Tax Legislative Highlights, January 2021

Online Power of Attorney (“POA”)

The IRS has announced that POA (Form 2848) and Tax Information Authorization (Form 8821) forms may be submitted online, easing burdens on taxpayers in a more virtual world.  See here for details and  here for FAQs.

Form 1065 Updates, Including Schedule K-1 (Form instructions here)

  • Tax Basis Partner Capital Accounts – Required for 2020 and going forward; IRS has allowed penalty relief for 2020 beginning balance calculation as long as reasonable consideration is used.
  • Business Interest Expense – For tax years beginning after 11/12/20, a new loss class for business interest expense has been established; for 2021 returns and forward, all partnerships are required to report business interest.
  • Gross Receipts – For 2021 tax returns, required to report gross receipts on K-1s if over $5mm; for 2022 returns and forward, partnerships must report gross receipts for the current year and the three immediately preceding tax years if greater than $5mm.

SE Tax Deferral

A draft SE schedule was released (instructions here) that includes the calculation of the SE tax deferral. As a result of the CARES Act, individuals can defer payment of 50% of the SS tax between 3/27/20 and 12/31/20.

Selected State Guidance on Remote Employees

Some states have issued guidance on whether or not telecommuting employees working in a state due to the impact of COVID-19 create nexus for an employer who does not operate in that state. This should be reviewed on a state-by-state basis as a developing area of guidance. DE has not yet issued specified guidance; PA initial guidance can be found here.

Extended Qualified Opportunity Zone (“QOZ”) Investing Deadline

In Notice 2021-10, the IRS provided additional extensions related to QOZs and Qualified Opportunity Funds (“QOFs”). These extensions relate to timing of investments into QOFs, relaxation of the prior 90% requirements, and the working capital safe harbor period. All extensions are automatic; however, required forms are to be filed.

Draft of 2021 Employer’s Tax Guide to Fringe Benefits Released

Two publications have been released that contain information for employers regarding the employment tax treatment of fringe benefits.

Publication 1

Publication 2

Employer Retention Credit Extended

The employee retention tax credit is a large-scale refundable tax credit instituted by the CARES Act and designed to encourage employers to retain staff.  If, due to COVID-19, an employer’s gross receipts were reduced by more than 50%, or operations were suspended in whole or in part, they may be eligible for this credit. The credit is 50% of a maximum of $10,000 in wages paid per employee, subject to other limitations; more information can be found here.

Report of Foreign Bank and Financial Accounts (“FBAR”) Filing Requirement for Virtual Currency

Generally, a U.S. person who has a financial interest in any foreign financial accounts located in a foreign country must file an FBAR if the value of those foreign accounts exceeds $10,000. Currently, regulations do not define virtual currency as a type of “reportable account.” However, authorities intend to propose to amend regulations to include this as a type of reportable account. More info here.

We will also continue to track proposed and enacted tax law changes as it relates to the new Administration, as well as discuss related compliance deadlines and planning opportunities.

The above list highlights select updates and is not intended to be comprehensive or individualized advice; please reach out to your Siegfried Advisory Relationship Coordinator if you would like to discuss the above items or any other updates.

Regards,

The Siegfried Advisory Team