The law known as the Tax Cuts and Jobs Act (TCJA), P.L 115-97, significantly changed Sec. 274 by eliminating the deduction for any expenses considered entertainment, amusement, or recreation. The amendments denied deductions for expenses for business entertainment and increased the scope of the deduction limitation for expenses related to food and beverages employers provided.

Because the Code was unclear about the deductibility of food and beverages expenses when combined with entertainment expense, the IRS provided transitional guidance on the deductibility of business meals through Notice 2018-76 and later through proposed regulations under Sec. 274 issued in February 2020 (REG-100814-19). On Sept. 30, 2020, the IRS issued Regs. Secs. 1.274-11 and 1.274-12 (T.D. 9925) to address the changes made to the meals and entertainment deduction under the TCJA.

Business Meals

Regs. Sec. 1.274-11 disallows the deduction for certain entertainment, amusement, or recreation expenditures paid or incurred after Dec. 31, 2017. An objective test is used to determine whether an activity is entertainment and the taxpayer's trade or business is considered when applying this test. Under this provision, any expenditure that is considered entertainment or in connection with an entertainment activity, including a facility used in connection with an entertainment activity, is not deductible. Dues or fees to any social, athletic, or sporting club, or to any organization that has connections to facilities are nondeductible. In addition, no deductions are allowed for amounts paid for membership in any business, pleasure, recreation, or social club.

However, under Regs. Sec. 1.274-11, entertainment does not include expenditures for food and beverages, unless the food or beverages are provided at an entertainment activity. Food and beverages provided at an entertainment activity are considered an entertainment expense and not deductible unless the food or beverage cost is stated separately from the cost of the entertainment cost on bills, invoices, or receipts. If the food or beverages are not purchased separately from the entertainment, or there is no reasonable allocation of the cost of food or beverages on the invoice separate from the cost of entertainment, then the entire amount is nondeductible.

Whether taxpayers are supporting natural disaster recovery, COVID-19 pandemic aid or another cause that’s personally meaningful to them, their charitable donations may be tax deductible. These deductions basically reduce the amount of their taxable income.

Here’s how the CARES Act changes deducting charitable contributions made in 2020:

Previously, charitable contributions could only be deducted if taxpayers itemized their deductions.

However, taxpayers who don’t itemize deductions may take a charitable deduction of up to $300 for cash contributions made in 2020 to qualifying organizations. For the purposes of this deduction, qualifying organizations are those that are religious, charitable, educational, scientific or literary in purpose. The law changed in this area due to the Coronavirus Aid, Relief, and Economic Security Act.

The CARES Act also suspends limits on charitable contributions and temporarily increases limits on contributions of food inventory. More information about these changes is available on IRS.gov.

The Internal Revenue Service today announced a number of changes designed to help struggling taxpayers impacted by COVID-19 more easily settle their tax debts with the IRS.

The IRS assessed its collection activities to see how it could apply relief for taxpayers who owe but are struggling financially because of the pandemic, expanding taxpayer options for making payments and alternatives to resolve balances owed.

“The IRS understands that many taxpayers face challenges, and we’re working hard to help people facing issues paying their tax bills,” said IRS Commissioner Chuck Rettig. “Following up on our People First Initiative earlier this year, this next phase of our efforts will help with further taxpayer relief efforts.”

“We want people to know our IRS employees are committed to continue helping taxpayers wherever possible, including offering many options for those struggling to pay their tax bills,” said Darren Guillot, the IRS Small Business/Self-Employed Deputy Commissioner for Collection and Operations Support. Guillot discussed the new relief options in a new edition of IRS “A Closer Look.”

Taxpayers who owe always had options to seek help through payment plans and other tools from the IRS, but the new IRS Taxpayer Relief Initiative is expanding on those existing tools even more.

Help is available for taxpayers who need tax information for prior years, but who didn’t keep copies of their returns. There are options for helping taxpayers get the information they need.

Taxpayers should generally keep copies of their tax returns and any documentation for at least three years after they file. If taxpayers didn’t keep these records, here are some things they can do:

Ask software provider or tax preparer
Those who need a copy of their tax return should check with their software provider or tax preparer first. Prior-year tax returns are available from the IRS for a fee.

Colorful tech figure and sometimes taunter of the IRS John David McAfee has been indicted for federal income tax evasion. Given his profile, particularly such antics as proclaiming that he isn’t filing tax returns but the IRS can come find him, it may not seem a surprise that McAfee is in some serious hot water. He has long been completely out of the antivirus company that bears his name, but he has still been in the news in numerous controversial ways over the last decade. Everyone has to file tax returns of course, even McAfee, and failing to file can be criminal. The indictment dates from June 15, 2020, but it was just unsealed following McAfee’s arrest in Spain where he is awaiting extradition to the U.S. This is an indictment, so the charges have yet to be proven. But it may be hard for McAfee to explain himself after he once colorfully admitted to not paying taxes in a video posted on Twitter. According to the indictment, McAfee earned millions from promoting cryptocurrencies, consulting, speaking, and selling the rights to his life story. From 2014 to 2018, the feds allege that McAfee failed to file tax returns despite receiving considerable income. How could he not file returns or report income?

The indictment alleges that McAfee directed that payments due him should instead go into bank accounts and cryptocurrency exchange accounts in the names of nominees. Hiding things, after all, doesn’t change the tax impact, and can actually make matters worse. The indictment also claims that he tried to evade the IRS by putting other names on real estate, a yacht and more. These are only allegations, but if he is convicted, McAfee faces a maximum sentence of five years in prison on each count of tax evasion, and a maximum sentence of one year in prison on each count of willful failure to file a tax return. He can also expect to pay taxes, big penalties, and interest. McAfee is presumed innocent unless and until he is proven guilty beyond a reasonable doubt, but as McAfee and his legal team mount a defense, here are some key lessons:

Report your income, and always file. You must file a tax return each year with the IRS if your income is over the requisite level. Don’t forget, and don’t be late either, even if you can’t pay what you owe. File anyway, and you can work out payments later. The statute of limitations on audit—usually three years and sometimes six years—can’t even begin to run until you file your return. So file, and remember, the U.S. taxes all income wherever you earn it.

Taxpayers interacting with the IRS have the right to finality. This is especially for taxpayers who are being audited. This is one of ten basic rights —collectively known as the Taxpayer Bill of Rights.

The Internal Revenue Service wants individuals to consider taking the home office deduction if they qualify. The benefit may allow taxpayers working from home to deduct certain expenses on their tax return.

The home office deduction is available to qualifying self-employed taxpayers, independent contractors and those working in the gig economy. However, the Tax Cuts and Jobs Act suspended the business use of home deduction from 2018 through 2025 for employees. Employees who receive a paycheck or a W-2 exclusively from an employer are not eligible for the deduction, even if they are currently working from home.

Whether it’s something they’ve been doing for years or something they just started to make extra money, taxpayers must report income earned from hobbies in 2020 on next year’s tax return.

What the difference between a hobby and a business? A business operates to make a profit. People engage in a hobby for sport or recreation, not to make a profit.

Using a reputable firm or group can protect employers from fraud; options include PSPs, RAs and CPEOs

WASHINGTON — The IRS reminded employers today to carefully choose their payroll service providers following continuing concerns that some disreputable organizations can fail to deposit employment taxes, leaving businesses vulnerable to unpaid bills.

Many employers outsource their payroll and related tax duties to third parties. This streamlines business operations by collecting and timely depositing payroll taxes on the employer’s behalf and filing required payroll tax returns with state and federal authorities.

“A business doing everything else right can suddenly find its future in doubt if it falls victim to an unscrupulous third party that fails to make the required payroll and withholding deposits,” said IRS Commissioner Chuck Rettig. “We want to encourage all employers to understand their obligations and choose wisely when it comes to selecting a trusted payroll service to carry out this critical function. This is especially important right now as businesses face unique challenges because of the pandemic.”