Tax Short Subjects, 10/5/18

Topics: Reasonable Cause, 100% Bonus Depreciation, Meals Under Tax Reform

Reasonable Cause

The 8th Circuit U.S. Court of Appeals upheld a federal district court ruling that a company had failed to provide reasonable cause for not paying its employment taxes on time. The district court held that the taxpayer “had an obligation to timely remit employment taxes.” His reliance on others (an employee and an accountant) doesn’t constitute reasonable cause for failure to remit those taxes. The company was seeking to get a refund for all penalties and interest assessed by the IRS for the understatement of tax. (Deaton Oil Company, LLC, 9/21/18)

Opting out of 100% Bonus Depreciation

There’s a pending deadline to elect out of 100% depreciation for 2017. The IRS is reminding taxpayers who placed qualifying property in service during 2017, but choose not to claim the new 100% depreciation deduction, that they have until 10/15/18 to file the required election. The Tax Cuts and Jobs Act retroactively increased the bonus depreciation percentage to 100% for qualified property acquired and placed in service after 9/27/17 and before 1/1/23. For property placed in service or acquired before 9/28/17, the percentage was 50%. Contact us for assistance.

Reminder: Meals Under Tax Reform

Is that still deductible? The Tax Cuts and Jobs Act generally eliminated the business deduction for entertainment expenses but not meal expenses. As long as certain conditions are met, taxpayers can still deduct 50% of the cost of business meals. The IRS issued Notice 2018-76 spelling out the five conditions. The expense must be “ordinary and necessary;” the taxpayer (or an employee) must be present at the meal; the meal can’t be lavish; it must be provided to current or potential customers; and the meal cost must be separately stated from the entertainment cost.




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