Archive for November 22, 2013

Using Technology To Just Do Things The Old Way

I imagine that many of you have seen this quote from Bill Gates:

“The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.”

I believe that in many cases, inside CPA firms, you have simply taken the way that paper flowed through your office and replicated it into some wonderful, advanced software program.

For example, I was visiting with a firm recently that had simply taken the steps that they Read More

Written by | Posted in Corporate

OECD Model Treaty Post Series – Business Profits

For the last few weeks, I’ve been talking about the OECD Model Treaty and how it deals with permanent establishments. Today, we’ll explain why all of this talk has been so important, as we’ll discuss the idea of business profits, and how the treaty deals with them. The following italicized paragraphs are from section 7 of the OECD Treaty dealing with business profits:

1. The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of Read More

Written by | Posted in OECD

7 Habitual Mistakes Companies Make – Chapter 3 (12)

TaxConnections Blog Post

Plan to Get Key Facts Out of the Tax Risk Management Strategy Session

– Assess what tax risk management processes currently exist.

– What ongoing queries exist with the IRS (on-the-radar screen tax issues)?

– What ongoing tax disputes exist with the IRS?

– Determine any potential tax risks in the table below (off-the-radar screen issues).

– Quantify any potential tax risks exposures by determining the potential risk to the business and the potential costs. Read More

Written by | Posted in Tax Risk Management

Green Card Holders Can Be Deported For Not Filing FBAR & OVDP – May Not Be The Cure?

On Tuesday, February 21, 2012, we posted Filing False Returns is a Deportable Felony – Supreme Court, where we discussed that the United States Supreme Court February 21, 2012 decided that lawful permanent residents who have pled guilty to charges related to the filing of false tax returns that resulted in a loss to the government of more than $10,000 have committed aggravated felonies involving fraud or deceit and are subject to deportation (Kawashima v. Holder, U.S., No. 10-577, 2/21/12). Petitioners Akio and Fusako Kawashima (“the Kawashimas”) are Japanese natives and citizens, but have been lawful permanent residents of the United States since 1984. The Kawashimas established a successful restaurant in California, owned by Nihon Seibutsu Kagaku Center, Inc., a Read More

Written by | Posted in Tax Fraud/Evasion/Crimes

Offshore Voluntary Disclosure Initiative (OVDI): Is The IRS Playing Fair?

This is an updated post.  The IRS has offered taxpayers with undisclosed foreign financial accounts the opportunity to “come clean” under its Offshore Voluntary Disclosure Initiative (OVDI) since 2009. According to the Internal Revenue Service, more than 38,000 United States taxpayers have entered the program. They have paid more than $5.5 billion to resolve issues, with an estimated $5 billion yet to come.

What is OVDI? It is a program of limited duration that offers significant benefits to taxpayers who may have engaged in conduct that could be viewed as criminal. Benefits include immunity from criminal prosecution and avoidance of the full brunt of civil penalties that otherwise could far exceed amounts concealed in offshore accounts. The OVDI program Read More

Written by | Posted in FATCA • FBAR • IRS • OVDP

New Office In Home (OIH) Deduction Review Form 8829 & Revenue Procedure 2013-13

According to IRS Revenue Procedure 2013-13 in addition to claiming the traditional office in home (OIH) or home office deduction on Internal Revenue Service Form 8829 there is a new simplified option now you can consider effective January 1, 2013. Basically this new simplified method if selected allows you to claim essentially a “standard deduction” of $5 per square foot up to 300 square feet for the portion of the home that meets the normal OIH limitations. There are some rules and of course advantages and disadvantages of each method so I’ve done some research comparing the traditional method and the new simplified method.

Under the traditional method

You calculate the square footage of the home used for business and maintain records of Read More

Written by | Posted in IRS • Tax Policy

IRS Advisory Council Releases 2013 Annual Report

The Internal Revenue Service Advisory Council (IRSAC) released its annual report featuring recommendations on a wide range of tax administration matters.

IRSAC is an advisory group to the entire agency. IRSAC’s primary purpose is to provide an organized public forum for senior IRS executives and representatives of the public to discuss relevant tax issues. The advisory group held a public meeting in Washington, D.C.

Based on its findings and discussions, IRSAC made several recommendations on a broad array of issues and concerns including:

• The IRS needs sufficient funding to operate efficiently, provide timely and useful Read More

Written by | Posted in IRS

Can the “Sailing Permit” Become the Next FBAR? Bringing Home the Money

What is a “Sailing Permit”?

A Certificate of Compliance, or “Sailing Permit,” is a tax form that a foreign (non-US) individual must file with the IRS to demonstrate that he/she has paid all applicable U.S. taxes before departing the United States. The purpose of the “sailing permit” is to establish whether a departing foreign national owes any tax dollars to the US government before he leaves the country. Foreign executives and professionals working temporarily in the US can potentially be a large source of revenue for the US’ ailing fisc. The envisioned procedure was set to be easily administered. Prior to departure, the foreigner was to report to an IRS office and submit a preliminary tax computation, as well as pay the amounts due. The person Read More

Written by | Posted in FBAR • International • Tax Policy • United States

OECD Model Treaty Post Series – Permanent Establishment & Agents, Part II

Yesterday we looked at dependent agents and their ability on the treaty to create a permanent establishment for an enterprise. Today I’ll be looking at independent agents, which do not lead to the determination of a permanent establishment for tax purposes and hence do not create a tax presence.

The commentaries provide this general definition to begin the discussion:

37. A person will come within the scope of paragraph 6, i.e. he will not constitute a permanent establishment of the enterprise on whose behalf he acts only if

a) he is independent of the enterprise both legally and economically, and Read More

Written by | Posted in OECD

Are You Missing the Boat? Do You Find Tax Credits Too Complex? We Don’t!

Today, there currently are nearly 3,000 tax credits and incentives programs in the United States, sponsored by federal, state and local governments to drive job creation, employee training, capital investment and new business development. These statutory and negotiated opportunities – including point-of-hire tax credits, to property & sales tax incentives, to utility & infrastructure abatements, to name a few – are available to companies of all sizes, across a broad range of industries.

But a relatively small number of companies, regardless of their size or financial sophistication, are benefiting fully from the tax credit and incentive-related benefits to which they are entitled. Industry estimates suggest that fewer than 25 percent of eligible US businesses participate in Read More

Written by | Posted in Affordable Healthcare Act • Corporate • Federal • Individual • IRS • North America • Tax Policy

7 Habitual Mistakes Companies Make – Chapter 3 (11)

TaxConnections Blog Post
Determine a Tax Team Charter

IT MAY BE useful to determine a tax team charter, which defines the elements of an effective tax team, evaluates the effectiveness of the tax team, determines the guidelines for planning meetings properly and ascertaining effective milestones. Use elements of the Six Sigma process in an adapted form.

The following Six Sigma processes can be adopted for the tax risk management strategy process and may prove to be useful in the strategy process:

• Quality Function Deployment (QFD) where the tax team can more effectively focus on the Read More

Written by | Posted in Tax Risk Management

Affiliate Nexus Legislation – Everyone Loses

I’ve written on aspects of this topic many times for many years – the state challenges in trying to collect all of the sales and use tax they are due for sales to their in-state consumers and businesses. With the requirement that a vendor only has to collect sales tax if they have a physical presence in the state and e-commerce enabling businesses to have customers everywhere but perhaps only one physical location, states become more dependent on trying to get their in-state consumers to self-assess use tax. States tend to do a poor job educating these folks about their use tax obligation.

It would just be far easier to have all vendors collect. However, that is unlikely to happen, even with federal legislation (such as S. 743, the Marketplace Fairness Act). This legislation Read More

Written by | Posted in Sales/Use Tax
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