Tax News Updates | December 2024

• 2024 BTB Tax Toolkit – Now Available
• Health FSA Contribution Limit Increases
• 1040 MeF Shutdown Starts on November 30
• NTA Concerned Over Shortened Notice Regs
• Q1 2025 Interest Rates Drop 
• Tax Troubles
• December  Applicable Federal Rates
• Remaining 2024 Seminar/Webinar Dates
• 2024 Desk Reference Guide
• Viroqua Tax Practice For Sale
• Accounting Practice for Sale
• Kenosha & Racine Area – Client Referrals
• Area Stakeholder Liaison Teams
• Speaking Engagements
• The Tax Book – Promo Code 544
• CFS Tax Tools – Coupon Code BTB57143
• $50 Referral Bonus 

“”

~  Alfred E. Neuman

Instructors 

James Hockenberry, EA – Jim is the President of Back to Basics Income Tax Seminars and has over 31 years of experience in income tax and financial planning. He is an Enrolled Agent and holds a Bachelor of Business Administration (BBA) degree from the University of Wisconsin-Eau Claire. He has worked as a tax researcher / technical writer and has served as an instructor for several tax and financial organizations.

Steve O’Rourke, EA – Steve is an Enrolled Agent with a successful tax practice in Oshkosh, Wisconsin. His firm, which was established in 1989, prepares over 2,500 individual and business tax returns. Steve has a Bachelor of Business Administration (BBA) degree from the University of Wisconsin – Oshkosh. He has over 40 years of experience as a tax professional and is a nationally known speaker, having taught tax seminars for the National Association of Enrolled Agents, the National Association of Tax Professionals, and several other professional organizations nationwide.

2024 BTB Tax Toolkit – Now Available

The year-end planning letter is now available. The cost is only $60 delivered to your email. In addition to your own professionally written 4-page ready to mail newsletter, we have included client interview worksheets, a data taker, sample election statements, and a client engagement letter. The newsletter includes articles on new tax laws, year-end planning, and much more. Click here for online ordering and delivery of the 2024 BTB Tax Tool Kit.

Seminars are Underway

If you have not registered – now is the time to do it. For those with more than one person attending an event from the same office, don’t forget to take advantage of the group discounts.

We have launched a new website where you can now create and manage your own account.

1. On-line registration. Once your account is created you can then login and register for each event. Click here or the button below to get started.

2. Group registrations. To take advantage of the group discounts, we can help you with the process. Just use the link and fill out the group registration form, hit submit and we will complete the group registration for you.

If you have already registered, we will see you at the event. Just remember to bring your seminar confirmation letter with you to the seminar. For our full-day seminars and webinars, check-in begins at 8:00 am. Seminars start at 8:25 am and end at 4:35 pm.

Health FSA Contribution Limit Increases

In 2025, employees can contribute up to $3,300 for their flexible spending arrangement (FSA) account, which helps pay for qualified medical expenses not covered by their other health plans. 

For FSAs that permit the carryover of unused amounts, the maximum carryover amount to 2025 is $660, up from $640 in 2024. The IRS clarified in a news release that the carryover doesn’t affect the maximum amount of salary reduction contributions that can be made.

If the plan allows, an employer may also contribute to an employee’s FSA account. If the employee’s spouse has a plan through their employer, the spouse can likewise contribute up to $3,300 to that plan. This means the couple could jointly contribute up to $6,600 for their household.

1040 MeF Shutdown Starts on November 30

The IRS has issued a Quick Alert for Tax Professionals informing filers that it will shut down the 1040 Modernized e-file (MeF) production on Saturday, November 30, 2024, at 11:59 p.m. ET.

The MeF undergoes a planned annual shutdown to allow the IRS to optimize its system for the latest filing requirements. In this case, the November 30 shutdown is made in preparation for the upcoming 2024 Filing Season.

The shutdown will only affect “Send Submissions” for 1040 (state and federal). Taxpayers and tax professionals must ensure that submissions are completed by the deadline to avoid potential delays.

Users of other systems, such as “Get Acks” and all state services, will not be affected by the shutdown and can expect no interruptions to these services. E-filing for business returns (BMF) is also not impacted.

The IRS will reveal an official timeline for resuming 1040 e-filings in early December 2024, and users can monitor the MeF Operational Status page for any updates.

NTA Concerned Over Shortened Notice Regs

National Taxpayer Advocate (NTA) Erin Collins has voiced strong opposition to proposed regulations that could significantly limit taxpayer’s rights to advance notice before the IRS contacts third parties regarding their tax matters. In her recent comments on Proposed Regulation 301.7602-2, Collins criticized the expanded exceptions to the longstanding 45-day notice requirement, calling attention to the potential erosion of taxpayer rights and due process. 

Under existing law, the IRS is prohibited from contacting third parties about a taxpayer’s tax liability unless the taxpayer is given a notice specifying a period (not to exceed one year) during which these contacts may occur. This notice must be provided at least 45 days before the start of the designated period, allowing taxpayers time to address the matter directly with the IRS.

The proposed regulations, introduced in March 2024, would create new exceptions to this 45-day notice requirement in specific time-sensitive situations, such as:

• Instances where the IRS must act quickly to assess or collect a tax liability.
• Situations where the statute of limitations on tax assessment or collection is set to expire within a year.

Collins expressed concern that these exceptions could undermine taxpayer rights, particularly when the statute of limitations is nearing its expiration. The advocate highlighted that the shortened notice period would not give taxpayers adequate time to respond or resolve issues directly with the IRS before third-party involvement. Collins also emphasized the broader implications of the proposed changes, noting that third-party contacts can cause reputational harm to taxpayers and damage trust in the tax system.

Implications for Tax Professionals

• Protecting Client Rights: Tax professionals should be vigilant in ensuring their clients are notified of potential third-party contacts and understand their rights under the law.
• Responding to Shortened Notices: If these regulations are implemented, clients may have less time to resolve issues directly with the IRS, requiring faster action and potentially more proactive tax planning.
• Monitoring Regulatory Changes: Tax professionals should stay informed about developments in this area, as they could significantly impact the representation of clients in IRS disputes.

Q1 2025 Interest Rates Drop

The IRS has announced that over/under payment interest rates will drop for the calendar quarter beginningJanuary 1, 2025. The interest rates for the second quarter of 2025 are:

• 7% for overpayments (payments made in excess of the amount owed), 6% for corporations.

• 4.5% for the portion of a corporate overpayment exceeding $10,000.
• 7% for underpayments (taxes owed but not fully paid).
• 9% for large corporate underpayments.

Tax Troubles

The Tax Court has issued a harsh ruling against a Georgia high school teacher who failed to report nearly $86,000 in wage and rental income for the 2018 tax year. In addition to being held liable for a tax deficiency of $16,690, Brian Dean Swanson was penalized the maximum $25,000 under§6673 for repeatedly pursuing frivolous arguments about his tax obligations.

In 2018, Swanson earned $79,186 in wages from the McDuffie County Board of Education and $6,510 in rent from the Chamber of Commerce of Greater Augusta, GA Inc. Despite this income, Swanson reported zero wages and rental income on his Form 1040, claiming these amounts did not constitute taxable income. Swanson argued that his wages represented “capital [that] does not qualify as wages”; and that

the rent was merely “the restoration of capital for tax purposes”; exempting it from reporting requirements. These positions contradicted clear provisions of the Internal Revenue Code (IRC).

In February 2022, the IRS issued Swanson a notice of deficiency, adjusting his income to include the omitted wages and rent. This resulted in a tax liability of $16,690, along with an accuracy-related penalty of $3,338 under §6662(a). Swanson filed a petition with the Tax Court in May 2022, contesting the deficiency and penalties.

The court reaffirmed that gross income includes “all income from whatever source

derived” under §61(a), explicitly citing wages and rents as taxable sources. Swanson’s arguments to exclude these amounts from gross income were dismissed as meritless. However, the court imposed the maximum $25,000 penalty under §6673, citing Swanson’s reliance on discredited and frivolous arguments. Swanson asserted that public school teachers are exempt from federal income tax and that taxing his wages would violate the Uniformity Clause of the U.S. Constitution. Despite previous sanctions for pursuing these arguments, Swanson continued to advance them.

The Tax Court expressed frustration at Swanson’s persistence in promoting frivolous arguments, noting that previous sanctions had failed to deter him. The court imposed the $25,000 penalty to encourage compliance with established tax principles in the future. “As these sanctions appear to have left petitioner undeterred, we will grant respondent’s Motion and impose a penalty of the full $25,000 permitted,” the court stated. This case serves as a stark reminder that frivolous tax arguments can result in not only the

payment of taxes owed but also substantial penalties that far exceed the original tax liability.

Brian D. Swanson, T.C. Memo. 2024-105

December Applicable Federal Rates

Rev Rul 2024-26

Remaining 2024 Seminar/Webinar Dates

Note: All webinars begin at 8:25 am and end at 4:35 pm in the time zone indicated.
*New Location

2024 Desk Reference Guide

Now that the final numbers for 2024 have been released by the IRS, we have updated the Desk Reference Guide for the new year. Click here for your copy of the 2024 Desk Reference Guide.  

Viroqua Tax Practice For Sale

Tax and accounting practice for sale in Viroqua, Wisconsin. Loyal clients, good reputation, high-growth community in the heart of the scenic Driftless area of Southwest Wisconsin. Owner retiring after 30 years. Gross revenue $330K. 68% tax, 32% accounting. Average 1040 fee is $621. Exceptionally clean files and well-organized office. Two employees are eager to stay under new leadership. Owner willing to provide transition services. Excellent office location is available to be leased from the owner, if desired. 

For additional information, please contact celeste@gibsoncpalaw.com.

Accounting Practice for Sale

Northeast/central Wisconsin. $380,000 gross (sale price negotiable). Drake tax software, Quickbooks accounting software. Networked computers, all office equipment, 3,300 square foot office on main highway, available for lease or purchase.   Seller willing to provide multiple years of transition support.  

Reply to bkcpa@frontier.com for more details. 

Kenosha & Racine Area – Client Referrals

I have been attending the BTB seminars for many years.  I plan to retire from tax work after next tax season – April 16, 2025.  I have a small tax practice in Kenosha with about 75 clients.  I work alone, out of my home, so I have been able to keep my fees reasonable.  When I visit with my clients after the first of the year, I would like to help them find a new tax preparer for their 2025 taxes by giving them a list of available tax preparers.  If you are in the Kenosha or Racine area, and you are taking new clients, please contact me via email: peggyjgallo@gmail.com.

Area Stakeholder Liaison Teams

Speaking Engagements 

If your professional group is looking for outside speakers for an upcoming event – we can help. For additional information, please email jim.s.hockenberry@gmail.com 

The Tax Book – Promo Code: 544

Use Promo Code 544 for additional discounts and take advantage of The Tax Book’s award-winning tax research solutions. 

Order at: www.thetaxbook.com/order
Promo Code: 544

CFS Tax Tools – Coupon Code: BTB57143

CFS Tax Software, Inc.

Tax Tools is a collection of over 300 worksheets, calculators, flowcharts, and forms that tackle a variety of tough tax topics (many of which aren’t included in your 1040 software), including:

• Individual Tax Planner 
• ACA modules 
• Penalty and Interest Calculator 
• Social Security Optimization 
• Updated for latest tax law changes

You can order online at www.taxtools.com, or call 1-800-343-1157. Either way, be sure to use Coupon Code BTB57143 for additional savings.

$50 Referral Bonus

Refer a new attendee to a Back to Basics Income Tax Full Day Seminar and receive a $50 referral fee. Upon receipt of the new attendee registration(s), BTB Income Tax Seminars will mail you a check of $50 for each new attendee. Click Here to get a copy of the referral coupon.

(NOTE: Not valid with any other special offers or discounts)

Back to Basics Income Tax Seminars^® is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: www.nasbaregistry.org. Sponsor ID # 108520