Wyden Commends IRS For Plans To Increase Focus On High Income Tax Cheats And Increase Equity in Audit Selection

Washington, D.C. — Senate Finance Committee Chairman Ron Wyden, D-Ore., issued the following statement on IRS Commissioner Werfel’s letter regarding the ongoing efforts of the IRS to rebalance its enforcement activities:

“I’m pleased to see the IRS using the enforcement funding from the Inflation Reduction Act to help lower-income taxpayers catch mistakes from the start and identify credits they are eligible for, while reserving enforcement resources to crack down on wealthy tax cheats and those who prey on vulnerable filers. This is exactly why Congress boosted funding for the IRS.

“By revisiting the EITC audit selection process and focusing audit activity on the wealthiest taxpayers who are dodging taxes, rather than working people who are just trying to comply, the IRS is taking important steps to address the racial disparities in audit selection identified earlier this year. I am encouraged by the IRS’s pilot programs and look forward to continued updates on the IRS’s progress in addressing these racial disparities. I will continue to watchdog the agency in its work to overhaul its approach to tax enforcement and make sure that it fully eliminates racial bias from its audit selection methods.”

Article From U.S. Senate Committee On Finance

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Elevate Your Tax Service, Tax Software, Tax Education Event: Your Membership Ensures Your Blog Content Is Distributed

TaxConnections.com

As we watch the tax professionals elevate their tax services, tax software and continuing education courses using the taxconnections.com platform we know all our hard work for the tax professional community is getting noticed.

Solution TaxConnections Provides
The tax industry, a niche business vertical, is facing the most competitive marketplace in history. As a result, tax advisors are required to raise their visibility, showcase their specialty tax expertise, and cultivate brand awareness to stay competitive. TaxConnections provides an online marketplace solution for sophisticated taxpayers to connect with leading tax advisors nationally and internationally. We identified the need and provide the solution for taxpayers to access a community of leading, technically sophisticated tax advisors who can be accessed easily online.

Tax advisors who position their profiles on www.taxconnections.com benefit from attracting new tax client engagements and tax jobs from businesses worldwide. The competitive advantage you gain marketing your profile on TaxConnections is a steady stream of sophisticated business executives discovering you. We distribute your blog content more than 100,000 times weekly to tax professionals and taxpayers.

If you are selling tax services, software that helps tax professionals do their job better, or continuing education courses, you will want to be seen on TaxConnections.

We have members who have received more 68,000, 78,000, 88,000 and 98,000 views since posting their professional profiles on TaxConnections:https://www.taxconnections.com/taxblog/taxconnections-member-exceeds-98000-views-learn-his-marketing-strategy-utilizing-a-tax-centric-media-site/

Start Your TaxConnections Membership Today: https://www.taxconnections.com/membership/sign-up
Once your profile is up, send kat@taxconnections.com a link to your blogs and we will distribute them weekly to our audience interested in tax content.

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Why Do Tax Automations Fail? Tax Process Automation Is A Journey, Not A Destination

Why Do Tax Automations Fail? Tax Process Automation Is A Journey, Not A Destination

s we’ve witnessed in the last two years, the global labor shortage is a post-pandemic new reality that businesses of all sizes must deal with. One of the areas where labor shortage is a real challenge is the field of Tax. As more senior Tax professionals opt for early retirement and not many college grads are willing to put in the long hours on repetitious spreadsheets, Tax has a real problem. To make the issue worse, while Tax Technology has advanced many Tax Departments are still relying on the old and time-consuming manual procedures performed by the Tax preparers. Why? Honestly, a sustainable transition to technology and automation is not that easy. Simply hiring a consultant to automate a Tax process is not a realistic and sustainable solution if your Tax professionals who use the new solution cannot maintain it for future use. This is why most Tax Technology investments either fail after the 1st cycle or do not yield the expected ROI.

Designing rewarding automated solutions require some basic understanding and best practices of technology concepts. Therefore, we believe it is unreasonable to expect a Tax professional to develop or maintain complex scripted solutions that are normally developed by professional IT staff.

To guarantee automation success and to protect investment in automation we recommend the following:
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The Intersection Between Equity Compensation Planning And Section 1202

The Intersection Between Equity Compensation Planning And Section 1202

There are numerous tax and business issues associated with equity compensation planning for employees and other service providers.[i] Numerous tax professionals focus on structuring compensation arrangements and many articles address the key planning issues. But at the same time, very little attention has been focused on structuring equity compensation arrangements for corporations that have issued qualified small business stock (QSBS) to founders and venture capitalists. This article focuses on the intersection between Section 1202’s unique requirements and traditional equity compensation planning.[ii]

This article is one in a series of articles and blogs addressing planning issues relating to QSBS and the workings of Sections 1202 and 1045. During the past several years, there has been an increase in the use of C corporations as the entity of choice for start-ups. Much of this interest can be attributed to the reduction in the federal corporate income tax rate from 35% to 21%, but savvy founders and venture capitalists have also focused on qualifying for Section 1202’s gain exclusion.  Legislation proposed during 2021 sought to curb Section 1202’s benefits, but that legislation stalled along with the balance of the Build Back Better Act. Finally, during August, 2022, Congress passed the Inflation Reduction Act, but that legislation did not amend Section 1202.
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Form 3520-A Explained: The Ultimate Resource For US Expats

Form 3520-A Explained: The Ultimate Resource for US Expats

Navigating the complexities of U.S. tax compliance and international taxation can be challenging, especially for U.S. expatriates. One form that often goes unnoticed but carries significant penalties for non-compliance is Form 3520-A. In this article, we’ll delve into what Form 3520-A is, who needs to file it, and the penalties for failing to do so.

WHAT IS FORM 3520-A?
Form 3520-A, also known as the “Annual Information Return of Foreign Trust With a U.S. Owner,” is a tax form required by the Internal Revenue Service (IRS) to report information about foreign trusts. If you are a U.S. person who is treated as the owner of any part of the assets of a foreign trust, you are obligated to ensure that this form is filed annually as part of your income tax return.

WHO MUST FILE FORM 3520-A?
The responsibility for filing Form 3520-A generally falls on the trustee of the foreign trust. However, if the foreign trust does not have a U.S. agent, the U.S. owner must ensure that the form is filed. A U.S. owner is defined as a U.S. person, including foreign persons who are treated as the owner of any part of the assets of a Foreign Grantor Trust under the grantor trust rules.

WHEN IS FORM 3520-A DUE?
Form 3520-A must be filed by the 15th day of the 3rd month following the end of the trust’s tax year, usually March 15th for calendar year taxpayers. This is a crucial 3520-A filing requirement that many expats are unaware of, leading to hefty penalties.
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Addison Henry Profile First To Upload Audio Podcast Feature

TaxConnections Podcast Feature

TaxConnections Membership means we are doing everything possible for our site members to connect with the millions of taxpayers who come to find a professional with a set of special skills. In the case of Addison Henry, CEO Of Vine Investment Partners in Lafayette, Louisiana he collaborates with companies to mitigate and lower their federal tax liability by acquiring and investing in federal tax credits. His firms meticulous underwriting process ensures that every opportunity is thoroughly evaluated, parameters are defined, and a diligently vetted tax credit prospect is presented to each of the firms valued partners. We give Addison the highest recommendation as a trusted advisor with specialized expertise in federal tax credits investments.

Take the time to listen to TaxConnections newest profile feature (Podcast Upload) that enables our members to upload their podcasts on their professional page:
https://www.taxconnections.com/Addison-Henry/12275719/United-States/Louisiana/Lafayette/profilepage

Our new Podcast upload feature is a great way to listen and learn about Addison Henry. We know listening to his podcast is a great way to get to know him better.

We encourage all TaxConnections Members to upload a Podcast to their Profile Page. Simply Login; Click on “Welcome Your Name” in green in the upper righthand corner of your computer screen; Then click on Virtual Office where you can upload Podcasts or articles in public or private view. Keeping all your assets in one professional profile location makes it easy for people to learn more about you. All this information builds trust(i.e. Professional Profile Page, Podcasts, Blog Articles, Q&As, Easily Accessible Contact Information, References, etc.) Clients want to work with people they trust. Addison Henry is someone you can trust to do a great job.

If you would like to be interviewed by our Podcast Host, please contact Kat Jennings at kat@taxconnections.com.

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Evaluating Q3 Performance: Understanding Financial Statements And Metrics

Evaluating Q3 Performance: Understanding Financial Statements And Metrics

It’s crucial to ask questions about your business’s Q3 performance! As we transition into the final quarter of the year, Understanding your financial statements and metrics from the third quarter can provide valuable insights to inform your Q4 strategies.

Part 1: Interpreting Your Q3 Financial Statements

Financial statements are the report card of your business. They consist of the income statement, balance sheet, and cash flow statement, each telling a unique part of your financial story.

The income statement measures your profitability during Q3, providing insights into revenue, costs, and net income. Meanwhile, the balance sheet offers a snapshot of your financial health at the end of Q3, outlining your assets, liabilities, and equity. Lastly, the cash flow statement shows how cash has moved in and out of your business, highlighting your operating, investing, and financing activities.

Understanding these statements can help you identify trends, pinpoint issues, and track your financial progress.

Part 2: The Importance of Financial Metrics
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Government Watchdog Says IRS Needs To Address Critical Safeguard Weaknesses

Government Watchdog Says IRS Needs To Address Critical Safeguard Weaknesses

New report highlights security risks to taxpayer information

Washington, D.C.–A new report from the U.S. Government Accountability Office (GAO) highlights both new and longstanding unresolved security risks to the safety of confidential taxpayer information at the Internal Revenue Service (IRS). The report, requested by U.S. Senate Finance Committee Ranking Member Mike Crapo (R-Idaho) and U.S. House Ways and Means Committee Chair Jason Smith (R-Missouri), identifies dozens of security weaknesses at the agency, many of which have been known by the IRS for years, and makes recommendations aimed at safeguarding and protecting taxpayer information. The report was originally requested following the unauthorized disclosure of private, legally protected information from the IRS to ProPublica—an incident of which little has been revealed, despite it being more than two years since that leak.

“From serious breaches of confidential taxpayer data and document mismanagement to poor cybersecurity training and infrastructure vulnerabilities, the IRS has a decades-long and troubled history with adequately protecting American taxpayers’ information. Now, in addition to tax collector and enforcer, the agency wants to act as tax preparer, despite the evidence showing it is unprepared to be trusted with such responsibility,” said Crapo. “Instead of devoting time and resources to developing new federal programs that would collect and expose even more sensitive information from taxpayers, the IRS should instead focus on addressing the security weaknesses identified by the GAO and Treasury Inspector General for Tax Administration (TIGTA) and improving its woeful customer service.”
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Common Mistakes Made In Tax Process Automation

Common mistakes made in tax automation process

Lack of preparation: Failing to properly prepare for automation, such as not thoroughly understanding current processes and not having clear goals, can lead to implementation problems and slow progress.

Inadequate data management: Poor data management practices, such as failing to validate and clean data, can result in inaccurate results and delayed processes.

Neglecting security and privacy: Neglecting to implement appropriate security and privacy measures can lead to data breaches and loss of sensitive information.

Underestimating complexity: Underestimating the complexity of tax processes and failing to adequately address all process components can lead to errors and inefficiencies.

Ignoring feedback: Failing to gather and incorporate feedback from stakeholders, including tax professionals and business owners, can limit the effectiveness and success of automation.
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Inflation Reduction Act Helps IRS Hiring 3,700 New Agents To Go After Wealthy Taxpayers And Partnerships

IRS Hiring 3,700 New Agents To Go After Wealthy Taxpayers And Partnerships

According to an article in the Federal Tax Network, the IRS says it plans to fast-track the hiring of more than 3,700 internal revenue agents across the country. Agents will focus on complicated tax compliance issues, and are trained to audit large corporations and complex partnerships. The announcement marks the IRS’s second major hiring initiative under the Inflation Reduction Act. The agency through the legislation has roughly $60 billion to rebuild its workforce and modernize its legacy IT over the next decade.

A new hire may have significant corporate experience from working in a private company tax department but have very limited individual tax experience,and be salaried around $125,000 annually. The agency said the job is a mid-career position that pays about $125,000 a year. Total compensation – when factoring federal employee benefits like child care, paid parental leave and student loan repayment – is closer to $175,000.

According to the Treasury Inspector General For Tax Administration, the Inflation Reduction Act(IRS) funding was intended to increase examination of high income earners as stayed in its report. The IRA was enacted providing 46.5 Billion for enforcement activities.

You can thank Congress for passing this bill in the House of Representatives. Who in Congress voted for the inflation reduction act?

On August 12, 2022, the Inflation Reduction Act bill was passed by the House on a 220–207 vote, with all Democrats voting in favor and all Republicans voting against it.

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A Section 1202 Walkthrough: The Qualified Small Business Stock Gain Exclusion

A Section 1202 Walkthrough: The Qualified Small Business Stock Gain Exclusion

Section 1202 allows stockholders to claim a minimum $10 million federal income tax gain exclusion in connection with their sale of qualified small business stock (QSBS) held for more than five years.[i] Assuming a 23.8% federal income tax rate, stockholders selling $10 million worth of QSBS qualify for a $2,380,000 gain exclusion.[ii] Needless to say, Section 1202’s gain exclusion is the most attractive tax benefits available to founders and venture capitalists. The failure of the Build Back Better Act and the Inflation Reduction Acts to reduce Section 1202’s benefits has dramatically improved the prospect that QSBS issued today will qualify for Section 1202’s 100% gain exclusion during 2027 and beyond.

This article is intended to serve as a resource for founders and venture capitalists exploring whether to position their business activities and investments to qualify for Section 1202’s gain exclusion. Along the way, the article bookmarks past in-depth articles and blogs addressing various QSBS planning issues.

This article is one in a series of articles and blogs addressing planning issues relating to QSBS and the workings of Sections 1202 and 1045. During the past several years, there has been an increase in the use of C corporations as the entity of choice for start-ups. Much of this interest can be attributed to the reduction in the federal corporate income tax rate from 35% to 21%, but savvy founders and venture capitalists have also focused on qualifying for Section 1202’s gain exclusion.  Legislation proposed during 2021 sought to curb Section 1202’s benefits, but that legislation stalled and then died, along with the balance of the Build Back Better Act. Congress finally passed the Inflation Reduction Act in August, 2022, but that legislation did not adopt the proposed amendments to Section 1202.

What It Takes To Qualify for Section 1202’s Gain Exclusion.
Section 1202 has a number of issuing corporation-level and stockholder-level eligibility requirements, all of which must be satisfied in order to claim Section 1202’s gain exclusion. These eligibility requirements are discussed below.
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Beyer, Titus Introduce Tax Simplification for Americans Abroad Act – Sept. 2023

Beyer, Titus Introduce Tax Simplification for Americans Abroad Act - Sept. 2023

Introduction and initial reactions

Today, U.S. Representatives Don Beyer (D-VA) and Dina Titus (D-NV) announced the introduction of the Tax Simplification for Americans Abroad Act, legislation to help American taxpayers living overseas comply with their U.S. tax obligations by calling on the IRS to create a short form certification for Americans living abroad who owe no U.S. tax and earn below $400,000 annually. The bill would expand the Foreign Earned Income Exclusion to include additional types of income that are earned overseas like pensions and distributions from retirements funds. It would also consolidate duplicative and burdensome forms that taxpayers must file under the Foreign Account Tax Compliance Act (FATCA) and the Bank Secrecy Act.

“Ordinary Americans living abroad are often overlooked when U.S. tax policy is written, which can make it extremely difficult and expensive for them to navigate the tax system,” said Rep. Don Beyer. “I saw a record-breaking number of Americans renounce their citizenship when I served as the U.S. Ambassador to Switzerland, and the needless complexity of the U.S. tax code was often cited as a reason. This bill would help ordinary Americans fulfill their obligations without having to retain an expensive accountant to certify that they owe no U.S. taxes, and remove some of the frustrations faced by Americans living abroad who just want to follow the law.”

“Americans abroad face a uniquely complex set of reporting requirements that we here at home aren’t subject to. I’m joining Rep. Beyer to create a simplified income tax return for taxpayers living abroad because Americans shouldn’t have to jump through extra hoops simply because they reside or work overseas,” said Rep. Dina Titus, Chair of the Americans Abroad Caucus.
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