Documents summaries for the week of April 23, 2018


Law firm can offset unpaid employment tax liability with payments made by related firm

The Tax Court held that a law firm was entitled to offset its unpaid employment tax liability for the first quarter of 1999 with the employment tax that a related taxpayer overpaid for the same quarter, even though it was time-barred because it qualified for equitable recoupment. In addition, the court found that the firm was entitled to abatement for additions to tax penalties that the IRS assessed for the first quarter of 1999, but, to the extent that the firm’s underpayment of employment tax for the first quarter of 1999 exceeded the related taxpayer’s overpayment for that quarter, the IRS’s determination to collect the balance by levy was sustained. Emery Celli Cuti Brinckerhoff & Abady, P.C., T.C. Memo. 2018-55 (4/24/18).

IRS supplements prevailing state assumed interest rates

The IRS has supplemented the schedules of prevailing state assumed interest rates set forth in Rev. Rul. 92-19, for purposes of Sec. 807, for certain insurance products issued in 2017. These rates apply to tax years beginning after Dec. 31, 2016, and on or before Dec. 31, 2017. Rev. Rul. 2018-13 (4/26/18).



Couple cannot deduct donations made to church they started

The Tax Court held that a couple was (1) not entitled to deduct $3,091 of charitable contributions for donations made to a church that the couple and another family started, (2) not entitled to deduct unreimbursed business expenses, and (3) could deduct $109 for tax preparation fees for  TurboTax. The court noted that the only documentation for the church donations was a letter signed by the husband, who was also the church’s president and minister. Also, the couple did not properly substantiate the unreimbursed business expenses they had deducted and had in fact deducted the same business expenses twice, as miscellaneous itemized deductions on Schedule A and on a Schedule C for the husband’s business, which the IRS had allowed. Davis, T.C. Memo. 2018-56 (4/24/18).

IRS issues annual adjustments to housing expense limitation for purposes of Sec. 911

The IRS provided its annual adjustments to the limitation on housing expenses for Sec. 911 for specific locations for 2018. These adjustments are made on the basis of geographic differences in housing costs relative to housing costs in the United States. Notice 2018-33 (4/23/18).

IRS restores 2018 deductible HSA contribution limitation under family coverage to $6,900

The IRS issued guidance providing relief for taxpayers with family coverage under high-deductible health plans by restoring the 2018 annual deductible contribution limit for their health savings accounts (HSAs) to the amount that was originally announced in 2017. The limitation, which was originally issued as $6,900 on May 4, 2017, but was reduced to $6,850 on March 2, 2018, has now been restored to its original amount of $6,900 for the entire year. Rev. Proc. 2018-27 (4/26/18) (see related news story).



IRS issues May 2018 applicable federal rates

The IRS issued a ruling that prescribes the applicable federal rates for May 2018. This guidance provides various prescribed rates for federal income tax purposes including the applicable federal interest rates, the adjusted applicable federal interest rates, the adjusted federal long-term rate, the adjusted federal long-term tax-exempt rate and are determined as prescribed by Sec. 1274. Rev. Rul. 2018-12 (4/24/18).

IRS issues qualified mortgage bond guidance

The IRS issued a revenue procedure providing issuers of qualified mortgage bonds, as defined in Sec. 143(a), and issuers of mortgage credit certificates, as defined in Sec. 25(c), with (1) the nationwide average purchase price for residences located in the United States, and (2) average area purchase price safe harbors for residences located in statistical areas in each state, the District of Columbia, Puerto Rico, the Northern Mariana Islands, American Samoa, the Virgin Islands, and Guam. Issuers may rely on the revenue procedure to determine average area purchase price safe harbors for commitments to provide financing or issue mortgage credit certificates that are made, or (if the purchase precedes the commitment) for residences that are purchased, in the period that begins on April 24, 2018, and ends on the date as of which the safe harbors contained in the procedure are rendered obsolete by a new revenue procedure, and for an additional transition period also provided in the revenue procedure. Rev. Proc. 2018-28 (4/24/18).

IRS publishes oil recovery and marginal production reference price for 2017

The IRS published the calendar year 2017 reference price under Sec. 45K(d)(2)(C) for determining the amount of the enhanced oil recovery credit under Sec. 43, the marginal well production credit under Sec. 45I, and the percentage depletion for oil produced from marginal properties under Sec. 613A. Notice 2018-32 (4/23/18).



IRS asking for comments on 2018–2019 Priority Guidance Plan

The IRS is inviting the public to recommend items that for inclusion on the 2018–2019 Priority Guidance Plan. The plan will identify guidance projects that the IRS intends to work on during July 1, 2018, through June 30, 2019. Notice 2018-43 (4/27/18).

IRS extends and expands Wisconsin dyed fuel relief

The IRS has extended the dyed fuel relief provided in Notice 2017-30, originally ending May 3, 2018, to Dec. 31, 2018. The IRS also expanded the relief, which allows refund claims for fuel that was initially taxed upon removal from a terminal in Milwaukee and later removed from a Green Bay, Wis., terminal as dyed fuel, to include fuel similarly transferred from a terminal in Madison, Wis. Notice 2018-39 (4/26/18).

Tax Insider Articles


Business meal deductions after the TCJA

This article discusses the history of the deduction of business meal expenses and the new rules under the TCJA and the regulations and provides a framework for documenting and substantiating the deduction.


Quirks spurred by COVID-19 tax relief

This article discusses some procedural and administrative quirks that have emerged with the new tax legislative, regulatory, and procedural guidance related to COVID-19.