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Gig Economy Tips Taxpayers Should Remember

IRS On Gig Economy

The gig economy, also called sharing or access economy, is activity where taxpayers earn income providing on-demand work, services or goods. Often, it’s through a digital platform like an app or website. While there are many types of sharing economy businesses, ride-sharing and home rentals are two of the most popular.
Here are some things taxpayers should remember:

• Income from these sources is taxable, regardless of whether an individual receives information returns. This is true even if the work is full-time, part-time or if an individual is
paid in cash.
• Taxpayers may also be required to make quarterly estimated income tax payments and pay their share of Social Security, Medicare or Medicaid taxes.
While providing gig economy services, it is important that the taxpayer is correctly classified.
• This means the business or the taxpayer must determine whether the individual providing the services is an employee or independent contractor.
• Taxpayers can use the worker classification page on IRS.gov to see how they are classified.
• Independent contractors may be able to deduct business expenses, depending on tax limits and rules. It is important for taxpayers to keep records of their business expenses.
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Learn The Tax Rules For Non-Resident Aliens

Learn The Tax Rules For Non-Resident Aliens

This guide is dedicated to helping you comply with US tax laws if you are a foreign national (resident or nonresident alien) working or investing in the US.  We take you through the substantial presence test and show you how to determine your US tax resident status. Whether you are an H1b, L1, O1, or other non-immigrant visa holder, you will learn about the US resident tests for tax purposes, which are different than for immigration purposes.

If you are a nonresident alien, investing in US real estate or other US business activities from your home country, we give you an overview of deductions and credits available on Form 1040NR, with plenty of additional resources provided. We explain your tax filing options on a dual status or resident tax return if you have obtained permanent resident (green card) status.

You will also learn the more complex tax rules that apply if you are an F1 or J1 visa holder. Then we give you an overview of tax treaty benefits, which are particularly useful for F1 and J1 visa holders. Finally, you will learn about ITIN requirements, state tax requirements and social security and Medicare tax withholding rules. For most Americans, completing their tax return is a confusing and frustrating exercise. We can only imagine how ominous the task must seem for you, a foreign visitor. Hopefully the information you find here will make the job easier.
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Hiring Trends In Corporate Tax Departments: Rethinking How You Hire And Retain Tax Professionals (Part 1)

Hiring Trends For tax Professionals

An interesting trend has been unfolding for the past few years as management tax executives have been searching to hire needed tax staff, tax seniors, and senior tax accountants. While news media focuses on job loss, this is certainly not the case in the world of taxes. Ask any management level tax executive, and they will tell you there is a lack of available talent to meet the current market demand. In fact, during the pandemic firms have held tightly on to tax staff with one to seven years of experience. Companies searching for tax staff are wondering how they will fill the hundreds of tax positions now open at the staff level. This post series will focus on factors contributing to the lack of qualified tax staff available today and provide a valuable, actionable solution to attract and retain talent at the staff level.

What has occurred in the world of hiring tax expertise is not a benign problem. Many organizations have Tax Managers doing the job that tax staff would normally do because they are unable to attract tax staff. There are firms who have searched for over a year to find and secure tax expertise at the staff level. What is happening? There are multiple factors contributing to tax executive’s inability to attract this talent. We will discuss what is happening as we share conversation’s we have had with tax staff at the lower levels and the tax executives searching to hire them today.

First you should understand the mindset of the tax staff we speak to today. Here are examples of recent discussions we have had with tax staff and tax executives searching to find and hire them. Their names have been changed to protect the confidential discussions we have had with them. We have given them a pseudonym (fictitious name).
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Tax Manager – Investment Management (San Francisco, CA)

Tax Manager - Investment Management (San Francisco, CA)

TaxConnections is conducting a search for an investment management group to fill a Tax Manager role located in San Francisco, CA. We would genuinely appreciate your review of this opportunity and kindly refer this to anyone you believe who may appreciate learning more.

The Tax Manager will be responsible for assisting senior tax management with tax research and planning and all aspects of the tax compliance and forecasting for a very significant investment partnership and the related investment management entity. Individual must have a solid understanding of current tax laws including knowledge of investment partnership structures.

Researching and communicating the tax consequences of current and proposed investments will be a part of the responsibilities of the successful candidate. In addition, the position will require both the preparation and review of highly detailed complex Federal, California and multi-state income tax returns, foreign investment reporting implications, preparation of tax forecasts and researching complex tax issues.  The Tax Manager must be able to perform multiple tasks, have proven project management skills and produce high quality, accurate and detailed work on a timely basis. Also, must be able to timely identify and communicate issues, positions, and opportunities both orally and in writing to management.

Responsibilities include the following:
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W-2 Or 1099 For Shareholder Employees Of S Corporations?

1099 or W-2 For Shareholders: Paul Hamann

W-2 Or 1099? That’s the number one question Jack receives here at RCReports.

Answer: W-2

We hear your argument: Paying wages via 1099-MISC instead of W-2 has no tax effect!

Here’s Jack’s reply: It’s the law.

FS-2008-25 states: Corporate officers are specifically included within the definition of employee for FICA (Federal Insurance Contributions Act), FUTA (Federal Unemployment Tax Act) and federal income tax withholding under the Internal Revenue Code.

Generally, an officer of a corporation is an employee of the corporation. The fact that an officer is also a shareholder does not change the requirement that payments to the corporate officer be treated as wages.

Just to be certain we looked up the IRS definition of Employee and Independent Contractor, just to make sure there wasn’t some loophole or wiggle room to argue for independent contractor status.
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Treasury Guidance On Payment Protection Loans

Treasury Guidance On Payment Protection Loans

This week we have new Treasury Guidance on the PPP loan forgiveness requirements. This guidance seems to be primarily aimed at the issue of the “necessity” of the loan, which continues to be somewhat murky. We also have updates on business expense reimbursement, which is an issue that has become more important with employees working from home and changing the pattern of their business expenditures.

New PPP Guidance

The Treasury has updated its guidance related to the CARES Act Paycheck Protection Program (PPP) loan forgiveness requirements. The Treasury now notes that most companies with adequate sources of alternative liquidity are likely not eligible for the program. In order to qualify for the loans, PPP borrowers are now required to provide a good faith certification stating that current economic conditions and uncertainty make the loan necessary to support ongoing operations. PPP borrowers who find they cannot make the certification in good faith are permitted to return the funds. For more information on the PPP loan rules, visit Tax Facts Online. Read More

Tax Professionals: Your Guide For Tax Audits

TaxConnections, Guide For Tax Audits, Venar Ayar

This Guide For Tax Audits was prepared by Tax Lawyer Venar Ayar. The Guide covers the many notices that the Internal Revenue Service sends to individual taxpayers regarding tax audits. This is an excellent guide for tax professionals and taxpayers alike and we thank Ayar Venar for compiling this information and reference guide for our readers.

Please be advised that all tax audits should be handled by an experienced tax professional. Please refer to the guide below:

IRS NOTICE NUMBER DESCRIPTION – VENAR AYAR’s ADVICE

CP11Audits   This notice states that your return has been changed because the IRS believes there was a miscalculation. This means you owe money on your taxes because of this. Double-check the numbers on your tax return to confirm that you actually did make a mistake.  If there was no mistake on the original return, you need to respond to the notice with an explanation.

CP14- Balance Due   The IRS has sent this notice because you owe money on unpaid taxes. This is the first letter sent in the collection process. It is the initial tax bill sent.  The letter gives you an opportunity to pay the tax in full to prevent any collection actions.  If you ignore the letter, the IRS will continue sending notices that get more and more threatening, and will eventually start taking collection actions.

CP16-Audits This notice was sent because we have found a miscalculation in your return that affects your refund. The IRS records show that you owe other tax debts, and we used all of part of your refund to pay them. Double-check the numbers on your tax return to confirm that you actually did make a mistake.  If there was no mistake on the original return, you need to respond to the notice with an explanation, otherwise the IRS will keep all or part of the refund you claimed.

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Tax Specialist (Family Office) – San Francisco, CA

Tax Specialist Job, Tax Accountant Job, Tax Researcher Job

TaxConnections is representing a high net worth family office in San Francisco, CA to locate a Tax Specialist with 2-3 years of experience. The opportunity to work in this family office is a once in a lifetime one. It is ideal for anyone wanting to leave public accounting and go in-house and work with a highly supportive family office with a stellar reputation.The Tax Specialist is responsible for performing tax compliance and planning functions as well as providing tax support for various company entities, which include Partnerships, Limited Liability Companies and Corporate entities. The financial and team support they have given all of their employees during this time is extraordinary.

Significant emphasis will be on tax work related to Partnerships and Limited Liability Companies. Prepare federal and state income tax returns and forecasts and perform various tax planning and research projects that involve a high degree of complexity.  Respond to audits by and information requests from various government authorities. Responsibilities include the following:
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Required Business Expense Reimbursement

Required Business Expense Reimbursement

Some employers are now permitting employees to work from home–while others are requiring it. In some jurisdictions (California and Illinois, for example) employers are required to reimburse employees for employment expenses. This may create the need for employers to reimburse employees for the cost of maintaining a home office.

Further, the FLSA does not permit an employer to require an employee to pay for business expenses if doing so would reduce the employee’s earnings to below the minimum wage. For more information on the impact of reimbursing business expenses, visit Tax Facts Online. Read More

How To Determine Reasonable Compensation For Closely-Held Business Owners (Complimentary CPE)

Free Tax Webinar

Are you concerned of guessing at Reasonable Compensation? Are you concerned your clients may be taking too little or too much compensation leaving them vulnerable to an IRS Challenge?

The IRS has specific guidelines on the compensation of S Corp & C Corp owners. Do you want to ensure you are advising your clients properly? Our software helps tax advisors increase the value of their practice by efficiently determining the compensation of an S Corp or C Corp owner in minutes, providing a high dollar value add service to your practice, while protecting your clients from an IRS challenge.

Paul Hamann is an expert on determining Reasonable Compensation for closely-held business owners. He has educated more than 30,000 tax advisors and valuators on the topic of Reasonable Compensation.

Determining Reasonable Compensation for Closely-Held SMB’s is not a magical or mysterious process. In fact, it is a straight forward process that relies on a basic understanding of the three different approaches for determining Reasonable Compensation and when and where they apply. Practitioners armed with this knowledge and the proper tools can easily determine Reasonable Compensation for any SMB.

Learning Objectives
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Anatomy Of An IRS Reasonable Compensation Challenge

Paul Hamann - Anatomy of an irs audit on reasonable compensation

What does an IRS reasonable compensation challenge look like from A-Z? Following is an analysis of a recent reasonable compensation challenge for a real estate agent in the Northeast handled by tax attorney Mike Breslin:

An S Corp owner has a fantastic year. More zeros than he’s ever seen. Then comes “The Letter” from the IRS.

That’s what happened to tax attorney Mike Breslin’s client. A real estate agent had a banner year, primarily because of one huge sale, more than doubling his usual income. But, like every other year in his career, he claimed no reasonable compensation on his S Corp tax return.

Here’s what happens before and after an S Corp owner receives what RCReports’ Jack Salewski calls the “It’s your lucky day” letter.

The IRS churns tax returns through its computers, using analytics to flag anomalies for audit. The analytics are secret, but CPAs and tax attorneys discern that the program looks for sudden changes in income, discrepancies from others in the same industry and same geographic area, surges in mileage or meals or thank you gifts. On the other hand, IRS analytics seem to ignore consistency. Mike Breslin’s client had been consistently reporting about the same amount in distributions, with zero reasonable compensation, for about a decade, without drawing any attention to his S Corp. He’d never even heard of reasonable compensation. Then one fantastic year inflated the size of his distribution. Red flag.
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Tax Manager/Senior Tax Manager (San Francisco, CA)

Tax Manager/Senior Tax Manager In San Francisco, CA

TaxConnections has been retained by an investment firm to fill a Tax Manager/Senior Tax manager role located in San Francisco, CA. We would genuinely appreciate your review of this opportunity and kindly refer this to anyone who may appreciate learning more.

The Tax Manager/Senior Tax Manager will be responsible for assisting senior tax management with tax research and planning and all aspects of the tax compliance and forecasting for a very significant investment partnership and the related investment management entity. Individual must have a solid understanding of current tax laws including knowledge of investment partnership structures.

Researching and communicating the tax consequences of current and proposed investments will be a part of the responsibilities of the successful candidate. In addition, the position will require both the preparation and review of highly detailed complex Federal, California and multi-state income tax returns, foreign investment reporting implications, preparation of tax forecasts and researching complex tax issues.  The Tax Manager must be able to perform multiple tasks, have proven project management skills and produce high quality, accurate and detailed work on a timely basis. Also, must be able to timely identify and communicate issues, positions, and opportunities both orally and in writing to management.

Responsibilities include the following:
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