Archive for April 2, 2024

California Wants To Reveal Taxpayers Income To Utility Company To Raise Their Tax Rates

California Wants To Reveal Your Income To Your Utility Company To Raise Your Rates
California wants to impose a new “charge” on your utility bill that you have to pay regardless of whether you use any energy that month and the rate will now be based on your income. Reform California opposes the charge and calls it an illegal tax and a violation of privacy. If you make over $180,000 annually you must pay an additional utility fee of $128 per month or $1536 per year more on your utility fees. While those making under $28,000 annually will pay an extra utility fee of $24 per month or $288 annually.

Californians are still suffering under some of the highest utility rates in the country, and many can barely afford to pay their bills.

Now California Democrat politicians want to impose a new “flat fee” on all utility bills based on each household’s income for the year. That means many residents will pay a charge of $128 per month – while low income and other “favored” groups pay just $24 for the SAME SERVICE.

Opponents say California Democrats are just playing class warfare and the “fee” is really an illegal tax on most Californians to subsidize the bills of lower-income residents.

The fixed rates are required under Assembly Bill 205 (AB 205), which was signed by Governor Gavin Newsom (D) in 2022. The bill states that “the commission may authorize fixed charges [for utilities] … The fixed charge shall be established on an income-graduated basis.”

The specific rates in this “flat fee” scheme is now being voted on by the California Public Utilities Commission (CPUC). The proposal would charge customers of Southern California Edison, Pacific Gas & Electric, and San Diego Gas & Electric fixed rates based on income. For San Diego Gas & Electric customers, the rates would be as follows:

  • Income of under $28,000: $24/month
  • Income of $28,000-69,000: $34/month
  • Income of $69,000-180,000: $73/month
  • Income of over $180,000: $128/month

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Written by | Posted in California Taxes • California Utility Taxes • Tax Increases • TaxConnections

Preparing For A Sales And Use Tax Audit: A Comprehensive Guide To Protecting Your Business

Preparing For A Sales And Use Tax Audit: A Comprehensive Guide To Protecting Your Business

Navigating a Sales Tax Audit: A Comprehensive Guide to Protecting Your Business

If you’re reading this, you’ve probably received a letter of audit from a government entity. You’ve also likely now gotten over your initial anxiety and are looking for help with the next steps. You’re in the right place – we’re here to tell you that there’s no need to panic.

So, what exactly is a sales tax audit? And what can you expect?

Definition Of A Sales Tax Audit

A sales tax audit is a rigorous examination conducted by state taxing authorities to review a business’s sales tax returns, financial records, and transactions. The primary objective is to ensure compliance with applicable tax laws and regulations regarding the collection, reporting, and remittance of sales tax.

We know, sounds scary. But we can help you navigate the process successfully. In this guide, we’ll unpack various aspects of sales tax audits, including triggers for audits, documentation requirements, strategies for responding to audit findings, the role of tax professionals, and the possible consequences of an unsuccessful audit.

Here’s what you can discover:

  1. Understanding Sales Tax Audits
  • Triggers for a Sales Tax Audit
  • Types of Sales Tax Audits
  • Common Misconceptions about Sales Tax Audits

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Written by | Posted in TaxConnections

R&D Payroll Tax Credit

R&D Payroll Tax Credit

The Research and Development payroll tax credit, also known as the R&D payroll tax credit is a tax incentive designed for qualified businesses to offset their payroll tax. It is designed for new companies that perform research and technology development activities to be able to apply up to $250,000 of research credit against payroll tax liability. These R&D credits can be carried forward for up to 20 years.

Which Businesses Qualify For The R&D Payroll Tax Credit?

In order to qualify for the tax credit, a business must meet each of the following criteria:

  • Have 5 years or less in revenue
  • Have less than $5 million in revenue in the current year
  • Have conducted qualifying research activities and expenditures
Documentation Needed To Claim The R&D Payroll Tax Credit

Documentation is extremely important to defending any R&D tax credit claims. This includes having a permitted purpose, technological uncertainty, the process of experimentation, and being technological in nature.

Permitted Purpose:

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Written by | Posted in Payroll Tax

Canada’s Underused Housing Tax Treats Non-residents Of Canada Differently

Canada's Underused Housing Tax Treats Non-residents Of Canada Differently

Purpose and summary of this post:

Because Canada’s Underused Housing Tax treats nonresidents of Canada differently, based on their citizenship, the tax may violate the non-discrimination Article in many of Canada’s tax treaties (including the Canada U.S. tax treaty). Nonresidents of Canada are treated differently depending on whether or not they are Canadian citizens. For example a Canadian citizen who is a nonresident of Canada is “excluded” from the tax. But, a U.S. citizen who is a nonresident of Canada is “affected” by the tax. This appears to violate paragraph 1 of Article XXV of the Canada U.S. tax treaty (and other Canadian tax treaties).

Paragraph 1 of Article XXV of the Canada U.S. tax treaty:

  1. Nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith that is more burdensome than the taxation and connected requirements to which nationals of that other State in the same circumstances, particularly with respect to taxation on worldwide income, are or may be subjected. This provision shall also apply to individuals who are not residents of one or both of the Contracting States.

The question is what is meant by “in the same circumstances”. Relevant commentary from the OECD and from U.S. Treasury underscores that the words “particularly with respect to taxation on worldwide income” include whether the individual is taxed as a tax resident of the country or as a nonresident of the country.

Arguably all “nonresidents” of Canada are “in the same circumstances” (in relation to Canada’s tax system). Hence, “nonresidents” should not be treated differently depending on their citizenship.

Discussion and analysis follows.

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Written by | Posted in Canada • Canada Housing Tax Credits • Housing Tax Credits

What Is Estate Tax?

What Is Estate Tax?

The estate tax is a tax on transferring assets from a deceased person to their heirs or beneficiaries. The federal estate tax in the United States is imposed on the transfer of the taxable estate of every decedent who is a US citizen or resident. The taxable estate includes all assets that the decedent owned or controlled at their death, such as real estate, investments, and personal property.

The history of the US estate tax dates back to 1797, when Congress imposed a tax on the value of legacies and inheritances. Since then, the estate tax has undergone numerous changes and revisions. In its current form, the federal estate tax was first enacted in 1916 and has since been subject to many amendments, including a temporary repeal in 2001.

Estate tax planning is an essential part of comprehensive financial planning. Proper estate planning can minimize the impact of estate taxes on an individual’s estate and ensure that their assets are distributed according to their wishes. Estate planning can also help reduce family conflicts and provide financial security for surviving family members.

How Estate Tax Works

To understand how estate tax works, knowing about exemptions and thresholds is essential. The current federal estate tax exemption is $13.61 million per person, meaning any estate worth less than this amount is not subject to estate tax. The estate tax exemption is adjusted annually for inflation, which may increase or decrease depending on the inflation rate.

For estates that exceed the exemption threshold, the estate tax is calculated based on the estate’s taxable value. The taxable value is determined by subtracting any debts, funeral expenses, and estate administration costs from the estate’s total value. The resulting amount is subject to the estate tax rate, which ranges from 18% to 40%, depending on the estate’s value. It’s important to note that the estate tax is a progressive tax, which means that the tax rate increases as the value of the estate increases. For example, if an estate is valued at $15 million, the first $13.61 million is exempt from the estate tax, and the remaining amount million is subject to a rate that increases until it reaches 40% for all amounts in excess of $1 million over the exemption amount.  The progression looks like the following:

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Written by | Posted in Estate Tax