On March 13, President Trump issued an emergency declaration under the Stafford Act and declared a national emergency due to the COVID-19 pandemic. As a result, under Code Sec. 165(i), certain taxpayers may be able to deduct disaster losses that are attributable to COVID-19 on their 2019 return, even though the pandemic is occurring in 2020.

A determination of whether a loss will qualify under Code Sec. 165(i) necessitates a thorough examination of the facts and circumstances, as well as any specific deductibility rules that may apply based on the type of expense. Although the pandemic meets the definition of a federally declared disaster, the IRS has not yet specifically ruled on the applicability of Code Sec. 165(i) to COVID-19.

Examples of losses that may qualify for the accelerated deduction opportunity include, but are not limited to, the following:

  • Inventory impairments
  • Worthless securities (but not bad debts);
  • Closure costs of store and facility locations;
  • Complete abandonment of leasehold improvements;
  • Permanent retirement of fixed assets;
  • Abandonment of pending business deals for costs otherwise capitalized;
  • Termination payments to cancel contracts, leases or licenses;
  • Prepaid events, travel, conference space, hotel rooms, etc. when taxpayer is not provided a refund or credit;
  • Prepaid raw materials or other items to fulfill a contract and the contract has been cancelled;
  • Mark-to-market securities; or
  • Losses from the sale or exchange of property.

Some losses generally would not qualify to be accelerated to 2019 under section 165. Examples include, but are not limited to:

  • Lost revenues
  • Goodwill losses, which are generally difficult to write off under section 165
  • A decline in fair market value of the property due to ’economic obsolescence‘ attributable to buyer resistance which attached to the property;
  • An appraisal reflecting a potential buyer resistance which represents speculative estimates of rental loss;

A taxpayer makes the election on an original federal tax return or an amended federal tax return filed on or before the date that is six months after the original due date for the disaster year (determined without regard to any extension of time to file). This means that for the 2019 calendar tax year a taxpayer could have until the Fall of 2021 to file an original or amended tax return to make this election. 

The taxpayer has the burden of proving the existence of the casualty as the cause of the section 165 loss.

Talley’s experienced team of tax professionals provide comprehensive tax compliance and consulting services so you can preserve, enhance and pass on to the next generation the assets and wealth that you’ve worked hard to build. We welcome the opportunity to discuss with you the current opportunities available to you. For more information, contact us today.

The gravity of the COVID-19 pandemic has forced a multitude of Americans to confront many issues they had previously put off because the topics are uncomfortable. Mortality has become a central concern due to the rise of the Coronavirus, so estate planning has become a priority for many individuals who currently have no plan in place and face the outlook of their probate estate distributed by the court rather than their own wishes. There are a few important documents you should have in place to handle unexpected situations such as illness, incapacitation, or death that make up a solid, basic estate plan.

One of the most obvious issues is the improper distribution of assets after a loved one’s death. It is not easy to talk or think about, but as they get older, a plan needs to be in place. If not, there is no guarantee that their assets will be handled properly after they die. More importantly, planning ahead can help protect accounts in special circumstances. For example, for those who fall ill and need expensive care and facilities, naming a legal beneficiary in advance can make sure that they can access money to help pay for the necessary treatment. Beneficiaries can also create a barrier from scammers, as with the right documents set up, there is a second source of control over accounts to prevent them from being drained without approval.

While the topic may not be easy to approach, there are a few tips to make starting a conversation easier. The first and most important tip is to be honest and respectful when bringing it up. It seems self-explanatory, but this is often the hardest part of the whole process. Just keep in mind that things will be a lot better when a plan has been created rather than leaving it until it is too late. In cases with multiple beneficiaries, tensions can run especially high. A good way to mediate these tensions while also ensuring things are handled correctly, is to hire a fiduciary. Fiduciaries, unlike other financial advisors, are legally obligated to conduct all business with their clients’ best interest above everything else. The most important tip is to stay dedicated to the process of getting an estate handled and taking the proper steps to make sure it is done correctly.

Even though COVID-19 has created a sense of uncertainty in many areas of our lives, creating or updating an estate plan is a huge step in taking back control and gaining some peace of mind. Though your options are virtually limitless, proper estate planning, deciding on the “who, what, when, and how”, and executing this with the least amount paid in taxes, legal fees and court costs possible can be a challenging and emotional affair to wrestle with alone. For more information, contact Talley LLP today.

As companies pursue success, avoiding fatigue should be a priority for employers and employees alike. According to the National Safety Council, sleep deprivation effects over 43% of workers, which ultimately deteriorates workplace productivity and safety. They estimate per year the loss per employee to be between $1,200 and $3,100, a large sum considering the size of a workforce. To combat this problem, here are three tips that can help you and your business battle fatigue.

Evaluate your lifestyle.  Lack of sleep is the most significant contributor to fatigue, and a few updates to your routine can make a world of difference. Temperature, bedding, nearby electronics, and lighting are all factors that can influence the way you sleep. Making gradual adjustments can help you determine which changes improve your quality of sleep and will leave you better rested. In addition to sleep, factors like diet and exercise have a considerable influence on your energy levels. To establish a baseline, keep a lifestyle log over a few weeks to determine which foods or activities make you feel better and worse. You may find that your most tired days are directly linked to certain foods or workouts that drain you.

Go see your doctors. Sometimes fatigue can be rooted in a deeper cause that no amount of sleep or habit tracking can help. It is essential to maintain your yearly checkups at the doctor to assess your health, but if your fatigue is affecting you long term, seeing your doctor again can only help you. Simple blood work or allergy tests can point to common biological and environmental causes preventing sleep. If the problem is more serious, a doctor can best help you find out why. Either way, a checkup can help you get treatment and get back on your feet.

Listen to your body. If your body needs something, do not feel bad about giving it that. Personal health is something many overworked business professionals may be ignoring, risking long term consequences. Taking a day or two off when you are too stressed or tired will allow your system to reset and recharge. Whether you are a boss or an employee, fatigue can affect you, so being mindful of your well-being will help you not only be more effective but improve your overall happiness.

Talley shares the same entrepreneurial spirit that has helped propel our clients to their current levels of success. With over 25 years of experience assisting high net worth individuals and business owners, Talley has the expertise necessary to help entrepreneurs throughout their entire journey, from formation to succession.

The Internal Revenue Service will start examinations of several hundred high-net-worth (HNW) taxpayers beginning July 15. These audits will address partnerships, private foundations (PFs), trusts and other matters for sophisticated individual taxpayers. With a coordinated IRS campaign, HNW taxpayers can expect aggressive IRS audits.

Partnerships and Other Passthroughs. The IRS will likely target HNW taxpayers with partnerships and other pass-through entities. Exams will address taxpayers with pass-through structures, such as partnerships, S corporations and disregarded entities. The Bipartisan Budget Act of 2015 overhauled the partnership audit rules to make it easier for the IRS to audit partnerships and collect tax from those audits.

Private Foundations. IRS examinations are expected to include individuals with PFs. HNW individuals and families utilize PFs to facilitate charitable giving and charitable activities. The tax rules governing PFs are complex. PFs are subject to several excise taxes and compliance requirements to ensure that PF assets are devoted to charitable purposes and to ensure that disqualified individuals don’t obtain certain prohibited personal benefits.

Multi-jurisdictional Families. Individuals with non-U.S. assets and income are subject to special tax and reporting requirements for offshore accounts and assets. The IRS has focused enforcement efforts on taxpayers with offshore bank accounts, assets and structures for several years. Reporting and compliance for these assets can be a trap for the unwary, especially for taxpayers living outside the United States, globally mobile individuals and multi-jurisdictional families. The IRS maintains a voluntary disclosure practice for individuals to regularize non-compliance with US international tax and reporting obligations.

TCJA Examinations for Individuals. The 2017 Tax Cuts and Jobs Act (TCJA) made major changes to the taxation of HNW individuals with international assets and activities. Many of the changes had a disproportionate impact on HNW individuals, including the rate structure of the Internal Revenue Code Section 965 transition tax, global intangible low taxed income and limits on available deductions. In May, the IRS announced a TCJA campaign and stated that “[t]he goal of this campaign is to identify transactions, restructuring and technical issues and better understand taxpayer behavior under the new law.” HNW individuals should be prepared to address TCJA tax issues and related planning during the coming cycle of examinations.

How Can Taxpayers Prepare? HNW individuals should be prepared to address issues relating to their sources of income, estate planning, foreign financial accounts, gifts to family members, assets transferred to PFs or charitable organizations and to identify assets they own both within and outside the United States. Increased scrutiny of IRS audits of HNW individuals make it extremely likely that the IRS will consider increasing enforcement measures.

Talley’s experienced team of tax professionals provide comprehensive tax compliance and consulting services so you can preserve, enhance and pass on to the next generation the assets and wealth that you’ve worked hard to build. We welcome the opportunity to discuss with you the current opportunities available to you. For more information, contact us today.

Famous reality television judge Judy Sheindlin famously said, “If it doesn’t make sense, it’s not true!” Many longtime fans of her show are likely echoing that sentiment after hearing the news that “Judge Judy” is coming to an end after its 25th season. While her reign on CBS may be coming to an end, it’s unlikely she will relinquish her hold on the Guinness World Record for longest career as a television judge or arbitrator any time soon. Judge Judy, the highest-rated daytime program in the U.S., has made Judy Sheindlin the highest-paid star in television and worth $440 million, according to Forbes. Her longevity and earnings make her a contender for one of the richest self-made women in the U.S. But every founder or entrepreneur must move on at some point.

While the series we know as Judge Judy will be coming to an end, Sheindlin plans on returning with a new show called Judy Justice. It’s incredible to think that Sheindlin sparked all of this from her reputation as a “tough, no-nonsense judge” in Manhattan almost four decades ago. But it is obvious that Sheindlin is a true entrepreneur with incredible ambition and dedication. And of course, it doesn’t hurt that she has been incredibly successful. While we can’t put ourselves in her shoes, Sheindlin has already established that this is not the end. It’s admirable to see that she isn’t letting the end of one thing end her career, citing that “If you’re not tired, you’re not supposed to stop.”

This news has a not-so-hidden message to keep going. Whether you have succeeded or not, entrepreneurship is about the journey and the constant drive to keep going. Judge Judy will always remind us that “I’m the boss, applesauce.” That should be enough to motivate you to work twice as hard for that thing you want to achieve.

If after a long and successful career in your field you’re thinking of going out on your own or creating another business that plays into your passions, Talley & Company has over 25 years of experience helping entrepreneurs successfully start and grow their businesses. From startup to succession, we maintain a proactive, global approach to our clients’ personal, family, and business needs.

We’ve heard of artificial intelligence in movies like Terminator and I, Robot. But the real applications of artificial intelligence include analyzing complex data sets, driving vehicles, providing more insightful user experiences, and even setting dinner plans or weeding out spam callers. While these applications have grown incredibly in the private sectors, government agencies like the IRS have also started to employ artificial intelligence as a utility for improving communication, taxpayer assistance, and even detecting tax evasion.

Several government tax agencies have already employed the use of chatbots to answer taxpayer questions. The most recent example comes in the form of Canada’s Charlie the Chatbot. A similar system is no doubt in the works for the IRS, which will hopefully help taxpayers avoid long wait times on the phone and get clarification on confusing documentation on the IRS website. Artificial intelligence has a consumer-facing goal of making lives easier, so it’s not far off to expect time-saving applications like chatbots.

While this appeals to taxpayers and consumers, the ideal application for an agency like the IRS is in tracking tax evasion, and increasing the likelihood of collecting tax payments from delinquent tax payers or non-filers. Such an application comes into the picture as the Internal Revenue Service ramps up data collection and analysis by using artificial intelligence to create graphs and present relationships between data to identify people who may be avoiding their taxes. But the usability goes as far as analyzing the scripts between IRS agents and taxpayers in order to find out how to effectively solicit tax payments, and ultimately “get a check sent.”

In an effort to fulfill these objectives, the IRS has even engaged in relationships with data firms to investigate potential tax evasion. IRS commissioner Charler Rettig even reveals the benefits of these new partnerships with this quote: “If I get a first name and a cell phone number, you’d be shocked how much information Palantir can provide.” Palantir refers to Palantir Technologies, a private data analytics company based in California. The initiatives are still fairly new and uncertain considering the budget of the IRS.

Additional implications come from the already detached nature of the organization becoming more automated, pushing human interaction even further from the taxpayer. Often, taxpayers are already confused as to the reason for IRS notifications, and making the communication process automated could become frustrating and ultimately leave taxpayers even more uninformed.

While the involvement of artificial intelligence in tax processes remains uncertain, human interaction will always be close by. Taxpayers should be wary of the fact that the evolution of technology within agencies like the IRS makes it much harder to conduct nefarious actions like tax evasion.

Talley’s experienced team of tax professionals provides comprehensive tax compliance and consulting services so you can preserve, enhance and pass on to the next generation the assets and wealth that you’ve worked hard to build. We welcome the opportunity to discuss with you the current opportunities available to you, your family and business. For more information, contact us today.

In today’s technologically advanced society, data is a driving force behind most if not every single industry. In fact, data is big business that is predicted to reach over a quarter of a trillion dollars by 2022. That’s not to say that the industry is wrought with failure. While there is no definite solution when it comes to such a new and unpredictable industry, here are four questions we can ask to analyze and potentially improve data-driven decision making.

How was the data sourced? Ultimately data is messy business, and data has a great potential to be entirely inaccurate. There is the element of human interaction, which is typically troubled by mistakes made when entering data like inventory, product purchases, etc. Lastly, and often the most overlooked, is the use of outdated data. Using a list or report from the wrong quarter or even wrong fiscal year can lead to disastrous consequences for businesses.

How was the data analyzed? Besides being misinterpreted by the people handling the data, accurate date can be misrepresented by computer models. Traditionally, we trust a spreadsheet/model to predict accurate results based on data input. The problem is twofold though: these models are not always entirely foolproof and even worse, some models contain enormous bias. Simply put, some models are entirely too simple and misrepresent data, while more complex models can muddle the data. In both cases, the claims of such models are often overly dramatic in either direction.

What doesn’t the data tell us? Data may be massively helpful to businesses in predicting shopper behavior or tracking performance, but it is just that, predicting. Humans cannot be entirely represented by data. This is called availability bias, and basically explains the phenomenon where decisions are made based only on available data or models and does not account for information that is not represented by what is not immediately available. Typical examples can include basing the amount of labor hours to give employees on hourly sales or extending loans to people based on established credit data. These are not always entirely representative of the entire situation, and ultimately reflect the danger of not asking this third question.

How can we use data to redesign products and business models? In other words, how do we utilize and/or apply data in business today to affect change in the way products are created, marketed, and sold as well as how businesses operate? This is multiple questions in one, but it is one of the most important to consider, because without an aim or goal for the data, it’s pointless to interact with it.

Data is such an incredibly valuable asset to business today, and utilizing it correctly and to its full potential can yield incredible results. It can be the difference between maximum efficiency and blatant inefficiency.

From technology-based accounting solutions to management information, analysis, and reporting, Talley LLP is the premier business consulting firm for entrepreneurs and their closely-held businesses. For more information on how to leverage your business’s data technology, contact Talley today.

Source: Harvard Business Review, 11 Feb. 2020,

With tax season in full swing, it’s a great time to address tax savings strategies that apply to everyone. No matter what your age or what capacity you are employed in, if you are making money then these tips apply to you. We wanted to focus on retirement, not only because it’s relevant in the current self-help-centered social climate, but because saving for retirement is one of the most crucial investments in your future that may also serve as a tax-saving tactic.

Most Americans are not prepared for retirement. Consider the fact that almost 300,000 baby boomers are set to retire each month until 2030 with less than 10% of the suggested minimum retirement savings. The unfortunate reality is that the lack of retirement investments and savings coupled with active debt (e.g., a mortgage), many baby boomers are not in a position to enjoy a stress-free retirement. Many may even be forced out of retirement or kept from retiring altogether. That is why it is so important to take advantage of financial planning options like retirement accounts and leveraging tax-saving strategies that are available to you.

Most workplaces offer options like a 401(k) or 403(b), which are effectively savings accounts that allow you to invest your money while deferring any taxes until a later time. Although there is more to it and the details are generally pretty complex, it’s not hard to set up automatic contributions every month. As a bonus, if you are utilizing a 401(k) offered by your company, they may even offer to match what you put in up to a certain amount.

Traditional IRAs are also an option because you are taxed at the time of withdrawal. As such, these contributions may be considered tax deductions when you file your taxes. Roth IRAs are an interesting alternative because you pay taxes upfront, so the benefits come later on. Either way, the best part is that you can maintain both a 401(k) and IRA at the same time.

In conjunction with money management and financial planning, long-term tax planning can help both you and your family protect your hard-earned money. No matter your situation, consulting with your wealth advisor and tax advisor is a good start.

Talley’s experienced team of tax professionals provides comprehensive tax compliance and consulting services so you can preserve, enhance, and pass on to the next generation the assets and wealth that you’ve worked hard to build. We welcome the opportunity to discuss the current options available to you. For more information, contact us today.

California’s groundbreaking Assembly Bill 5 (AB 5) went into effect on Jan. 1st, becoming the standard for determining whether workers should be classified as employees or independent contractors. All companies using independent contractors in California will be put through a three-part test to determine whether they must reclassify their workers. If they don’t pass that test, they’ll have to turn their workers into employees.

The debate that raged around the bill for months focused mainly on its effects on Big Tech and gig economy companies such as Uber, Lyft and Postmates. But by the time the legislation became law last year, its scope broadened to encompass an array of industries, from transportation/trucking to journalism. Proponents of the bill say that it forces companies to replace gigs with jobs that entitle employees to state-mandated protections like paid time off, coverage for job injuries, and unemployment insurance. Critics of AB 5 say despite its good intentions the legislation has boomeranged on contractors, making it harder for tens of thousands of them to make a living in a tight economy.

The three-part AB 5 “ABC classification test” requires businesses to use the following test in determining whether a worker is an employee or an independent contractor:

(A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.

(B) The person performs work that is outside the usual course of the hiring entity’s business.

(C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.”

If even one of the conditions is not met, then the worker is classified as an employee. As concerns grow over the new law, large companies and third-party organizations like Uber and Airbnb are looking for ways to avoid having to take on a rush of new “employees” under this classification.

Our assessment of AB 5 is that it will have major tax implications across a wide variety of businesses and industries. Talley welcomes the opportunity to discuss what AB 5 may mean for you and your business. For more information, feel free to contact us

This year alone, Americans are estimated to inherit over $750 billion while only paying an estimated 2.1% in taxes, according to the Brookings Institution. In comparison, the estimated taxes on work income and savings is 15.8%. While plenty of people advocate for higher taxes on the wealthier population, Lily Batchelder, who advised Barack Obama during his presidency, is proposing an inheritance tax that could raise approximately $1.4 trillion over the next ten years in taxes.

Currently, wealthy Americans and their estates are required to pay a 40% tax on bequests and gifts to their heirs. However, there are many ways to avoid the tax. For example, the first $23.2 million in inheritance is tax-exempt for married couples, and there are many other methods to transfer wealth to heirs tax-free using trusts and other strategies.

Batchelder’s plan would eliminate the current estate tax system and require heirs to pay income and payroll tax on inherited money. Also included in her plan is a proposed lifetime threshold that would make certain heirs exempt, taxing only the richest heirs. The estimate is still not representative of the actual number raised by the new “inheritance tax” due to the fact that it does not include additional funds raised through the closing of certain tax loopholes also enacted by the new plan.

Batchelder wrote that the proposal would “soften inequalities, strengthen mobility, and more equitably allocate taxes on inheritances among heirs,” while also cutting any distortions in the labor market and increasing work among heirs.

Though your options are virtually limitless when it comes to estate planning, deciding on the “who, what, when, and how” and executing this with the least amount paid in taxes, legal fees, and court costs possible can be a challenging and emotional affair to wrestle with alone. For more information, contact Talley LLP today.

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