Here is the summary provided by Chat GPT for Current Federal Tax Developments for the Youtube posted on 1/22/23
IRS provides extended due dates for tax relief for victims of storms in Georgia and Alabama.
The relief is similar to the relief provided for California storms earlier.
The relief applies to due dates after January 12th, 2023 and extends them to May 15th, 2023.
This includes tax return filing due dates for physical gear entities and the first estimate for 2022.
The relief applies to individuals who reside in or have their books and records located in the counties listed on the IRS website as disaster areas related to the storms.
The list of affected counties may grow and taxpayers should check if their clients are in close proximity.
Taxpayers do not have to do anything if their address is in the affected counties.
If the address is not in the affected counties, taxpayers may have to contact the IRS.
IRS executive states that the IRS has achieved the goal of responding to practitioner priority line calls on average within 10 minutes.
This is a recent development and it will be interesting to see the impacts going forward.
IRS releases new auto depreciation limits for 2023 under Section 280 cap f and the lease inclusion tables.
Taxpayer loses court case where he tried to exclude a distribution he received from a 401k plan because he had been diagnosed with diabetes two years earlier and lost his job unrelated reasons.
The court ruled that the taxpayer misunderstood the article he read online and the exclusion did not apply in his case.
Overall, IRS is providing tax relief and improving phone response times while also releasing new auto depreciation limits and lease inclusion tables.
Tax Court memo case 2023-9 involves a taxpayer who received a distribution from a 401k plan.
The taxpayer had been diagnosed with diabetes in 2015 and continued to work until losing his job in 2017 unrelated to his diabetes.
The taxpayer took a distribution from the 401K plan due to financial pressure and was hit with a 10% early distribution penalty for the amounts coming out of the account.
The taxpayer read an article on the internet and interpreted it to mean that if he was disabled and that his diabetes qualified as a disability, he didn't have to pay tax on the distribution from the retirement plan.
The court noted that the article was not talking about whether the distribution is taxable, but whether he had to pay the 10% early distribution penalty.
The court also noted that even if the article said it was excludable, the article is not what's binding in the courts, the courts are looking to the underlying law.
Under the underlying law, distributions are taxable and there is no disability exception for the regular income tax.
The court noted that there is a disability exclusion for the 10% early distribution penalty, but the taxpayer has to show that he is disabled.
The Treasury regulations indicate that diabetes is a condition that could qualify for the exception but the court has to look at the specific condition of the taxpayer.
The underlying real test is whether the taxpayer is able to engage in substantial gainful activity, which generally means being able to work and be paid for it.
The court said there was no evidence submitted that the taxpayer could not perform substantial gainful activity and he was not able to qualify for the disability exclusion.
The court ruled that the taxpayer had to include the entire distribution amount in his income and pay the 10% early distribution penalty.