Latest Fun Facts and New Forms from the IRS

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How to Love Your CPA

Tax Season if here with a vengeance but we wanted to update you on several new forms and fun facts we learned at our latest continuing education classes.  

New IRS Forms (Love from the IRS)

We have several new forms in 2021 for Corporate and Partnership tax returns – specifically new Forms K-2, K-3 and Form 7203. 

Form K-2/K-3 is 14 pages long. No kidding. This form is required (at present) to be attached to all business returns and a copy sent to all owners. The purpose of the form (as far as we can tell since once again the IRS is giving us minimal guidance) is to report foreign activities. The form is required, even if the business has no foreign activities. The IRS has implemented this new form for 2021 reporting, even though they are not ready to accept the forms electronically. The IRS has already announced they would not accept the forms electronically until mid-March (partnerships) and mid-June (S corporations). 

Currently the AICPA is asking the IRS to postpone this 2021 filing requirement until they get their act together by next tax season OR they give us more guidance and explanation. We will see. Currently, the forms are required and there are penalties for the taxpayer (you) and the preparer (us) if they are not filed. Stay tuned on this one.

Form 7203 is a new form required in 2021 for S corporations. The purpose is to report when S corporation shareholders are taking too much money out of the corporation (bottom line). Our tax software does not have it available yet so that’s giving us a rash. We hope to see it soon so we can process corporate tax returns.

• Crypto assets (bitcoins, etc.) – hence the question on your individual questionnaire about virtual coins. It is imperative you answer that correctly and let us know if you have been selling any virtual currencies. The IRS will find you if you do not. They have their ways.

• Independent contractors versus employees – this is an on and off hot topic for the IRS. It is back to being an IRS focus. For example, we have told many of you over the years that your associates aren’t really independent contractors but are employees. We will send out an Eblast after tax season on the difference between the two so you can evaluate your situation and take the appropriate steps.

• S corporation salary versus distributions – many, many S corporation shareholders think they can take small salaries and large distributions, thus avoiding payroll taxes. The IRS will be looking at this with more enthusiasm. And it is very easy for the IRS to see if this is happening on your corporate income tax return. We will be letting you know if we think you are not paying yourself enough (“reasonable” salary).

How to Love Your CPA (us)   

Folks, it is tax season. We need to concentrate on your tax returns, make sure they are correct and come up with tax strategies that will help you pay less tax (legally). 

We love talking to you, but we hope you understand that unless it’s an emergency, could you call us after April 15th? Imagine that all your hygiene patients came in to see you in a two-month time frame and then you will understand how our tax season is going (every year). 

Love you, and please stay healthy and sane (therapy helps, if you can find someone!).

Let the Tax Season fun begin!