Archive for John Dundon

Tax Implications Of Converting An LLC To A Corporation

Converting An LLC To A C Corporation

(Per visitor request this is an excellent article we are re-posting from TaxConnections Member John Dundon)

Recently a husband/wife owned 3 LLC’s that each successfully elected to be treated as S-corporations for federal income tax purposes by filing IRS Form 2553 – Election by a Small Business Corporation. Subsequently this great couple found themselves entertaining a rather complicated buyout offer of all 3 of their LLCs. This post addresses the tax implications of converting an LLC to a Corporation as part of a buyout strategy…

Their fundamental question:

Can the LLCs do a tax deferred corporate reorganization under IRC 351-368?

The husband/wife were concerned that their LLCs electing S corporation status might not be able to engage in a corporate reorganization because the LLC’s were comprised of ‘member interests’ and they did not have any “stock” – which is a key term in IRC 368 governing statute.

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Written by | Posted in Conversions • LLC • S-Corp

A Leading Tax Expert Speaks Up: Why Turbo Tax Sucks And Intuit Is Evil

Review of Turbo Tax And Intuit

Why TurboTax Sucks & Intuit is Evil can be distilled down to the simple fact that corporate america has lost its soul and this particular company is simply following along into the abyss.

There once was a time when board members of large publicly traded corporations actually understood and were deeply concerned about balancing the needs of their main constituencies; customers, employees, shareholders and the communities they were polluting. Those days are LONG gone.

Today’s corporations are concerned about 1 constituency – the shareholder. As such it is a horribly dysfunctional time for workers and customers alike. Presently all we can do is take solace in the belief that lopsided disrespect for people and communities will eventually – one day – bite short term thinking parasites where it hurts most.

In the mean time those of us in the trenches must continue to call out nefarious behavior as it presents itself. With that these are the 3 main reasons why TurboTax SUCKS and Intuit is EVIL.

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Written by | Posted in Intuit

R&D Tax Credits – IRS Form 8974, IRS Form 6765, IRS Form 3800 And The Tax Cuts And Jobs Act

JOHN DUNDON - IRS Forms On R&D Tax Credits

Hold On! Resist the urge to gloss over the title so fast! Do whatever it takes to clear your head and FOCUS for 6,000 words or so on R&D Tax Credits – IRS Forms 8974, 6765, 3800 & the TCJA.

Understanding the tax reporting and compliance procedures of this very interesting tax credit is GOOD BUSINESS for 3 VERY IMPORTANT Reasons:

  1. MONEY – Taxpayers Save BIG
  2. OPPORTUNITY – More Taxpayers Qualify
  3. TIMING – Applicable statues changing in 2022

Money

Since becoming law in 1981 the R&D tax credit has proven to be quite a valuable tax planning tool yielding billions of dollars in federal and state benefits for LARGE US businesses with big compliance budgets.

Opportunity

Now that the tax credit is permanent and can be applied towards employment tax, planning opportunities abound for medium size and smaller companies – including startups!

The intended consequence of the 2015 PATH Act is prevailing and it turns out more small businesses are putting systems in place to comply with tax credit audit standards.

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Written by | Posted in IRS Form 6865 • IRS Form 8974 • IRS Tax Credits • R&D Tax Credits

The Sharing Economy – Tax War Stories

John Dundon

Coming to you from the procedural trenches of the tax compliance industry, today’s post is about the sharing economy – tax war stories.

Most recently I had the privilege of leading a group discussion about the tax implications of this ubiquitous ‘Sharing Economy’ business model we are all currently experiencing with 60 or so members of the National Association of Tax Professionals.

I love my tax nerd friends and our discussion was a real barn burner! After addressing many questions and getting a fair amount of valuable input it is safe to write that we came to 5 general conclusions:

  1. Much like quantum entanglement, what the sharing economy ‘is’ originates predominately from the observer’s perspective at this point. It can be one thing to you and another to me.
  2. Much like the grEAt wild west, this relatively untamed voyage involves the collection, organization and digital storage of what was once deemed private information… by LARGE corporations.
  3. This collection and analysis of our private data causes each of us to be systematically ‘profiled’ which can be both good and evil.
  4. Our individually compiled profiles in the hands of the wrong people or governments (think Enron or Nixon or Clinton) is a scary proposition, particularly in light of our history.
  5. Big Brother and lemming references aside, the procedural mechanics required to maintain regulatory compliance has many overt challenges for the average taxpayer and tax professional alike.

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Written by | Posted in Shared Economy

Tax Implications Of Converting An LLC To A Corporation

John Dundon

Recently a husband/wife owned 3 LLC’s that each successfully elected to be treated as S-corporations for federal income tax purposes by filing IRS Form 2553 – Election by a Small Business Corporation. Subsequently this great couple found themselves entertaining a rather complicated buyout offer of all 3 of their LLCs. This post addresses the tax implications of converting an LLC to a Corporation as part of a buyout strategy.

Their fundamental question – can the LLCs do a tax deferred corporate reorganization under IRC 351-368?

The husband/wife were concerned that their LLCs electing S corporation status might not be able to engage in a corporate reorganization because the LLC’s were comprised of ‘member interests’ and they did not have any “stock” – which is a key term in IRC 368 governing statute.

This drove them into the weeds of IRC 708 pertaining to the merger of two or more partnerships. Fortunately they came to me and turns out the main concern here is converting the legal form of the businesses from LLCs to a corporation which can require a state licensed business attorney.

Keep in mind however, the husband/wife converted each of their LLC’s tax status from a partnership to a corporation without changing the LLC’s legal form in Colorado. As such they only needed to:

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Written by | Posted in Convert LLC To Corporation • TaxConnections

Are You A U.S. Citizen Living Outside The United States?

John Dundon - Expatriate Filing Extension

International Taxpayers Extension Request is for US taxpayers residing outside of the USA. Your 2018 income tax forms are due June 17th 2019. That date is coming up here soon and it usually catches people off guard.

If this might be you, worry not… Simply File IRS Form 4868 for automatic extension of time to file US individual tax return.

Filing this form gives you an additional 4 months (until October 15th) to file your income tax forms. However you still must estimate what your federal income tax liability will be and get that payment into the US Treasury ASAP. That payment was actually due April 15th 2019.

If you live outside of the US you should not be penalized for late payment if you pay by June 15th, but you will be assessed interest for the late payment.

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Written by | Posted in Expatriate Taxes • Filing Extension

Yikes! New Treatment Of Patents Under Tax Cuts And Jobs Act

John Dundon- Patents

One of my more favorite clients has done quite well for herself financially by being the Primary Inventor over the last 10 years on 30 + patents (7 internationally protected). It is so humbling to have her trust when it comes to the US Tax Code as she is so very smart and tenacious in pursuit of the truth… definitely keeping me on my toes.

Being who she is, of course she read that the Tax Cut & Jobs Act (TCJA) removed patents from the definition of ‘Capital Asset‘ as per the newly amended Internal Revenue Code section 1221(a)(3). She called me all concerned that the proceeds from selling her patents and other projects would now be considered ordinary income for tax purposes.

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Written by | Posted in Patents Under Tax Cuts And Jobs Act

What Is A Specified Service Trade or Business (SSTB)?

John Dundon - What Is A Specified Service Or Trade Business

When not riding my mountain bike in the Rocky Mountains I tend to hang out with tax nerds … pretty much all the time, to the extent that tax nerds actually ‘hang out’ that is.  At one of our most recent ‘meetups’ (think band camp without the instruments) we had a lot of fun indulging in freshly picked peaches & poking holes in the bizarrely nuanced albeit new ‘concept’ (if you will) of what a Specified Service Trade or Business (SSTB) is ‘proposed to be’ according to our esteemed ‘rule-writers’ from the US Treasury.

Worth noting is that there were a LOT of smart people in the room, many of whom spent their entire adult lives reading and writing about (as well as applying) the US Tax Code/Regulations. 

We all generally agreed that no business wants to be deemed a SSTB (as the acronym alone sounds like a disease) and that as a result there will be all sorts of skulduggery rearing its ugly head in the not too distant future from US Taxpayers and perhaps our beloved federal government alike.

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Written by | Posted in Specified Service Or Trade Business

The Perturbing New Treatment Of Patents Under The Tax Cuts And Jobs Act

John Dundon- Patents And Tax Cuts And Jobs Act

One of my more favorite clients has done quite well for herself financially by being the Primary Inventor over the last 10 years on 30 + patents (7 internationally protected). It is so humbling to have her trust when it comes to the US Tax Code as she is so very smart and tenacious in pursuit of the truth… definitely keeping me on my toes.

Being who she is, of course she read that the Tax Cut & Jobs Act (TCJA) removed patents from the definition of ‘Capital Asset‘ as per the newly amended Internal Revenue Code section 1221(a)(3). She called me all concerned that the proceeds from selling her patents and other projects would now be considered ordinary income for tax purposes.

YIKES!

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Written by | Posted in Patents And Tax Cuts And Jobs Act

Another Surprise! Business Losses Limited For The Unincorporated

John Dudon - Limited Loss Deductions F

Unless your business is registered as a Corporation you may be subject to excess business loss limitations. Let that sink in for a while.

In AMERICA you can no longer report losses of more than $250,000 in any given tax year … unless of course your business affairs are incorporated.

This shittiest of the #Stoopid Tax Cut & Jobs Act reporting requirements – IRS Form 461 is but one of many new mind numbing forms. If you don’t believe me, check out line 13 of the form – my personal fav:

“If line 12 is a negative number, enter it here as a positive number. If line 12 is a positive number, enter it here as a negative number.”

IRS Form 461 Line 13

What the ….?!?!

Why must we use the tax code as some sort of social engineering tool?

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Written by | Posted in Business Loss Limitations

Tax Planning For Pass-Through Entities After Tax Reform

John Dundon - Passthrough Entities

(NOTE READERS: THERE WAS SUCH A HIGH LEVEL OF INTEREST IN THE PASS-THROUGH POST WRITTEN BY MANASA NADIG YESTERDAY, WE WANT TO SHARE WITH READERS ANOTHER HIGHLY READ POST ON PASS-THROUGHS WRITTEN BY JOHN DUNDON)

Tax planning under the TCJA for pass through entities is a post for small business owners everywhere paying US income taxes.

Now that the Tax Cuts and Jobs Act (TCJA) is in full swing, many of you have been clamoring for tax planning strategies. This post addresses some essential aspects of the Act and suggest some strategic implications to be used for planning purposes.

One of the most significant changes coming out of the TCJA are the new tax rates:

  • The individual tax rate is reduced to a maximum 37%.
  • The tax rate for pass-through entities can be reduced by 20%.
  • The corporate tax rate is reduced from 35% to as low as 21%.

As a result of these new tax rates there is a growing debate over whether a business should be organized as a pass-through entity or a full blown ‘C’ corporation. 

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Written by | Posted in Pass-Through Entities

Tax Professionals: Do You Have A Data Protection Plan?

John Dundon - Do You Have A Data Protection Program

My friend, Deborah Rodgers, a dedicated and decorated public servant serving since the dawn of time as an IRS Stakeholder Liaison in the Denver Office called the other day before the government shutdown with all sorts of questions about my firm’s data protection plan. Time with Deborah is ALWAYS well spent!

Working inside the proverbial heart of the beast she truly knows my pain as I invest significantly in a data protection planning. Out of compassion she felt compelled to share with me that the IRS needs help too from taxpayers and tax practitioners alike to work diligently together towards protecting their private data.

It is evident to both of us that with increasingly sophisticated profiling aplenty online and otherwise people compiling and processing all the personal and business data required for reporting taxes to the IRS had best have a plan in place to protect that data. 

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Written by | Posted in TaxConnections
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