Archive for Federal

New Filing Compliance Procedures for Non-Resident U.S. Taxpayers

The IRS is aware that some U.S. taxpayers living abroad have failed to timely file U.S. federal income tax returns or Reports of Foreign Bank and Financial Accounts (FBARs). Some of these taxpayers have recently become aware of their filing obligations and now seek to come into compliance with the law. The Service is announcing a new procedure for current non-residents including, but not limited to, dual citizens who have not filed U.S. income tax and information returns to file their delinquent returns. This procedure will go into effect on Sept. 1, 2012.

Note: On September 30, 2013, FinCEN posted, on their internet site, a notice announcing FinCEN Report 114, Report of Foreign Bank and Financial Accounts (the current FBAR form). FinCEN Report 114 supersedes TD F 90-22.1 (the FBAR form that was used in Read More

Written by | Posted in Expatriate • FATCA • FBAR • Federal • International • OVDP • Tax Fraud/Evasion/Crimes

LIFO Repeal – Tax Savings For The Small Business?

LIFO REPEAL – TAX SAVINGS FOR THE SMALL BUSINESS?

The Tax reform Act, 2014 calls for a repeal of the Last in First Out (LIFO) method of inventory valuation. Despite the promise of reduced tax rates associated with LIFO repeal and other proposed changes, there has been strong opposition to the proposed repeal particularly from a group of over 120 companies coming together to form the LIFO Coalition in 2006. (LIFO Coalition, 2014)

The group contends that getting rid of LIFO would cause severe economic hardship to businesses and lead to loss of jobs. (Whitehouse, 2009).

WHAT IS LIFO?

Read More

Written by | Posted in Corporate • Federal • Income Tax • IRS • Small Business • Tax Policy

Summer Hearings On Comprehensive Tax Reform

On June 5, 2014, Senators Wyden and Hatch of the Senate Finance Committee announced three hearings for the summer on comprehensive tax reform. The topics:

June – Education incentives

July – (1) Identity theft and taxpayer privacy protection (2) Modernizing corporate taxation

They also mention:

• Simplification
• Promoting economic prosperity
• Innovative ways to fix the depleted Highway Trust Fund Read More

Written by | Posted in Corporate • Federal

Kovel Agreements: The Solution To Well-Meaning But Useless Tax Practitioner – Client Privilege?

Contrary to popular belief, there is no accountant-client privilege recognized in federal law. However, in 1998, Congress enacted a limited privilege for tax advice. Section 7525 extends the same common law protections of confidentiality that apply to communications between a taxpayer and an attorney to communications between a taxpayer and any “federally authorized tax practitioner.” IRC § 7525(a)(1).

Thus, if the communication would be considered privileged if it was between a taxpayer and an attorney, then so too will it be privileged if it is between the taxpayer and a federally authorized tax practitioner. IRC § 7525(a)(3)(A). The term, “federally authorized tax practitioner” applies to any individual who is authorized to practice before the IRS. For example, it includes CPAs, enrolled agents, and enrolled actuaries. Read More

Written by | Posted in Federal • IRS • Tax Fraud/Evasion/Crimes

Tangible Assets Used In Converting Corn To Fuel Grade Ethanol Are Properly Included In Asset Class 49.5

A certain important person in my reality – my wife – is becoming increasingly interested in the business end of biomass refineries. You go girl. Funny but this interest also happens to correlate with a new file I am developing involving a farmer who owns an ethanol plant so hopefully we will be taking another journey together. What I am quickly learning is that valuation in this particular file really is all about the asset list, depreciation schedule, useful life, salvage value and the significance of having the assets properly categorized (to clean up the tax returns). It is a mess. From my warped perspective there is no better way to understand the business end of a refinery then to start with assets. So honey feel welcome to contribute to your heart’s content…

In conducting research I came across IRS Revenue Ruling 2014-17 stating tangible Read More

Written by | Posted in Federal

Has Uncle Sam Gone Mad? FATCA, BRS, AEOI And Other Strange Words Pouring Into South Africa

In South Africa, the South African Revenue Service (SARS the local equivalent of the IRS) has just issued a draft public notice for comment and it refers to strange new terminology, not always correctly understood by the non-American resident.

Most US expats and failed SA expats returning from the USA with a green card in the back pocket, are all facing being caught red handed. Yes, for many years SARS was not the best of gossip queen in the OECD. The cam the Krok case and SARS received some interesting info from the ATO. Not only did SARS wake up to the word FOUNDATION they also saw the benefit of acting in “cohort” with another tax authority.

Suddenly the effort to make FATCA happen for FFI’s in South Africa, became an interesting Read More

Written by | Posted in Africa • FATCA • Federal • Income Tax • International • IRS • OVDP • Tax Controversy • Tax Fraud/Evasion/Crimes • Tax Risk Management

House Votes To Reinstate The Research And Experimentation Tax Credit

On Friday, May 9th The U.S. House of Representatives voted 274-131 to reinstate the Research and Experimentation Tax Credit (hereinafter “RTC”) under § 41 of the Code which recently expired on December 31, 2013.

As a background, the RTC was first enacted in 1981 into the Code as a temporary provision at a time when research and development based jobs were alarmingly declining throughout the United States (hereinafter “U.S.”) due to U.S. based companies moving these jobs overseas. Lawmakers stated the lapse-and-revive cycle of the past 33 years has prevented companies from relying on it and thwarted its incentive effect. “Businesses can’t grow and invest when the tax code is riddled with instability and uncertainty,” Ways and Means Committee Chairman Dave Camp, a Michigan Republican, proclaimed on the House floor Read More

Written by | Posted in Federal • R&D Credit Services

Tax Exemption: A Precious Status, Take Care Not To Lose It!

Martin Luther King Jr said, “Life’s most persistent and urgent question is, what are you doing for others?” Daily routine is an all-consuming machine, we do forget to ask ourselves this question.

Speaking of doing something for others, brings to mind Charitable Organizations. May 15th is creeping up on us real fast. And for those of us who have non-profit organizations as clients, we know that it is the deadline to file Form 990. This form is due on the 15th day of the fifth month after an organization’s tax year ends. Since most use the calender year, the deadline for them is May 15th.

A non-profit or a tax-exempt organization is one which seeks exemption from federal income Read More

Written by | Posted in Federal • Income Tax

House Ways And Means Committee Approves Permanent Extension of Research & Experimentation Tax Credit Amongst Other Expired Business Tax Provisions

On April 29th, The House Ways and Means Committee approved six separate bills to permanently extend certain expired business tax provisions. These bills specifically address the research and experimentation tax credit (H.R. 4438); ‘look-through’ treatment for controlled foreign corporations (CFCs) (H.R. 4464); the subpart F exceptions for active financing income (H.R. 4429); increased section 179 ‘small business’ expensing limits (H.R. 4457); a reduced recognition period for S corporation built-in gains (H.R. 4453); and basis adjustments to stock of S corporations making charitable contributions of property (H.R. 4454).

These permanent ‘tax extender’ bills, approved by the Ways and Means Committee without revenue offsets, are estimated by Joint Committee on Taxation (JCT) staff to reduce federal Read More

Written by | Posted in Federal • R&D Credit Services • Tax Policy • Tax Provision/Tax Reporting

Late Lateef: The Story of Filing Late Returns And Penaltiies!

“Late Lateef” is a term very often used in the Indian sub-continent for those who are habitually late! When thinking of this post, I was curious if Google.com would oblige me with a story or two about how this term originated. Sure enough, as soon as I hit the “I am feeling lucky” button, I had various versions on hand; if you feel curious, do check out one version here!

But, we are not here to talk about folklore and its origins, although it is more interesting any day than penalties for late filing and/or failure to file. Today is April 29th 2014, tax deadline was two weeks back and if you are one of those like Late Lateef and did not file your tax return, then you need to read this post!! If late Lateef was due a refund, he would not be penalized for late filing BUT would only have three years from the due date of the Read More

Written by | Posted in Federal • Income Tax • Individual • IRS

10 Pointers Regarding IRS Bills, Penalties And Interest Charges

Many people have been reaching out to me to learn specifically about what they are up against for failing to hit the tax deadline of April 15th. To help those of you in this situation I’ve highlighted below what I believe to be the top 10 most valid points in regards to IRS bills, penalties and interest charges as detailed in IRS Publication 594 The IRS Collection Process.

1. Federal income tax returns are systematically checked for mathematical accuracy. If there is any money owed, you will be sent a bill. So don’t worry so much about math errors on the federal tax return as it will be caught. Generally speaking if you catch a math error after the tax return was submitted it can make sense in many instances to wait for the IRS to contact you with the changes before going through the brain damage of filing an Read More

Written by | Posted in Audit • Federal • IRS • Tax Tips

Liens And Levies Make The IRS A Collection Agency On Steroids

Sometimes the problem with “food for thought” is that it can almost choke you with its stark simplicity. Take our tax system, for example. The federal government prints our money, regulates the places where we keep it and has vast powers to take it away from us if we don’t give them their cut.

The aforementioned powers are the statutory means at their disposal to enforce collection, far beyond the capabilities of the most relentless collection agency. The IRS does not have to resort to harassing telephone calls, threats or intimidation. They need only to determine you have an unpaid tax debt and set in motion the process of notification and enforcement. Read More

Written by | Posted in Federal • Individual
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