Archive for North America

IRS Extends Fast-Track Settlement to Smaller Businesses Nationwide

Formerly available only to large and midsize businesses and in a geographically limited pilot program for smaller entities, the IRS’s Fast Track Settlement program is now available to smaller businesses nationwide, the IRS announced Wednesday, November 6.

Fast-track settlement allows the IRS and business or self-employed taxpayers under examination to use alternative dispute resolution procedures to resolve tax controversies more quickly, without a formal administrative appeal or litigation. The program began on a pilot basis in 2001 for businesses over which the IRS’s Large and Mid-Size Business Division (LMSB, now the Large Business and International Division) had jurisdiction—those with more than $10 million in assets. Read More

Written by | Posted in North America • Tax Controversy

Is That Worker An Employee? Part II

a. Behavioral Control

I. INDEPENDENT CONTRACTORS SHOULD RETAIN CONTROL OF THEIR WORK

The most fundamental difference between employees and independent contractors is that employers have the right to tell employees exactly what to do and how to do it. This is a recipe for disaster for the employer that intends to treat its workers as independent contractors. Whatever you do, don’t supervise or control an independent contractor as if he was one of your employees. It’s perfectly okay to provide detailed guidelines or specifications for the results that you expect from your contractors. But how those results are achieved must be left entirely up to the contractor. Read More

Written by | Posted in Corporate • Individual • North America

How to Pass the EA Exam the First Time

Here are some tips and tricks on how to pass the EA Exam, or any government type test, the first time. I will cover three important sections for success; 1) Pre-Test Studying Tips and Tricks; 2) Tips and Tricks for test Day; and 3) How to Break Down the Questions.

Tips and Tricks for Pre-test Studying

Have a study plan! This test is one of the hardest ones I’ve ever taken.  But, with the possible exception of Part 2, there is nothing on here that a Tax pro with some experience under their belts can’t handle.  So don’t freak out about the difficulty of the test. It’s hard, but you can do this!

Use the study material available at the IRS Enrolled Agent website and Candidate Read More

Written by | Posted in Federal • IRS • North America • Tax Education • Tax Policy

Is That Worker An Employee? Part I

QUESTIONS AND ANSWERS ON WORKER CLASSIFICATION

If you own or manage a business that uses independent contractors, you need to know when you can or cannot treat a worker as an independent contractor. This article answers some of the common questions about worker classification.

INTRODUCTION

Misclassification of employees as independent contractors is now a common phrase uttered by state and federal legislators and regulators. State task forces have been formed to crack down on businesses that do not pay unemployment insurance and workers’ compensation premiums or withhold taxes for workers whom the state believes are employees and not Read More

Written by | Posted in Corporate • Individual • North America

Many Tax Questions On Same-Sex Federal Tax Filings

I think the Internal Revenue Service did a good job getting real guidance issued on the meaning of the United States Supreme Court’s finding that Section 3 of DOMA is unconstitutional. On August 29, 2013, the Internal Revenue Service issued Revenue Ruling 2013-17 (binding guidance) and some new FAQs (not binding, but often just restating the binding guidance).

Key points of the ruling:

The Internal Revenue Code and regulations should be read in a gender neutral manner. This is helpful because there are several references in both to “husband and wife” rather than always “spouse.” Read More

Written by | Posted in Federal • Individual • IRS • North America

Do I Really Have To Pay More For My Investment Gains In 2013?

As with all good tax questions, the answer is: It Depends! The new 3.8% tax on your Net Investment Income (NII) only kicks in at the higher adjusted gross income (AGI) levels. So unless you are in the top 3% of earners then the answer is no.

But if your AGI is over the threshold then you will possibly have to pay an additional 3.8% on the NII. The thresholds are $200,000 if unmarried, $250,000 if married filing jointly, and $125,000 if married filing separately.

Once you have determined that your income is over the threshold, you must determine what types of income applies. The IRS, of course, has a handy new form, the Form 8960, for just that calculation. The long and short of it boils down to this. You will pay the additional tax on the lesser of the amount of your NII or the amount of your income over the threshold. Read More

Written by | Posted in Individual • North America

Sellers of Bundled Services Beware

Money GiftA recent Washington excise tax determination points out the need for sellers to be careful when bundling retail sales taxable and service taxable activities into a single package or bundle. In Det. No. 13-0059, 32 WTD 232 (2013) the Department of Revenue held that wedding packages were subject to retail sales tax despite the inclusion of non-taxable services within the wedding package.

The taxpayer sold wedding package that included facility rental, decorations, furnishings, catering and linens. The administrative law judge agreed with the taxpayer that amounts received for facility rentals are licenses to use real property that are subject to services B&O, but not retail sales tax. However, this facility rental was bundled with a number of other items that are clearly subject to retail sales tax, such as catering.

The determination notes that prior to July 1, 2008 Washington used a “true object” test to determine whether a bundle of items and services were subject to retail sales tax. For periods after July 1, 2008 there is a specific bundling rule that must be followed. This rule provides in general that if a bundle of property and services are sold for a single itemized price that includes items that are subject to retail sales tax and items that are not, the entire bundle is subject to retail sales tax. Read More

Written by | Posted in North America • Sales/Use Tax

Tax Payers End of Year Tax Tips

TaxConnections Picture - TIPSHere are some tips for planning last minute tax savings for individual tax payers.

As always there are ways to tweak your 2013 tax bill, but not very much time left to do so. Before making any decisions please see my last Wag the Dog blog and keep those items in mind. The two biggest ways to adjust your taxes for 2013 are to increase your deductions before the end of the year or to decrease your income.

You can increase your deductions by doing things like making additional charitable contributions, paying your health insurance premiums in December instead of January, paying your January mortgage payment in December, paying your 2014 property taxes in 2013 instead of 2014, making a contribution to a traditional IRA before the end of the year or balance that stock portfolio and reap the losses you would take after the first of the year now.

You can decrease your income by increasing the contributions to your 401(k) or other employer sponsored retirement plan before the end of the year, making a contribution to a Health Savings Account, joining or increasing your cafeteria plan contribution, getting your boss to push that bonus or pay raise into 2014, or hold off on balancing that stock portfolio until after the first of the year if you look to make some gains. Read More

Written by | Posted in Federal • Individual • IRS • North America • Tax Education • Tax Tips

CPAs: Review California Clients Today for Enterprise Zone Credits (Up to $50,000 Per Qualified Employee)

TaxConnections Blogger PostsOn June 27, 2013, the California State Assembly passed AB 93, which eliminates the current Enterprise Zone (EZ) program, replacing it with a new set of incentives, which will be statewide in application. This change requires businesses to take action now to get the most out of existing credits while also preparing to take advantage of the new credits that will be effective January 1, 2014.

The EZ program was first established in 1986 and has been used to attract business to depressed areas in California and to support new and existing businesses located in depressed areas of the state. The program has allowed qualified businesses to claim hiring credits on qualified employees and sales tax credits on qualified purchases.

Do your clients need help understanding the immediate steps they must take? If your clients (CPAs: review your California clients) are in one of California’s 42 EZs, pay California income tax, and have employees, they are a prime candidate to review the various credits that remain available. These credits and refunds can be reviewed for the last four (4) open tax years. The time to act is now. After December 31, 2013 — your clients will have forfeited up to $50,000 per qualified employee. Read More

Written by | Posted in Corporate • Individual • North America • Sales/Use Tax • Specialty Tax Incentives • State And Local Tax (SALT) • Tax Controversy • Tax Policy • Tax Provision/Tax Reporting

California Enterprise Zone Tax Credits End 12/31

TaxConnections Picture - Hand Holding Golden DollarEvery business can benefit from hiring based tax credits. Here is something that you may not know …

Did you know that you have an opportunity to get an additional refund? Studies show that up to 60% of businesses did not take advantage of the Federal 2010 payroll tax credit called the HIRE Act. Employees that were hired between February 1, 2010, and January 1, 2011 and were unemployed for 60 days prior to hire can qualify for a refund of 6.2% of the employee wage for 2010. The deadline for this refund is January 10th, 2014 in order to receive the refund check. (HIRE Act Example: General contractor hired 32 qualified employees in 2010. They receive a refund for over $94,000.00.)

You are probably aware of Enterprise Zone HR Tax Credits for clients within California. However, recent legislation changed the existing statutes making it more difficult for businesses to take advantage of this program. The changes include changing the “look back” ability to limit businesses to review only 12 months from the employee’s date of hire. Some of the categories for eligibility are being amended as well to create additional hurdles for you. California Enterprise Zone ends December 31, 2013.

Businesses should also keep in mind the WOTC (Work Opportunity Tax Credit) program. Recent legislation expanded the qualifiers for this program to make it much more accessible. This program is very time sensitive. EDD requires new employee paperwork be submitted to them in less than 28 days from each employee’s respective date of hire. Businesses can receive up to $9,600 per qualified employee.

These are just a few instances of hiring based tax credits.

In accordance with Circular 230 Disclosure

Written by | Posted in Corporate • North America • Partnership • Specialty Tax Incentives • Tax Provision/Tax Reporting

The Foreign Service Corporation in Transnational Corporate Structures

TaxConnections Picture - Man with Laptop at BeachIntroduction

Injecting a conduit offshore corporate entity in a transnational corporate structure can implement cost savings. One useful purpose is characterized as an offshore corporate entity that provides services within the organizational structure.

As stated in a previous segment, (Foreign Corporations and Subpart F Income – Part II on TaxConnections, 17/September 2013 – Corporate – International – Tax Blogosphere) the essence of this type of corporate planning is to combine the concept of ownership structure that subjects a foreign corporation to controlled status and activities of the corporate entity. The two concepts are intertwined in the implementation of Subpart F Income tax consequences.

If a foreign corporate entity has Subpart F Income because it has Foreign Base Company Income, but it is not deemed a controlled foreign corporation by virtue of ownership, it is not subject to Subpart F Income treatment. Those are two distinct planning features.

Conversely if the aspect of controlled ownership or the characterization of corporate activity of Subpart F Income treatment is averted by virtue of it not being deemed Foreign Base Company Income, it achieves the same planning result. The elimination of either enables the corporate taxpayer to remove itself from the application of Subpart F Income treatment. The gist of this Read More

Written by | Posted in Corporate • Federal • International • North America

Government Shutdown, One Tax Provision In Debt Ceiling Deal

TaxConnections Picture - Debt CeilingWednesday’s deal to fund the federal government through January 15 and to extend the federal government’s borrowing authority through February 7 in the end contained only one tax provision, making a minor change to 2010’s health care legislation. The agreement, H.R. 2775, was passed by the Senate in an 81–18 vote on Wednesday and by the House of Representatives in a 285–144 vote. President Barack Obama is expected to sign it immediately, without an increase in the debt ceiling, since a U.S. debt default could happen soon.

A separate part of the agreement, not included in the bill but made in a separate Senate motion, will create a framework for formal budget negotiations. These will be scheduled to conclude by December 13, with negotiators charged with making recommendations for long-term budget and deficit reduction goals.

The change to the health care law under the agreement reached Wednesday sets up a new requirement that the eligibility of people who receive cost-sharing reductions under Section 1402 of the Patient Protection and Affordable Care Act, P.L. 111-148, or the health insurance premium tax credit under Sec. 36B, be verified. Under the agreement, the secretary of Health and Human Services must ensure that health insurance exchanges verify that individuals applying for the credit or cost-sharing Read More

Written by | Posted in Federal • North America • Tax Provision/Tax Reporting
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