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Tax News: July ’18

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in Small Business Tax

Check up on charities. Are you considering donations to charity? To provide more information, the IRS has developed a new online tool, The Tax Exempt Organization Search. It replaces Select Check, the previous organization search mechanism. This latest tool includes Form 990 forms, IRS determination letters and other status checks. It can verify when your donations to an organization qualify for tax deductions. Find it at https://apps.irs.gov/app/eos.

Tax tips on tips. Some businesses have tip jars or boxes on counters so customers can easily reward workers. In a new ruling, volunteer workers pooled all the tips and split them at the end of the shift, but no one reported the income. The IRS says these tips are subject to employment taxes only when it issues a notice and demand for taxes due. (IRS Chief Counsel Advice 20186010, 4/20/18)

Pilot audit program. The IRS is conducting a test program for online audits. It is inviting 19,000 taxpayers who are being audited for discrepancies for itemized deductions, dependent care credits or education credits. Participating taxpayers (and their tax pros) can communicate with the IRS online. For example, you can respond to information requests and post documents electronically. This is the latest step in IRS efforts to modernize operations.

Back to school. As part of its tax reform efforts last year, Congress debated provisions to consolidate the numerous and sundry tax breaks involving education, but without any success. Now lawmakers are gearing up to take another shot. Some of the proposals being considered include improvements in the American Opportunity Tax Credit and repeals of the Lifetime Learning Credit, the tuition deduction and the student loan interest deduction. In addition, the special tax exclusion for U.S. Savings Bonds used to pay for college is on the chopping block, while Coverdell Education Savings Account contributions would be restricted. On the plus side, Section 529 plans could be expanded to cover expenses of vocational schools or other types of training.

Blue Book review. It looks like the general public, including taxpayers and tax pros, will have to wait a little longer for the next edition of the “Blue Book.” This publication, which is produced by the Joint Committee on Taxation and comes out every two years or when significant new tax legislation is enacted, provides valuable insights into the intent of key tax law writers in Congress. It also contains substantial analysis and explanations for your perusal. Initially, hopes were high that the Blue Book reflecting the new Tax Cuts and Jobs Act would be released before the end of the summer, but now the smart money is betting it won’t appear until later this year. We will provide a summary of the Blue Book highlights as soon as the publication is available.

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