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16 Apr 2024

The Day After April 15th: How To Find A Tax Job When Your Firm Downsizes

The Day After April 15th: How To Find A Tax Job When Your Firm Downsizes

With wars spreading throughout the world, tax and accounting professionals must build a backup business plan to protect their tax careers from unwanted interruptions. Unless you are not paying attention, (doubtful since tax professionals are highly educated), world events are quickly unfolding that will affect the tax and accounting profession, too. Previous wars are a good indicator of future actions, with generations having lived their lives through the Vietnam War(1969-1973); Persian Gulf War(1993); Afghanistan War( 2001-2014); Iraq War( 2003-2011, we know wars create a fast track to downsizing firms. While the government is funding wars in Ukraine, Russia, Israel with Iran; U.S. taxpayers are increasingly taxed to the max. We know from years of experience that large firms downsize to reduce overhead costs after April 15^th . They now call downsizings, a rightsizing which is an oxymoron. A firm rightsizing is the process of restructuring an organization by cutting costs, reducing employees, or reforming upper management. For tax and accounting professionals caught in these rightsizings, it is devastating. However, this time it is different, as we built a safety net to protect tax professionals.

What action should you take now to support and protect your tax career?

A tax career is smart choice, if you manage it properly, and this means taking personal responsibility for marketing yourself. Every firm’s marketing budget focus is on the firms’ name and brand, not your name. What most tax staff do not realize is that the Tax Partners who are knocking it out of the ballpark for their firms are privately investing their own money in marketing themselves. You need not wait to make Tax Partner to realize what really happens. Years ago, a Tax Partner privately confided in me, they would rather get a root canal than go in and ask management at the firm for money to market themselves. They told me the answer would be a hard no! The firm’s marketing budget is spent on a firm’s name, not individual names. This makes good business sense since the turnover rate is 25%-30% in the Big Four. Most do not realize that the Tax Partners who are doing well in large firms invest in marketing themselves out of their own pocket. Once you learn this lesson, you learn to start early in taking personal responsibility to market your tax expertise.

Written by TaxConnections Admin

16 Apr 2024

What Happened To Bitcoin?

Those who involved themselves in Bitcoin markets after 2017 encountered a different operation and ideal than those who came before. Today, no one much cares about what came before, speaking of 2010-2016. They are only watching the upward price momentum and are thrilled for the increase in the asset valuation of their portfolio.

Gone is the talk of separating money and state, of a market-based means of exchange, of genuine revolution that would extend from money to the whole of politics the world over. And gone is the talk of changing the operation of money as a means of changing the prospects for freedom itself. The enthusiasts around Bitcoin have different goals in mind.

And during this entire period, the exact time when this digital asset might have protected multitudes of users and businesses from rapacious inflation growing out of the worst and most globalized experience of corporatist statism in modern history, made possible due to the money monopoly of central banks that funded the operation, the original asset that carries the symbol BTC was systematically diverted from its original purpose.

The ideal was nicely articulated by F.A. Hayek in 1974. Much of his career as an economist was spent arguing for sound monetary policies. At every important turning point, he faced the same problem: governments and the institutions they serve did not want sound money. They wanted to manipulate the currency system to benefit elites, not the public. Finally, he refined his argument. He concluded that the only real answer was a complete divorce of money and power.

“Nothing can be more welcome than depriving government of its power over money and so stopping the apparently irresistible trend towards an accelerating increase of the share of the national income it is able to claim,” he wrote in 1976 (two years after his Nobel Prize). “If allowed to continue, this trend would in a few years bring us to a state in which governments would claim 100 per cent of all resources—and would in consequence become literally ‘totalitarian’.”

Written by Jeffrey Tucker

14 Apr 2024

The Life Of A Tax Advisor In The Israel War Zone Today

Over the weekend, I reached out to a Tax Advisor in Israel to learn what was is happening on the ground there. Here is what this Israel/US Tax Advisor (who we will keep anonymous) communicated in his letter to me. To protect this Tax Advisor, we are providing portions of his communication. If you believe you have had a tough tax season, you will appreciate learning what it is like for a US/Israel Tax Advisor in Jerusalem today!

To protect his identity, we will call him David. If you would like to support David and his family, providing your commentary through this site will get to him. Few Americans realize what it is really like for the people living in Israel today.

For the record, TaxConnections does not support war of any kind. We support world peace. Pray for peace for all people.

Hi Kat,

THANK YOU FOR REACHING OUT!!!!! As you know, most of the world does NOT care and/or is brain dead.

We had a very scary night. We already received reports that the Iranian attack was due to hit us between 2 to 4:30 AM.

We prepared our war room, a room that newer buildings have that is specially reinforced to offer some protection in case.

Scuds (remember Sadam Hussein who shot scuds at Israel a few years ago!) landed and exploded nearby. The war room is NOT strong enough to resist a direct hit, however. We stocked water bottles, lights, airbeds, and face masks and flashlights for emergency use.

Then, at 1:30 or 1:35 AM, we heard several huge explosions near us. Our building shook and rattled, but we could not see anything outside of our windows. We live on the 7th floor of an apartment building in southern Jerusalem. We are surrounded by Arab Muslim villages who have perpetrated many terrorist attacks against us, so we are ALWAYS concerned about another October 7th massacre emanating from these hostile villages. Talk about close proximity to your enemy who is a couple of blocks away ( 1/4 mile?).

There were 6 -8 rockets, missiles, and/or drone that struck near us and put the real fear of G-d into us…. our poor dog was howling and scared out her mind also…….and the Home Front Command Air Raid Sirens went off for 10-15 minutes.

Then, there were continuous smaller booms and explosions, but we still could not see anything. We have clear views to the north, to the east into Jordan, and to the south. We have the privilege to see the Temple Mount, much of Jerusalem, Jordan, and the Dead Sea from our windows and porch.

Written by Kat Jennings

12 Apr 2024

Impact Of Sales And Use Tax On Mergers And Acquisitions

Mergers and acquisitions (M&A) involve complex transactions that require careful planning and execution. One aspect that is often overlooked is the impact of sales and use tax on the transaction. Failure to properly account for sales and use tax can have a significant impact on the deal, including increased costs, potential legal issues, and decreased profitability.

One of the main reasons why sales and use tax can be a challenge in M&A due diligence is that it varies by state. Each state has its own rules and regulations regarding sales and use tax, and these rules can change frequently. This means that companies involved in M&A transactions need to be aware of the specific sales and use tax laws in each state where they operate or plan to operate.

When performing a due diligence review, it is important to address the target company’s sales and use tax exposure by reviewing nexus, previously filed tax returns, payment history, and any audits or assessments. This will help identify any potential liabilities, such as underpayment or non-payment of sales and use taxes.

It is also important to assess the target company’s sales and use tax compliance processes, including the accuracy of tax calculations, the appropriate use of exemptions and credits, and the maintenance of proper documentation.

Another important consideration in a due diligence review is the potential impact of sales and use tax on the transaction itself. In some cases, the buyer may be responsible for any unpaid sales and use tax liabilities of the target company. This can significantly increase the cost of the transaction and impact the profitability of the deal.

Written by Dan Thompson

12 Apr 2024

TITGA Reports On Status Of IRS Digital Asset Monitoring And Compliance

The Treasury Inspector General for Tax Administration (“TITGA”) recently has released a report on the status of efforts by the Internal Revenue Service (“IRS”) to develop the digital asset monitoring and compliance strategy mandated by Congress with the Inflation Reduction Act of 2022.

For purposes of federal taxation, a “digital asset” is defined as “any digital representation of value which is recorded on a cryptographically secured distributed ledger or any similar technology as specified by the Secretary.”[1] This includes non-fungible tokens and virtual currencies.

As part of the Infrastructure Investment and Jobs Act of 2021, Congress had amended sections 6045 and 6050I to require reports from digital asset brokers and from any person engaged in non-financial trades or business who receives more than $10,000 at least in part in digital assets.[2]

TITGA noted that the IRS has created the Digital Asset Advisory Committee (“DAAC”) in February 2022 to provide service-wide collaboration, planning, and information sharing with respect to digital assets. The DAAC has the following goals:

Coordinating collaboration, planning, information sharing, and executive leadership over the IRS’s digital asset strategy related to its compliance programs.
Identifying and monitoring the management of digital asset programs and resources to ensure accountability, transparency, and consistency.
Recommending funding and investment opportunities for digital asset technology and operational needs such as tracing software, or basis computational tools.
Reviewing digital asset related activities, as needed.

Written by TL Fahring

12 Apr 2024

IRS: High-Income Filers Vulnerable To Illegal Tax Schemes

As part of the Dirty Dozen campaign, the Internal Revenue Service warned wealthy individuals about three tax traps designed for them by dishonest promoters and shady tax practitioners.

For those with high incomes, they can be tempting targets for a variety of schemes and aggressive tax strategies designed to reduce taxes. These can take many different forms, ranging from inflated art donation deductions to aggressive charitable remainder annuity trusts and detailed shelters that maneuver to delay paying gains on property.

“High-income taxpayers can be vulnerable to being pulled into these aggressive schemes and scams,” said IRS Commissioner Danny Werfel. “Taxpayers should be extra careful on tax maneuvers that seem too good to be true. Beware of advertisements for seemingly ideal tax structures that distort tax laws and leave victims with civil or criminal tax penalties.”

“There’s growing risk for taxpayers pulled into aggressive schemes as the IRS continues to accelerate and expand our compliance work involving high-income individuals,” Werfel added. “The IRS reminds taxpayers that relying on an independent tax or legal professional can help avoid problems with aggressive promoters.”

This marks the tenth day of the special Dirty Dozen series. The annual Dirty Dozen list comprises a list of scams and schemes that can put taxpayers and tax professionals at risk. The list is not a legal document nor a formal enforcement priority. The education effort is designed to raise awareness and protect taxpayers and tax pros from common tax scams and schemes.

Improper Art Donation Deductions

Written by TaxConnections Admin

11 Apr 2024

Where Do U.S. Presidential Candidates Stand On Taxes?

Where Do Presidential Candidates Stand On Taxes?

The research on Presidential candidates and where they stand is a must read provided by the Tax Foundation. TaxConnections highly recommends you take the time to read the research provided by this non profit comprised of researchers and the best of the tax profession. According to the Tax Foundation, Tax policy has become a significant focus of the U.S. 2024 presidential election. The Tax Foundation has created this tool to keep track of the tax policies proposed by presidential candidates during their campaigns. It is smart to pay attention to the Tax Foundation site.

Joe Biden, under his proposed budget for fiscal year 2024, would increase tax rates on corporate, individual, and capital gains income; expand tax credits for workers and families; and expand tax bases to include more types of income.

Business Taxes:

Increase the corporate income tax rate to 28 percent. Read more
Increase the global intangible low-taxed income (GILTI) tax rate from 10.5 percent to 21 percent and repeal the reduced tax rate on foreign-derived intangible income (FDII). Read more
Repeal the base erosion and anti-abuse tax (BEAT) and replace it with an undertaxed profits rule (UTPR) consistent with the OECD/G20 global minimum tax model rules. Read more
Expand the net investment income tax to non-passive business income. Read more
Raise taxes on the fossil fuel industry. Read more

Capital Gains and Dividend Taxes:

Tax long-term capital gains and qualified dividends at ordinary income tax rates for taxable income above $1 million and tax unrealized capital gains at death above a $5 million exemption ($10 million for joint filers). Read more
Tax carried interest as ordinary income. Read more
Impose a minimum effective tax rate of 20 percent on an expanded measure of income including unrealized capital gains for households with net wealth above $100 million. Read more

Credits, Deductions, and Exemptions:

Make the Child Tax Credit fully refundable on a permanent basis. Read more
Increase the Child Tax Credit to $3,600 for young children and $3,000 for older children, make it fully refundable, and make other changes, on a temporary basis. Read more
Increase the Earned Income Tax Credit for workers without qualifying children on a permanent basis. Read more
Expand premium tax credits on a permanent basis. Read more

Written by TaxConnections Admin

11 Apr 2024

Offsetting Section 174 R&E Software Development Tax Liability With R&D Tax Credits

Section 174 Changes Impact R&D Tax Credits for Software

The new changes to Section 174 have a significant impact on software development costs. For tax year 2022, any cost that has been paid or incurred related to software development is now considered a Section 174 R&E expenditure. This means it must be capitalized and amortized over 5 years (15 years for foreign software development).

Many favorable provisions are made temporary due to the budgeting constraints of Congress, making yearly extensions normal and expected. It is important to note that the research expenses being addressed by this provision in the TCJA are not just the same as those provided for in the R&D tax credit rules. These general research costs are much broader.

If the current unfavorable tax treatment of research expenses does not get fixed, companies could see larger tax bills and therefore need the benefits of R&D tax credits even more.

Which Software Development Costs fall under the new Section 174 R&E Amortization rules?

While guidance related to what costs constitute Section 174 Expenditures is still vague, potential expenditures can include:

Written by Deborah Roth

11 Apr 2024

Citizens Against Government Waste: The Prime Cut Series (#4)

Eliminate Federal Subsidies for Amtrak
1-Year Savings: $2.5 billion
5-Year Savings: $12.3 billion

Since Amtrak was created in 1971, it has cost taxpayers more than $40 billion. The railroad was supposed to earn a profit but has continuously failed to do so. In some cases, it is less expensive to use other forms of transportation. A 2009 study found that taxpayers paid $32 in subsidies per Amtrak passenger. By booking a month or more in advance, it is possible to buy a round-trip plane ticket from New Orleans to Los Angeles for less than the $437.82 that Amtrak loses per passenger on a one-way trip between those same locations.

A January 2018 Ernst and Young audit found that “the Company has a history of operating losses and is dependent upon substantial Federal Government subsidies to sustain its operations and maintain its underlying infrastructure.” An August 2012 New York Times article reported that Amtrak had lost $834 million on food service alone since 2002, largely due to employee theft.

Unfortunately, the waste and abuse does not end with food sales. The Amtrak Office of Inspector General (IG) has issued several reports detailing inadequate supervision, including a September 2012 report that investigated two employees who received fraudulent pay for hours they never worked. One employee was paid $5,600 in regular and overtime pay “when he was actually off Amtrak property officiating at high school sporting events.” Another employee was observed for 84 days, and it was discovered that “$16,500 of the $27,000, or 61 percent of the overtime wages he was paid
were fraudulent.” The IG concluded that, since it is likely that this employee had a history of fraudulent overtime pay, the amount of fraudulent pay “would be approximately $143,300 of the $234,928 that he was paid.”

Amtrak has also failed to control costs on key expansion projects. The overhaul of Union Station in Washington, D.C., “faces significant risks of coming in over budget and behind schedule,” according to an August 1, 2018 IG report. Projects in Virginia were cited for poor staff communications and project delays.

Written by TaxConnections Admin

09 Apr 2024

How Is Software As A Service (SaaS) Treated Under State Tax Laws?

A very important and often misunderstood area in the sales tax arena is the taxability of cloud-computing, cloud-based services, etc., collectively often referred to as Software-as-a-Service (or SaaS). The moniker alone is enough to start the state tax conversation down an interesting path.

The Basics

When we work with clients to determine how something should be taxed, we start with a few basic questions and then work from there.

Has nexus has been created?
This includes looking at both the physical presence as well as an economic presence. Following the U.S. Supreme Court’s June 2018 ruling in South Dakota v. Wayfair, many states enacted economic nexus statutes which require sellers to collect and remit sales tax in those states based on sales or transactional thresholds. In this process we also look at when nexus was created based on physical presence or economic nexus.

Is the product taxable?
Once nexus is established, the sale of tangible personal property by a retailer to a customer in a given state is generally taxable. We start there, and then review the transaction to see if there are any exemptions that would cause the sale of the property to not be taxable.

Written by TaxConnections Admin

09 Apr 2024

Biden Administration Wants To Increase Your Taxes For 2025

If you are wondering if President Biden is proposing tax increases, look no further than the General Explanations of the Administration’s Fiscal Year 2025 Revenue Proposals.

According to PWC “President Joe Biden on March 11 sent Congress a fiscal year (FY) 2025 budget that proposes to increase taxes by nearly $5 trillion for corporations and for individuals with incomes above $400,000. Many of the president’s tax proposals — including a proposal to increase the corporate tax rate to 28% and impose a 25% minimum tax on certain high-income individuals – were included in President Biden’s previous budgets. New tax proposals in the FY 2025 budget include measures to increase the recently enacted corporate alternative minimum tax rate from 15% to 21% and to deny business deductions for employee compensation above $1 million.”

Look no further than the Table Of Contents of the Biden Administration Revenue Proposals to see a number of tax increase proposals that include:

Raise the Corporate Income Tax Rate To 28%
Increase The Corporate Alternative Minimum Tax Rate To 21%
Increase The Excise Tax Rate On Repurchase Of Corporate Stock
Tax Corporate Distributions As Dividends
Limit Tax Avoidance Through Inappropriate Leveraging Of Parties To Divisive Reorganizations
Read More

Written by TaxConnections Admin

09 Apr 2024

Foreign Self-Employment Income: A US Expat’s Guide

Navigating the intricate world of expat taxes presents unique challenges and reporting obligations for self-employed U.S. citizens living abroad. Understanding the nuances of foreign income, tax treaties, and self-employment taxes is crucial for maintaining compliance with the IRS while optimizing financial health.

WHAT CONSTITUTES FOREIGN SELF-EMPLOYMENT INCOME?

Foreign self-employment income refers to the income earned by self-employed individuals who work outside of the United States. The IRS defines self-employment income as any income earned through a trade or business when you are a sole proprietor or a member of a partnership, and it includes income earned from side gigs or part-time businesses. Self-employment income is subject to self-employment taxes, which include Social Security and Medicare taxes, and self-employed individuals are required to pay quarterly estimated taxes in addition to filing an annual return.

WHAT IS THE THRESHOLD FOR REPORTING FOREIGN SELF-EMPLOYMENT INCOME?

If your net earnings from self-employment exceed $400, you are required to report this income on a US tax return. This income threshold applies to all self-employed individuals, including those working abroad, and encompasses your worldwide income.

WHAT IS THE U.S. SELF-EMPLOYMENT TAX RATE?

For the tax year 2023, US expats who are self-employed need to be aware of the self-employment tax rate that applies to their net earnings. The Internal Revenue Service (IRS) outlines that the total self-employment tax rate is composed of two parts: a 12.4% contribution towards Social Security and an additional 2.9% that goes towards Medicare. Collectively, this brings the self-employment tax rate to approximately 15.3% of your net profit.

Written by Olivier Wagner