What about companies that are already cutting R&D specifically because of this tax change? I've seen several businesses in our industry reducing US-based research and moving more overseas because of this issue. Doesn't that defeat the purpose of encouraging innovation?

You're absolutely right that the tax change is having unintended consequences. I have clients who are shifting R&D to countries with more favorable tax treatment, like Canada and the UK, which offer refundable R&D tax credits on top of immediate expensing. This is exactly why there's bipartisan interest in fixing it. The original change was never about discouraging R&D - it was a revenue raiser to offset other tax cuts in the 2017 bill. Many legislators from both parties have expressed concern about the competitiveness impact. But tax policy often moves slowly, especially with divided government. Companies have to make decisions based on current law while advocating for changes. It's a challenging balance.

Great question - it varies by state. Many states use federal taxable income as their starting point, so they automatically adopt federal treatment unless they specifically decouple. California partially conforms to federal tax changes but has its own R&D credit that remains very favorable. Massachusetts has decoupled from this specific federal change, allowing immediate expensing of R&D for state tax purposes. Check with your specific states, but this is an area where you might get some relief at the state level even while the federal issue remains unresolved.

This is really helpful to know! Would I need to provide any specific documentation to qualify for the First Time Penalty Abatement, or do they just check their own records? How far back do they look at your payment history?

They check their own records, so you don't need to provide any documentation for First Time Penalty Abatement. They typically look at the past 3 tax years to confirm you have a clean compliance history. They're specifically checking that you filed all required returns on time (or with valid extensions) and paid all tax due on time during those previous 3 years. As long as those conditions are met, you should qualify automatically.

I sent a penalty abatement request by mail last year using IRS Form 843. It took about 8 weeks to process, but they did approve it. Make sure you clearly mark "Reasonable Cause" on the form and include a detailed explanation letter plus any supporting documentation.

This is really helpful info. Do you know if there's a specific IRS form or format they prefer for documenting gambling sessions? I have most of this info in my records but not organized in any special way.

There's no specific IRS form for documenting your gambling sessions. The key is consistency and detail. I use a simple spreadsheet with columns for: Date, Casino/Location, Type of Gambling (slots, poker, sports betting, etc.), Amount Wagered, Amount Won, Amount Lost, and Net Gain/Loss for the session. Make sure to include those big jackpots that generated W-2Gs, noting them specifically in your records. The more your documentation aligns with the W-2Gs the IRS received, the more credible your overall record keeping will appear. Also include any supporting documentation like hotel folios if you traveled to gamble, ATM receipts showing withdrawals at casinos, and credit card statements showing casino charges. The goal is to create a comprehensive picture of your gambling activity that explains both the reported winnings and your overall losses.

Do professional gamblers have to pay self-employment tax? I'm curious because I've been winning pretty consistently at poker for the last few years and wondering if I should be filing differently.

I had no idea I might qualify for those credits! Do they apply even if I'm self-employed? And how do they interact with the self-employment tax?

Yes, they absolutely apply to self-employed people! Self-employment income is earned income, so it counts for the EITC calculation. The Child Tax Credit and Child and Dependent Care Credit are available regardless of how you earn your income. These credits don't reduce your self-employment tax directly, but they reduce your overall tax bill. The EITC is even refundable, meaning you can get money back even if you don't owe income tax (though you'd still owe the SE tax).

My accountant advised against S-Corp until hitting at least $80k in profit consistently because the added costs of payroll services and additional tax forms can eat up the savings at lower income levels. Worth getting professional advice on this one!

I had a similar underwater property situation. In my case, my tax advisor explained that there's still no cancellation of debt income because of the merger doctrine, but I had to adjust my basis in the property down to its fair market value at the time of inheritance. So if you loaned $300k, but the property was only worth $250k when you inherited it, your basis would be $250k, not the loan amount. The $50k difference isn't treated as COD income but essentially gets "lost" in the transaction. At least that's how it worked for me - definitely check with a professional for your specific situation.

Thanks for sharing your experience! That makes sense about adjusting the basis to fair market value rather than the loan amount. I'll definitely verify with my tax person, but it's reassuring to hear about a similar situation.

That's an interesting variation. With trusts, it depends on whether it's a grantor trust or non-grantor trust. If it's a grantor trust where you're both the grantor and the beneficiary, the merger principle would likely still apply similarly to individual ownership. If it's a non-grantor trust with multiple beneficiaries, the analysis becomes more complex because you don't have complete identity between the lender and new property owner. In that case, there could potentially be some cancellation of debt considerations depending on how the trust is structured and who the beneficiaries are.