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National Taxpayer Advocate Annual Report Highlights Most Serious Problems With The IRS

Nina Olson- Serious Problems With IRS

Every year, the National Taxpayer Advocate’s Annual Report to Congress identifies at least 20 of the nation’s most serious tax problems. These issues can affect taxpayers’ basic rights and the ways they pay taxes or receive refunds, even if they’re not involved in a dispute with the IRS.

As your voice at the IRS, the National Taxpayer Advocate uses the Annual Report to elevate these problems and recommend solutions to Congress and the highest levels of the IRS.

Tax Law Questions: The IRS’s Failure To Answer The Right Tax Law Questions  At The Right Time Harms Taxpayers, Erodes Taxpayer Rights, And Undermines Confidence In The IRS

In 2014, the IRS implemented a policy to only answer tax law questions during the filing season, roughly from January through mid-April of any year.  It justified this abrupt change in policy as a cost-savings effort in a time of budget constraints.  This change does not comport with an agency charged with administering the tax law and focused on the customer experience.

Taxpayers have ever-changing tax situations year-round.  People move, open a business, close a business, get married, get divorced, have children, and experience many other life changes that affect their tax obligations.  Forcing taxpayers into a 3.5-month window to ask questions or making it necessary for them to seek advice from a third-party source can be frustrating and costly to the taxpayer and result in eroded trust and confidence in the IRS. Read Full Discussion

Transparency Of The Office Of Chief Counsel: Counsel Is Keeping More Of Its Analysis Secret Just When Taxpayers Need More Guidance Than Ever

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What Taxpayers Need To Know About Dividends, Interest And Capital Gains In The New Tax Landscape

Blake Christian
Key Takeaways
  • Regular dividends are generally not eligible for the lower long-term capital gains tax rates that Qualified Dividends receive unless the recipient holds the underlying shares for a specific period of time.
  • A common misconception is that the underlying shares must be held for longer than one year in order for any related dividends to be taxed as Qualified Dividends.
  • Since Real Estate Investment Trusts (REITs) generally pay no entity-level tax, dividends issued by a REIT are generally not eligible for the reduced rates assigned to Qualified Dividends.
  • Mutual fund distributions will only qualify for the reduced tax rate to the degree that the amount is determined to be a Qualified Dividend that’s received by the mutual fund.

Introduction
With the new 21 percent flat tax rate, along with liberalized asset depreciation and expensing provisions plus a lower tax on repatriated foreign earnings, the landmark Tax Cut and Jobs Act (TCJA) has been a boon to U.S. C corporations since its passage late last year. But, many individual taxpayers and their advisors are still digesting the changes and mulling over their next steps. Below is a primer about the tax treatment of dividends, interest and capital gains in light of the new tax reform landscape.

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Are You An Amazon FBA Seller Who Owes California Taxes? You Need To Act Right Now!

Monika Miles - Amazon FBA

Does your company now, or has it in the past, taken advantage of Fulfillment by Amazon (“FBA”), and did you recently receive a letter stating you owe California taxes? This blog post explains why you cannot ignore this letter. Please contact us right away if you need help navigating your next steps!

Physical Presence Nexus And Fulfillment By Amazon

Back before Wayfair made headlines and the concept of economic nexus became a household term, essentially giving states the ability to pursue collection of sales tax from internet retailers, “physical presence” still established nexus within a state. A variety of factors determined physical presence nexus, such as employees located within a state, or owning or renting property within the state.

One such obvious physical presence item coming into play for a lot of companies that participate in FBA is inventory. If a company’s physical property (inventory) is held within a state (even if held in a third-party warehouse, like Amazon’s), it creates nexus, or taxable presence, for the company. That means that the company is then responsible for collecting and remitting the state’s sales/use tax and also filing income tax returns in the state.

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Can The IRS Garnish Wages From Both You And Your Spouse? IRS Wage Garnishment Policy

Venar Ayar - Can The IRS Garnish Wages From Both You And Your Spouse

The IRS can garnish the wages of both you and your spouse for joint tax debt. The IRS policy is generally to garnish the wages of the higher earning spouse, but they may deviate from this rule if you’ve flagrantly refused to pay your tax debt.

Wage Garnishment

When you owe tax debt and the IRS has sent you several notices demanding payment, you may be at risk for enforced collections. A wage garnishment is a common IRS collection tactic, which involves taking a portion of each paycheck you receive and applying it to your tax debt.

A taxpayer gets an exempt amount that cannot be garnished based on their filing status and number of dependents. For example, a married taxpayer who files jointly and has two dependents will receive $2,733.33 per month. The rest of your wages will be sent to the IRS until your tax debt is paid off in full.

If you receive any bonuses or commissions, the IRS can also seize 100% of these amounts.

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Senior Vice President Tax – Los Angeles, CA

Senior Vice President Tax Los Angeles California

TaxConnections Executive Search Services Division has been retained to conduct a search for a Senior Vice President Tax in the Los Angeles, CA area. This client has a global diversified portfolio of investments. An ideal Senior Vice President Tax candidate will be currently working as a Partner in a Big Four firm, real estate investment firm, investment fund, private equity or asset management. The Senior Vice President of Tax will lead acquisition structuring and due diligence including tax integration efforts.

Senior Vice President Tax

Responsibilities include global tax strategy; review and filing of all domestic and international corporate, personal, partnership and other income tax returns; implementing and managing company’s income tax and indirect tax compliance activities (partially insourced and partially outsourced); and supervision of an outstanding, incumbent tax team.  The Senior Vice President Tax will work directly with the CFO in identifying and developing effective tax strategies and planning techniques to minimize overall tax burden of consolidated group of companies and minimize overall costs associated with the tax structure.

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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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The Federal Opportunity Zone Program – Overview

Blake Christian-Federal Opportunity Zone Program

The 2017 Tax Cut and Jobs Act (2017 Act) created the federal Qualified Opportunity Zone program (QOZ or Program) effective in 2018 and operative up to the next three decades.

Beginning January 1, 2018 through December 31, 2026, individuals, corporations, REITs, and pass-through entities can sell their appreciated capital assets and elect to reinvest the resulting capital gain into a Qualified Opportunity Fund (QOF). The federal tax impact of participating in a QOF includes deferring qualified gains for up to eight years and permanently exempting up to 15% of the original federal gain and 100% of the post-reinvestment gain – after holding the investment for seven and ten years, respectively. State conformity to this law is varied and requires a careful state-by-state analysis.

The Program offers a powerful and flexible tax savings and diversification tool for taxpayers generating capital gains. To participate, taxpayers must roll all (or a portion) of their capital gains (whether short-term or long-term) into a QOF. The QOF must then timely (180-day window discussed below) invest the gain into undeveloped or developed real estate, a new or existing QOZ-based business, or into other qualified QOZ property. While most of the focus is on real estate projects, the Program also provides significant potential benefits for taxpayers investing in active businesses that operate primarily within a QOZ. A future sale of an active business at multiples of 6- to 8-times EBITDA can easily eclipse a healthy real estate appreciation.

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What’s Considered Reasonable Cause For Penalty Abatement?

Venar Ayar - Reasonable Cause For Penalty Abatement

The IRS may grant penalty relief for reasonable cause based on all the facts and circumstances of your situation. This broad category of penalty relief can cover many different types of accidents or unexpected circumstances.

Typical Reasonable Causes

The IRS lists the following events as “sound reasons” for failing to meet your tax obligations:

  • Fire, casualty, or natural disaster
  • Inability to obtain records
  • Death, serious illness, or incapacitation of the taxpayers or an immediate family member

If one of the situations caused you to miss a tax payment or filing deadline, you may have a good case for reasonable cause penalty abatement.

Other Potential Reasons

The IRS will consider any other reason that shows you used ordinary business care and prudence to follow the tax laws but were unable to do so. These cases usually involve some events that were out of your control, whether due to someone else’s fault or an accident.

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Depreciation Limitations On Luxury Automobiles And Personal Use Property

IRS- Deduction On Luxury Automobiles And Computers

The TCJA changed depreciation limits for passenger vehicles placed in service after December 31, 2017. If the taxpayer doesn’t claim bonus depreciation, the greatest allowable depreciation deduction is:

  • $10,000 for the first year,
  • $16,000 for the second year,
  • $9,600 for the third year, and
  • $5,760 for each later taxable year in the recovery period.

If a taxpayer claims 100 percent bonus depreciation, the greatest allowable depreciation deduction is:

  • $18,000 for the first year,
  • $16,000 for the second year,
  • $9,600 for the third year, and
  • $5,760 for each later taxable year in the recovery period.

The TCJA also removes computer or peripheral equipment from the definition of listed property. This change applies to property placed in service after December 31, 2017.

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Section 199A: Tax Cuts And Jobs Act Introduction

Manasa Nadig - Section 199A 2

The biggest change that came out with the Tax Cuts and Jobs Act of 2017: Section 199A. This section allows owners of flow through entities such as Sole Proprietorships, S Corporations or Partnerships a deduction of 20% of the income earned by the flow-through. The Internal Revenue Service dropped the proposed Regs on Section 199A on August 8th, 2018, all of its 184 pages can be accessed here.

Caveat: Today’s post is a small introduction to this new section. There is a LOT more information to be culled from the 184 pages. Let us get some basics out of the way first:

  1. What is a pass through business? A pass through is a business where taxes are not levied at the entity level but rather at the owner level where the income and expenses have been passed through. The owners’ tax rates apply to this pass through income. Pass through entities are typically sole proprietorships, partnerships, LLC’s, trusts and S corporations. Only pass through entities are eligible for the Section 199A deduction.II. Do all pass-through businesses qualify for the deduction? YES, any trade or business qualifies UNLESSOne: The pass-through is a “Specified service trade or business” or SSTB.
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Complimentary Tax Blogger Series: 14 Smart Blog Secrets Any Tax Professional Can Master To Acquire New Clients

Kat Jennings- Complimentary Tax Blogger Series

TaxConnections is approached by many writers who want to post their articles on our site in order to receive distribution of their content to our global readers. We post content written by TaxConnections Members in order to drive new clients and business opportunities to them. We know for a fact that our bloggers gain higher visibility in the market for their tax expertise and the attention of a steady stream of prospective opportunities. We cannot impress upon you enough the value of your written ideas.

Your tax blog posts provide readers an opportunity to get to know you through your writing. What you are doing is engaging the public with you and your ideas and tax expertise. As many people search for tax help this time of the year, you have an opportunity to reach an audience truly interested in your tax expertise. Our tax bloggers are attracting new clients, opportunities and fans.

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Summary Of Tax Reform Changes Now Available

TaxConnections ADMIN GIRL

TaxConnections has had numerous requests for a written summary of the changes due to Tax Reform.  According to the Taxpayer Advocate Services (TAS) website you can view Tax Changes By Topic:

Tax Changes by Topic

The Tax Reform Changes website shows you how the new tax law may change your future tax filings and helps you plan for these changes. Currently the site addresses the most common 2017 IRS Form 1040, US Individual Income Tax Return topics and whether the tax law has changed or not. It provides line by line explanations and scenarios to describe how the new law may affect you. You can also sign up to receive email notifications as the website is updated with new tax law information.

The information on this page is categorized by tax topic in the order of the IRS Form 1040. Simply choose a tax return category such as income or payments and find information including the previous (2017) tax law information and the tax law change, if any, plus scenarios to describe how the new law may affect you.

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