Archive for Tax Provision/Tax Reporting

Massachusetts Governor Announces Fiscal Year 2015 Budget Proposal

On January 22, 2014, Massachusetts Governor Deval Patrick announced his budget for fiscal year 2015. While much of the budget is focused on investments in infrastructure and education, those in the tax community will be particularly interested in the proposition to close tax loopholes the Governor has attempted to close in past years. Included among these loopholes, according to the summary, is a proposition to impose tax on the markup that online travel companies receive. Similarly, the budget proposes to apply the room occupancy tax on new forms of transient rental, such as apartments, condos, and homes. The budget seeks to close another loophole by applying the corporate tax rate to pass-through entities owned by insurance companies and security corporations.

The budget summary anticipates that closing these loopholes will raise $40 million but Read More

Written by | Posted in Tax Provision/Tax Reporting • United States

Offshore Asset And Income Amnesty Mooted By Australia’s Tax Commissioner

Nassim Kadem reports in today’s Australian Financial Review that recently appointed Commissioner Chris Jordan has mooted a new amnesty for disclosure of hidden offshore assets and income. A Tax Office official has confirmed the proposal and apparently, Treasurer Joe Hockey has indicated support for the idea.

The amnesty would cap the retrospective tax and penalty period to four years, making it relatively attractive for Australian taxpayers wanting to come clean and avoid later criminal prosecution and unlimited back taxes. It would be particularly attractive to second and third generation members of wealthy families who have “inherited” the problem of secret offshore caches. Read More

Written by | Posted in Australia/Oceania • Tax Provision/Tax Reporting

United States Corporations With Foreign Shareholders? Form 5472 – Part I

The United States market is a promising one for foreign investors and companies, but complicated issues must be addressed to avoid fines and penalties. One of these issues involves the completion of Form 5472.

US companies that are at least 25% owned by non-US shareholders and foreign companies that are engaged in a US trade or business must disclose information to the IRS on this somewhat confusing form. The IRS uses Form 5472 in developing information about the company and its related parties. Information provided on the form helps the IRS identify potential audit issues. Certain information on the Form 5472 might raise bright red flags for the IRS, too. Read More

Written by | Posted in FATCA • Tax Policy • Tax Provision/Tax Reporting

2014 – The South African “Tax Year” Ahead In Perspective

The first and very important note to make, in dealing with South African tax issues: tax year 2014 ends on the last day of FEBRUARY 2014. The South African tax year for most individuals, are 1 March until the last day of February in the next calendar year. Corporates can change their tax year-end to align with the last day of their financial year-end, yet Trusts partners in a JV or partnership, are obliged to file assuming a tax year-end on the last day of February, despite their financial year-end being the last day of another month.

Yes, sadly this date, Friday 28th 2014, is not even listed on the SARS webpage on important dates, yet is an extremely important tax deadline.

SARS has two webpages namely: www.sars.gov.za and www.sarsefiling.co.za. Read More

Written by | Posted in Africa • Expatriate • FATCA • FBAR • Indirect Tax • International • Tax Provision/Tax Reporting • Tax Risk Management • VAT

Continued Bonus Depreciation Or Tax Reform?

One of the fifty seven federal tax provisions that expired at the end of 2013 was 50% bonus depreciation. That has been a temporary provision for several years, primarily aimed at helping economic recovery. It’s also been a generous provision (it was even 100% for a few years). With 50% bonus depreciation, a business claims depreciation on new equipment in the year it is placed in service equal to 50% of the cost plus normal depreciation on the balance. If the company was also eligible for Section 179 expensing, it would first claim $500,000 and then take 50% of the balance and then normal depreciation on the balance.

Temporary tax provisions are often renewed well after they expire. These temporary provisions all “cost” money because they result in reduced tax collections. To be extended in a revenue neutral bill, Congress has to find “offsets” – other tax increases or spending cuts. Read More

Written by | Posted in Corporate • Tax Provision/Tax Reporting

Tax Provisions Not Extended

Is it real this time? –

In one of the most visible expressions of confusion in tax policy out of Washington D.C. is the treatment of a short list of tax laws that have been repeatedly extended only to expire only to be extended once again. These laws expire on midnight December 31st, 2013 unless… once again… the laws are extended.

• Teacher $250 deduction for qualified classroom expenses

• Deduction for state and local general sales taxes (in place of state income tax deduction)

• Deductibility of home mortgage insurance premiums Read More

Written by | Posted in Tax Provision/Tax Reporting

Sales of Business Assets

Business assets are not capital assets but the sale my result in long-term capital gain if the asset has been held for more than one year. Under Code Section 1231, the net gain from sale of all Section 1231 assets is long-term capital gain, but there are two are two exceptions for depreciable property. (1) For personal property, under Section 1245, gain is ordinary income to the extent of any depreciation allowed or allowable (depreciation recapture). Allowable means that if the taxpayer could have taken depreciation on the asset but did not do so, then this amount must reduce the basis of the asset and is considered as ordinary income when the property is sold for a gain. (2) Under Section 1250, real property depreciated under an accelerated method is also treated as ordinary income. The amount of recapture depends on when the asset was placed in service and what depreciation method Read More

Written by | Posted in Property Tax • Sales/Use Tax • Tax Provision/Tax Reporting

Last Call for Tax Deductions

There is about a week left for 2013 which means this is the last call for most tax deductions. Sure, there a few things you can still do in April when you are filing your return but the vast majority of tax deductions must be taken care of before the end of the year. It’s the holiday season so tax deductions are not likely to be on top of your to-do list, but maybe they should be.

Charitable contributions need to be made before year-end. That includes donations of appreciated stock which need to be transferred into the charity’s account before January. Sometimes the paperwork for transferring securities can take a day or two, so don’t wait until 4:00PM on New Year’s Eve to start the process. Read More

Written by | Posted in Gift Tax • Individual • Tax Provision/Tax Reporting

New User Fees for Processing Installment Agreements and Offers in Compromise

Effective January 1, 2014, processing fees for standard installment agreements and doubt as to collectability offers will increase. Fees for direct debit installment agreements are unchanged. Low income fees and fee waivers are also unchanged.

The notice of proposed rule making proposed to increase the fee under § 300.1 for entering into an installment agreement from $105 to $120 and to increase the fee under § 300.2 for restructuring or reinstating an installment agreement from $45 to $50.

Under the notice of proposed rule making, the fee for a direct debit installment agreement remained $52, and low-income taxpayers, as defined in § 300.1(b)(2), would continue to pay $43 for any new installment agreement, including a direct debit installment agreement. The Read More

Written by | Posted in Tax Provision/Tax Reporting

A Practical Guide To Identifying, Gathering, And Documenting A Sustainable Research Tax Credit Claim

Introduction

The Research and Experimentation Tax Credit (hereinafter “RTC”) was added to the Internal Revenue Code (hereinafter “the Code”) in 1981 as a temporary provision of the Code at a time when research and development based jobs were significantly declining in the United States due to these jobs being moved overseas where labor rates and overall operating costs were considerably less. For this very reason, the RTC was introduced into the Code in 1981 to motivate business entity taxpayers to incur significant and qualifying research and development expenditures with the high expectations that such an advantageous tax incentive would facilitate in stimulating job growth and investment in the United States and Read More

Written by | Posted in Tax Provision/Tax Reporting

Australian Taxation Office Plans To Outsource “Tax Audits” To Big 4 Accounting Firms

The Australian Financial Review’s Fleur Anderson reported today on an internal ATO memo to staff. The memo said “We are currently exploring a new initiative for undertaking assurance work through the External Compliance Assurance Process (ECAP) project…This approach will look at how we might use the capabilities of accounting professionals, who are registered company auditors, to conduct certain assurance reviews on our behalf.”

This is an interesting development, but the report does not indicate whether the ATO would engage and pay the external auditor, or that corporate taxpayers would be expected to do so as part of their tax risk mitigation processes.

If the ATO was to engage the corporation’s existing auditor, that would raise ethical Read More

Written by | Posted in Australia/Oceania • Corporate • Federal • International • Tax Controversy • Tax Policy • Tax Provision/Tax Reporting

1099-K Notices Bewilder Taxpayers – To Match or Not to Match?

TaxConnections Blog PostDo you have tax clients who run small businesses or decided to sell their household items on e-bay this past year? Or perhaps you are a CPA who accepts credit card payments from your clients? If so, you may have already received a notice from the IRS or should be aware of the latest updates on the IRS push for information matching with Form 1099-Ks (Payment Card and Third Party Network Transactions). Some AICPA members have received 1099-K mismatch notices assessing thousands of dollars in penalties.

Less than a year ago, the AICPA raised the topic in a blog post about a major initiative that requires merchant card companies to report gross receipts on Form 1099-K. At the time, the IRS was carrying out a compliance program that sent notices to small business taxpayers to match their sales information with merchant provided Form 1099-K reports. The program was used to ensure business taxpayers were reporting adequate income from their credit card receipts. A driving force behind this decision was the growing US tax gap, as IRS data indicated that a major source for the gap was related to underreporting of business income on individual tax returns.

As a result, many taxpayers, especially self-employed Schedule C filers, are beginning to receive notices related to Form 1099-Ks. In these notices, the IRS is providing basic instructions such as “Read the notice thoroughly and complete any Read More

Written by | Posted in Federal • IRS • Sales/Use Tax • Tax Provision/Tax Reporting
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