TaxConnections


 

Santa’s Tax Return – He Seeks Your Tax Advice!

Santa GIFT From TaxConnections

We know there are many smart and fun tax professionals out there so we want to have a little fun with you. Let’s see what other ideas or suggestions you may have for Santa’s Tax Return this year. You can View Santa’s Tax Return.

Please provide your comments below and we may very well add  your ideas to his future years tax returns.

Click on this link to go to Santa’s Tax Return and look it over first. Then come back to this blog and make your comments and suggestions. The more comments the merrier!

Send this on to every tax professional you know to see what ideas they may come up with, too. The tax professional with the funniest suggestion will receive a call from an elf with a little gift.

 

 

Tax Strategies That Can Be Utilized In The Last Minute

Charles Woodson- Last Minute Tax Strategies

Just a reminder that the last day you may make a tax-deductible purchase, pay a tax-deductible expense, take advantage of tax credits, or make tax-deductible charitable contributions for 2018 is Dec. 31. Every taxpayer’s situation is unique, and the suggestions offered here may not apply to you. The best way to ensure that you are putting yourself into the most tax-advantaged position is to seek tax-planning advice, usually earlier in the year. However, the following are some tax strategies that can be utilized at the last minute.

Maximize Education Tax Credits
If you qualify for either the American Opportunity or Lifetime Learning education credit, check to see how much you have already paid in qualified tuition and related expenses in 2018. If it is not the maximum allowed for computing the credits, you can prepay 2019 tuition as long as it is for an academic period beginning in the first three months of 2019. That will allow you to increase the credit for 2018.

Employer Health Flexible Spending Accounts
If you contributed too little to cover expenses this year, you may wish to increase the amount you set aside for next year. As a reminder, you cannot set aside amounts to get tax-free reimbursements for over-the-counter drugs for which you don’t have a doctor’s prescription other than insulin, and the maximum contribution for 2018 is $2,500.

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New York State Sales Tax Exemptions For Utilities

Aaron Giles - New York State Sales Tax Exemptions

Utilities consumed in the state of New York are generally subject to sales and use tax. However, there are several utility uses that qualify for New York sales tax exemptions. In New York, utilities include purchases of gas, electricity, refrigeration and steam. Below are discussions of some of the more common exemptions for utilities in the state of New York.

Fuel and Utilities Used in Manufacturing or Processing
Utilities, including fuel, gas, and electricity, sold to manufacturers within the state of New York are completely exempt from sales tax if they are directly and exclusively used in production. The state of New York determines that a utility is used directly in production if it is either used to operate tax exempt equipment or machinery, used to create conditions necessary or required for production, or perform an actual step or part of the manufacturing or production process. A utility is used exclusively in production if it is 100% used in the production process.

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Americans Abroad And The Transition Tax – Leaves Taxpayers In Tough Situation

John Richardson - Transition Tax Leaves Taxpayers In Tough Situation

As 2018 comes to and end many individuals are still trying to decide how to respond to the Sec. 965 “transition tax” problem. The purpose of this post is to summarize what I believe is the universe of different ways that one can approach Sec. 965 transition tax compliance. These approaches have been considered at various times and in different posts over the last year.

As 2018 comes to an end the tax compliance industry is confused about what to do. The taxpayers are confused about what to do. For many individuals they must choose between: bad and uncertain compliance or no attempt at compliance. (I add that the same is true of the Sec. 951A GILTI provisions which took effect on January 1, 2018.)

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Tax Audit Red Flags-10 Most Common Things That Can Trigger A Tax Audit (Part 1)

Venar Ayar - Tax Audit Red Flags
What Even Is A Tax Audit Anyway?

Nothing strikes fear into the hearts of an American taxpayer like the word “audit.”  But there really is nothing inherently bad about them.  An audit is essentially a review and examination of an individual’s, business’s, or organization’s tax records and returns to verify that there are no discrepancies in the numbers.  There are a couple of different types of tax audits that are conducted, but more on that in a later blog.

Where fear of the dreaded tax audit is concerned, if you have nothing to hide and are completely honest and forthcoming then you have nothing to worry about.  If, on the other hand, you have some sketchy deductions, expenses, income information, etc. on your returns, then beware.  Because there is  something to be afraid of.

Luckily, however, tax audits are not as common as you may think.  They only really happen to about 1% of the population.  And so folks, here they are.  The ten most common tax audit red flags to be on the lookout for.

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The Tax Reform Impact On Meals, Entertainment, And Automobile Parking

Kazim Qasim - Meals Ands Entertainment Deductions

If you’ve formed certain habits related to how you handle meals, entertainment, transportation, and parking as it relates to your business and taxes, the time to change those habits has come.

As this report notes, tax reform law commonly referred to as H.R. 1 Tax Cuts and Jobs Act of 2017 has changed the deductibility of certain meals, entertainment and transportation expenses. Before 2018, a taxpayer could deduct 50 percent of business meals and entertainment and 100 percent of meals provided through an in-house cafeteria or meals provided for the convenience of the employer (i.e., also known as a de minimis fringe benefit).

Not so anymore.

Under the new law, effective January 1, 2018, entertainment is no longer deductible and meals provided through an in-house cafeteria or for the convenience of the employer are subject to the 50 percent limitation.

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What Are The Penalties For Not Filing Your Tax Return?

Charles Woodson- Penalties For Not Filing A Tax Return

Everybody knows the old saying about death and taxes, yet a surprising number of people fail to file an income tax return. If you’re one of those people and you think you’ll be able to slide by, you need to reconsider your position. Even if you’re unable to pay your taxes, you need to file a return. Not doing so will eventually lead to a domino effect of negative consequences.

No matter how many people have told you that it’s no big deal, or that the IRS has “bigger fish to fry” than you, the employees of the Internal Revenue Service have a job to do and a process that they follow. Even if no legal action is taken against you, failure to file a return will end up working against you. Let’s take a look at the rules regarding filing your taxes and the various outcomes that you risk:

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Texas Sales Tax Exemption For Manufacturing – What Is Exempt?

Aaron Giles - Texas Sales Tax Exemption

The Texas sales tax exemption for manufacturing makes purchases that are necessary and essential to the manufacturing process non-taxable.  Under the general heading of the Texas Sales Tax Exemption for manufacturing, there are a number of subcategories of purchases which are designated as taxable or non-taxable by the Texas Comptroller’s Office.

A manufacturer, as Texas defines, is a taxpayer who manufactures, fabricates or processes tangible personal property for sale. Texas Administrative Code 3.300 explains in detail what items specifically are exempt from sales tax and which items are not.  This list is not intended to be exhaustive, but does provide taxpayers solid guidance about what may and may not qualify for the Texas sales tax exemption for manufacturing.

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ASC 740 Webinar – International Impact Of Tax Cuts And Jobs Act – Friday, December 14, 2018

ASC 740 -International Impact

Nick Frank, Tax Prodigy CEO teaches Accounting For Income Taxes at the University of Minnesota – Carlson School of Management. We asked Nick to share his tax provision expertise with our readers on a complimentary basis. Join his last complimentary ASC-740 webinar for the year 2018.

Nick Frank is here to educate and prepare you for the tax provision under tax reform.

Register for ASC 740 – International Impact Of The Tax Cuts And Jobs Act on Dec 14, 2018 10:00 AM CST at: 

https://attendee.gotowebinar.com/register/2889836910527624705?source=Tax+Connections

Avoid surprises at year end! This intermediate course explores how Subpart F, GILTI, FDII and Sec. 163(j) interact with one another in the context of ASC 740.

After registering, you will receive a confirmation email containing information about joining the webinar.

If you are unable to make this complimentary webinar, and want information on how to shorten the tax provision process and simplify it for your organization, please register here.

 

 

IRS Issues Guidance For Determining Nondeductible Amount Of Parking Expenses

IRS Rules On Parking Expenses

The Internal Revenue Service issued interim guidance regarding the treatment of qualified transportation fringe benefit expenses paid or incurred after Dec. 31, 2017. The new rules assist taxpayers in determining the amount of parking expenses that are no longer tax deductible. They also help tax-exempt organizations determine how these nondeductible parking expenses create or increase unrelated business taxable income (UBTI).

The IRS acknowledges that this guidance falls late in the year and taxpayers that own or lease parking facilities may have already adopted reasonable methods in 2018 to determine the amount of their nondeductible parking expenses. Taxpayers may rely on the guidance or, until further guidance is issued, use any reasonable method for determining nondeductible parking expenses related to employer-provided parking.

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Are You An S Corporation Stockholder? Are You Taking Reasonable Compensation In The Form Of Wages?

Charles Woodson-S Corporation Reasonable Compensation

S corporation compensation requirements are often misunderstood and abused by owner-shareholders. An S corporation is a type of business structure in which the business does not pay income tax at the corporate level and instead distributes (passes through) the income, gains, losses, and deductions to the shareholders for inclusion on their income tax returns. If there are gains, these distributions are considered return on investment and therefore are not subject to self-employment taxes.

However, if stockholders also work in the business, they are supposed to take reasonable compensation for their services in the form of wages, and of course, wages are subject to FICA (Social Security and Medicare) and other payroll taxes. This is where some owner-shareholders err by not paying themselves a reasonable compensation for the services they provide, some out of unfamiliarity with the requirements and some purposely to avoid the payroll taxes.

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As The IRS Redesigns Form W-4, Employee’s Withholding Allowance Certificate, Stakeholders Raise Important Questions

Nina Olson- 2019 W-4 Form

The IRS is redesigning Form W-4, Employee’s Withholding Allowance Certificate. The changes to this form will affect nearly every employee and employer, potentially more than once a year. When a person starts a new job or his or her tax situation changes (e.g., due to a birth, a pay raise, a marriage, or a home purchase), he or she may be required by IRC § 3402(f)(2) to fill out a new Form W-4 and give it to his or her employer. The employer uses the number of “allowances” claimed on the Form W-4 to compute (based on IRS tables) how much of each paycheck to withhold and send to the IRS.

If employees claim too many allowances, they will have too little tax withheld (i.e., be under-withheld) and also violate IRC § 3402, whereas if they claim too few allowances, they will have too much tax withheld (i.e., be over-withheld). They can avoid an underpayment penalty under IRC § 6654 if either (1) they owe less than $1,000 in tax after subtracting their withholding and estimated tax payments, or (2) the amount withheld is at least 90 percent of their tax liability for the current year or 100 percent (or 110 percent for higher income taxpayers) of their tax liability shown on their tax return for the prior year, whichever is smaller.

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