductions. [Tax Notes Today; 2/26/2021, article by Kristen Parillo]

IRS Issues Alert on Domestic Production Activities Deduction

The IRS has issued a release (IR-2021-45) warning that it has received a wave of questionable amended returns claiming the domestic production activities deduction, which was repealed by the Tax Cuts and Jobs Act. [IR-2021-45; 2/25/2021]

  1. IRS Issues Practice Unit on Producer’s UNICAP Calculations

The IRS has released a practice unit addressing the application of the uniform capitalization of costs under section 263A for a taxpayer who is a producer and suggesting audit techniques when examining a producer’s section 263A computation. [COR-P-020; 2/25/2021] [39-page PowerPoint slide show]

The unit focuses on the simplified production method, with the adjustment calculated in seven steps followed by:

  • Definitions
  • Other Considerations
  • Index of Referenced Resources
  • Training and Additional Resources
  • Glossary of Terms and Acronyms, and
  • Index of Related Practice Units

Definitions and methods in final section 263A regulations that are effective Nov. 20, 2018, will be covered in a separate practice unit.

Missed last week’s Tax topic? Catch up with Lynn on the Tax Updates video playlist.

All commentary is brief, and you should not take a position on the items discussed until you thoroughly examine it with authoritative sources. The topics can be found discussed in further length at Tax Notes Today.

“I have relied on Tax Analysts® to provide reliable and timely analysis of Federal tax developments for over 30 years. The ‘headnotes’ you see here are from ‘Tax Notes Today,’ the preeminent source of accurate information and analysis of important developments and trends in Federal taxation,” Nichols says.

You can contact Lynn Nichols at lynnnicholscpa@outlook.com or 714.321.3387 and connect on LinkedIn.

A federal tax specialist for 50 years, Lynn Nichols provides tax consulting services to CPA firms on complex federal income tax issues, professional standards in tax practice and effective tax practice management.

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