Partner Capital Accounts Required to be Reported on Tax Basis for 2020

In response to the Tax Cuts and Jobs Acts of 2017, there were a number of changes to the disclosure requirements for partnerships and LLCs filing as partnerships – specifically, on the K-1s of Form 1065 returns, some of which became effective for the 2019 tax year. 

For the current (2020) tax year, however, the most significant change relates to the reporting associated with partner capital accounts.  Beginning with the 2020 year, partnerships are required to report capital accounts for partners using the tax basis method.  The prior rules allowed the capital accounts to be reported in accordance with Generally Accepted Accounting Principles or Section 704(b).  This will no longer be permitted.

According to IRS, most partnerships/LLCs taxed as partnerships have already been reporting capital accounts on a tax basis.  For those taxpayers, no change is required.  

For partnerships that were not using tax basis, the “transactional approach” must be used to switch to tax basis for capital reporting purposes. Under that approach, partnerships use partner contributions, the partner’s share of partnership net income or loss, withdrawals and distributions, and other increases or decreases using tax basis principles, instead of reporting using other methods such as GAAP. 

For those partnerships that have never used tax basis, since many partnerships would have difficulty reconstructing tax basis, the IRS is allowing them to re-figure beginning basis using one of a number of options including the modified outside basis, modified previously taxed capital, or Section 704(b) methods.  These options are all described on page 32 of the Form 1065 instructions. 

The same basis method should be used for each partner.  IRS is not assessing penalties as long as the calculation is done with “ordinary and prudent business care.” 

“Small partnerships,” which are defined as having less than $250,000 in total receipts under $1 million in total assets, are exempt from reporting capital accounts on the tax basis.

The IRS is hoping this new disclosure will assist in assessing compliance risk and result in fewer audits for compliant taxpayers.

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Categories: April 2021 Newsletter

5 Tips to Spice Up Working from Home

We’ve been in a pandemic for what seems like five years now, right? All joking aside, if you’ve been lucky enough to work from home this past year, then it’s possible that you are in the process of going stir-crazy. Or maybe you’re simply ready to shake things up a bit.

Working from home has its benefits. Yet, if you are someone who enjoys going to the office every day, chatting with co-workers in person, attending meetings that aren’t all virtual, and having a little spontaneity each week, then we’re here to help. Here are five tips to boost your WFH (working from home) environment.

Take Short Breaks

Taking regular breaks throughout the day is so important, and more so now than ever before! Without a doubt, these breaks will help you mentally (that is, keep you from going stir-crazy), but they can also help your work productivity and quality. These breaks don’t need to be—and shouldn’t be—long or strenuous.

Walk the dog. Stand up and do some light stretches. Run up and down your stairs. Go outside into your backyard. Dance to a song. Do a quick chore, like emptying or loading the dishwasher. Call a friend. Or choose your own favorite break activity.  The goal is to get the blood flowing and the fog cleared from your mind.

Switch Up Locations

Get creative and switch up your location. If you have a yard or patio of some sort – and good weather — that allows you to sit outside and work, perfect! If not, try working from the living room, the dining room, the kitchen, even the bedroom. The idea here is to change your surroundings a couple of times a week so that you don’t feel stuck or get lost in the monotony of a daily routine.

Treat Yourself with Lunch

Everyone needs something to look forward to, and what is better to look forward to than food? Depending on your budget, treat yourself to a special lunch once a week, every other week, or monthly. Consider trying new restaurants, different foods, places that you’ve always wanted to eat at but haven’t had the opportunity to do so. Not only will this be fun for you, but you will also be supporting small, local businesses. Win-win!

Dress for Success

We can probably all agree on one thing: sweatpants are comfortable! As such, it can be difficult to trade in the sweats for jeans or dress pants every day. After all, if you’re working from home and there’s no dress code to enforce, it can be hard to dress for success. Yet, doing so can give you a little burst of inspiration to get through the day. You can keep your outfits casual just as long as you have fun getting dressed. For example, you could have Sandal Mondays or Blue Shirt Fridays. Again, just have fun with it!

Create a New Playlist

Does music motivate you? Are you able to work and listen to music at the same time?  If so, create different music playlists to listen to throughout your day. Try listening to various genres or new artists, anything that keeps you alert and stimulated, even excited about your workday. Depending on the type of music you enjoy listening to, you can even get up periodically and take dance breaks (Tip #1)!

Keep your day fresh, and boost your productivity and mood by using your imagination and trying the tips above.

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Categories: April 2021 Newsletter