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Joshua Smeltzer is a former litigator for the U.S. Department of Justice Tax Division. He uses this first-hand knowledge to advise and defend individuals and businesses in a variety of challenging tax controversies before the IRS and federal court.

Old axe standing against a piled pieces of firewood in wood“Give me six hours to chop down a tree and I will spend the first four sharpening the axe.”

― Abraham Lincoln

The Bipartisan Budget Act (BBA) was signed into law by President Barack Obama in 2015 and fundamentally changed the way partnerships are audited. Under the BBA, the IRS generally assesses and collects any understatement of tax (called an imputed underpayment) at the partnership level. The new rules were applicable to all entities starting on January 1, 2018, unless they are eligible to elect out. A significant uptick in BBA audits hasn’t, for the most part, occurred because of other demands on the IRS. However, a ramp up in BBA audits in 2021 is expected given IRS plans to increase audits on small businesses, usually operating as partnerships, by 50 percent.  Preparation prior to any audit is a good idea, but it is imperative for partnerships navigating new audit rules under BBA.  Here are some ways to sharpen your axe before the audit notice arrives.
Continue Reading Is Your Partnership IRS Audit Ready?

Magnifying glass in front of an open newspaper with paper houses. Concept of rent, search, purchase real estate.Even if you are not a tax professional, many people have heard of a 1031 exchange or like-kind exchange. This tax deferral provision has been a permanent part of the Internal Revenue Code for a long time. Usually, if a taxpayer swaps an asset for another asset it is usually a taxable sale.  However, if the exchange comes within Section 1031, then it can generate no tax or limited tax due.  Essentially, a taxpayer can change their investment without, according to the IRS, cashing out or recognizing capital gain.
Continue Reading IRS Issues New Rules for Gain Deferral in Business Exchanges of Real Property

Texas statelineShortly after I moved to Texas from Washington, D.C., a federal judge called me about a potential conflict with a party in a lawsuit I just filed. Once the conflict was resolved, and recognizing I didn’t have a Texas accent, he asked if I was new to Texas and then welcomed me.  This was years ago and the numbers of those moving to Texas has only increased.  California, in particular, seems to generate many newly minted Texans.  The exodus from California is real and it involves high-profile moves like Elon Musk and hundreds of other Californians. The reasons for the exodus are usually cost of living and no state income taxes. However, the California Franchise Tax Board (FTB) is notoriously aggressive and may not let you go quietly.  If you are new to Texas here is what you need to consider when making the breakup with California official.
Continue Reading Leaving California for Texas May Cause State Income Tax Headaches

Cryptocurrency SavingsCryptocurrency is more accessible than ever before. Banks are continuing to both implement procedures for and, in some cases, develop their own cryptocurrencies. Paypal allows users in the U.S. to buy, sell and hold select cryptocurrencies directly through PayPal and it will enable cryptocurrency as a funding source for purchases in 2021. Volatility in the price of cryptocurrencies continues, and is likely to continue, but it is becoming a more recognized investment and method of payment. As more taxpayers integrate cryptocurrency into their finances, they should consider tax implications. Here are some things to remember about current or future cryptocurrency transactions and investment.
Continue Reading Taxpayer Guidelines for Cryptocurrency in 2021