TaxConnections is a where to find leading tax experts and tax resources worldwide.

24 Apr 2019

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Written by Kat Jennings

23 Apr 2019

Read This Before Tossing Old Tax Records!

If you are a neat-nick and your tax return for last year has been completed and filed, you are probably thinking about getting rid of the tax records related to that return. On the other hand, if you are afraid to dump old records, you are probably looking for a box to put them in so you can store them away. Well, you do have to keep them for a period of time but not forever.

Generally, tax records are retained for two reasons: (1) in case the IRS or a state agency decides to question the information on your tax returns or (2) to keep track of the tax basis of your capital assets, so that you can minimize your tax liability when you dispose of those assets.

With certain exceptions, the statute of limitations for assessing additional taxes is three years from the return’s due date or its filling date, whichever is later. However, the statute in many states is one year longer than that of federal law. In addition, the federal assessment period is extended to six years if more than 25% of a taxpayer’s gross income is omitted from a tax return. In addition, of course, the three-year period doesn’t begin elapsing until a return has been filed. There is no statute of limitations for the filing of false or fraudulent returns to evade tax payments.

Written by Chuck Woodson

23 Apr 2019

Citizenship And Worldwide Taxation: Citizenship As An Administrable Proxy For Domicile (Part 6)

Administrability, Residence, and Citizenship – Overview

As noted earlier, tax mavens often invoke ability-to-pay considerations to justify the worldwide taxation of an individual’s income and assets by the nation in which she resides. The country in which an individual lives exercises in personam jurisdiction over that individual. In addition to such personal jurisdiction, the nation of her residence is often the country in which an individual works (at least in significant part), earns some (often much) of her investment income, and maintains some (often much) of her assets. By virtue of her presence in the country of her residence, that country, the argument goes, is best positioned to measure and tax an individual’s overall capacity to pay by aggregating her worldwide income and assets and by enforcing against this resident the taxation of her aggregate income and assets. These ability-to-pay considerations, combined with the substantial public benefits the nation of residence provides to its residents, underpin the near universal practice of worldwide income taxation by the nation in which an individual lives.

At first blush, this argument for residence-based taxation leaves no room for a defense of citizenship-based taxation. If residence-based taxation of worldwide income and assets is the proper way to measure and tax an individual’s overall abilityto- pay and if such residence-based taxation correctly reflects the governmental benefits bestowed on individuals by virtue of their respective residences, it is the nation in which a U.S. citizen lives which should tax her worldwide income and holdings. If a U.S. citizen lives abroad, it follows from this argument, the nation of residence, rather than the United States, is best positioned to assess such citizen’s ability to pay by aggregating and taxing her worldwide income and assets. Moreover, the nation in which an individual lives is also properly compensated for the public benefits it provides to its residents by taxing globally such residents’ income and assets.

Written by Kat Jennings

23 Apr 2019

Minnesota Business And Tax Climate

Minnesota is a state in the Upper Midwest and northern regions of the United States. Minnesota is the 12^th largest state in area and the 22^nd most populous state, where 60% of its residents live in the Minneapolis-Saint Paul metropolitan area (known as the “Twin Cities”). This area is the center of transportation, business, industry, education, and government, while being home to an internationally known arts community. The remainder of the state consists of western prairies now given over to intensive agriculture; deciduous forests in the southeast, now partially cleared, farmed, and settled; and the less populated North Woods, used for mining, forestry and recreation.

Minnesota’s first state park, Itasca State Park, was established in 1891, and is the source of the Mississippi River. Today, Minnesota has 72 state parks and recreation areas, 58 state forests covering 4 million acres and numerous state wildlife preserves. The Mississippi National River and Recreation area is a 72-mile-long corridor along the Mississippi River through the Minneapolis-St. Paul Metropolitan Area connecting a variety of historic, cultural, and geologic interest.

Written by Monika Miles

23 Apr 2019

Changes In The Tax Forms And Software This Year

Kazim Qasim - Changes In Tax Forms And Software

With the acceptance of the Tax Cuts and Job Act reform, we are now seeing the results of one of the most expansive tax law changes in nearly thirty years. With this came large changes to the forms and reporting structures themselves. No longer are Forms 1040-A or 1040-EZ available for use – everyone must file utilizing Form 1040. While the Form 1040 itself is greatly reduced, there is additional paperwork that may need to be completed in order to properly calculate your tax breaks and deduction. In June of 2018, the IRS released the first drafts of the form for review by its partners in the industry, and after revisions, Form 1040 was approved and released for public use. Much like prior years, the Form 1040 will utilize a summary of schedules format. Taxpayers with relatively straightforward tax situations will be able to file a Form 1040 with no numbered schedules. However, for those needing to file the form with additional supplemental information, the schedules are far more extensive, including income and adjustments, tax calculations, credits and designations.

Written by Kazim Qasim

23 Apr 2019

The Adoption Of A Withholding Code And The Improvement of Free File Fillable Forms Would Streamline Tax Withholding And Reporting

In last week’s blog, I discussed the potential benefits arising from an expansion of the pay-as-you-earn (PAYE) tax system to incorporate additional income items, as well as credits and deductions. Such a step would require substantial systemic adjustments and in the recent Annual Report to Congress I recommended that Congress direct the Treasury Department to consult with the IRS and TAS to analyze and report on the feasibility of and steps necessary for expanding withholding at source to encompass seven of the most common types of income. This broader PAYE coverage on the income side could be a precursor to the incorporation of credits and deductions into the PAYE system such that the exact amount of annual tax liability would be collected throughout the course of the year, leaving no subsequent taxes to pay or refunds to collect.

In the meantime, two additional innovations could be considered that would improve the collection of tax at source and streamline the reporting of tax liabilities at year end. As I discussed in a recent blog, redesign of the Form W-4, Employee’s Withholding Allowance Certificate, has generated a range of concerns, including complexity, taxpayer burden, and employee privacy. These issues arise because the U.S. system requires employees to navigate an often-confusing and difficult process to provide employers with their personal information, including other sources of income and marital status, so that the correct amount of tax can be withheld as discussed in TAS’s in-depth 2018 study. Some other countries, such as New Zealand, however, follow an alternative course that could be beneficial for the U.S.

Written by Nina Olson

18 Apr 2019

Complimentary Webinar On Friday, April 19, 2019: ASC 740 On Stock Comp, States And Uncertain Tax Benefits

COURSE: ASC 740 Intermediate Topics: Stock Comp, States and Uncertain Tax Benefits
DATE: Friday, April 19, 2019
TIME: 11:00AM EST/10:00AM CT/9:00AM MT/8:00AM PST

This course will discuss the intermediate ASC 740 topics such as stock compensation, states and uncertain tax benefits. It is a great course for practitioners new to ASC 740 or brushing up on their skills.

TaxConnections has invited internationally recognized tax provision expert Nick Frank to share what he has learned talking to Fortune 500 to Fortune 5000 clients about the corporate tax provision. He will also share what the tax auditors are saying about the corporate tax departments and their readiness on the tax provision. If you are not ready, you will want to attend this session to learn how to take a more simplified course of action with your corporate tax provision.

REGISTER FOR COMPLIMENTARY ACCESS TO TRAINING WEBINAR

Written by Kat Jennings

18 Apr 2019

Citizenship And Worldwide Taxation: Citizenship As An Administrable Proxy For Domicile (Part 5)

Citizenship-Based Taxation and Benefits

Against the background established in the last three Parts, we can now assess the merits of the United States’ practice of taxing on the basis of citizenship, with a particular focus on the United States’ policy of taxing its nonresident citizens on their respective worldwide incomes and assets. In this Part, I evaluate citizenship-based taxation in terms of the benefits associated with U.S. citizenship. Governmentally furnished benefits are a traditional consideration for tax policy and, as we have seen, 130 is the rationale of Cook. However, upon examination, the benefits rationale for citizenship-based taxation proves unpersuasive, both in theory and in practice. The most significant civil and social benefits extended by the U.S. polity are tied to U.S. residence, not to U.S. citizenship.

The strongest benefits argument for citizenship-based taxation is one with which citizenship mavens are most uncomfortable, namely, the Tiebout/purchase characterization of citizenship as a public service purchased through tax payments. However, even that approach cannot be squared with the current system, which in practice charges different tax prices (often radically different tax prices) for the identical benefits of U.S. citizenship, depending upon the level and kinds of taxes assessed by the nation in which a U.S. citizen resides and earns his income.

Written by Edward Zelinsky

18 Apr 2019

Tax Reform Ideas To Reflect How Small Businesses Operate In The Modern World

The Tax Cuts and Jobs Act brought several improvements for small businesses, most notably, favorable accounting methods such as use of the cash method and not having to deal with the Unicap rules. The AICPA Tax Section recently posted a position paper noting 13 more changes that would further help modernize the Code to reflect how small businesses operate. Some of these would more completely simplify what Congress started with the TCJA.

For example, the TCJA increased the Section 179 expensing amount to $1 million, adjusted for inflation annually. But, despite the fact that intangibles are important to all sizes of businesses today (and for the past two decades), it only applies to tangible assets (and off-the-shelf software), not intangible assets, such as acquisition of a patent or domain name.

Written by Annette Nellen

18 Apr 2019

Consequences Of Failing To Resolve Your Tax Debt

Are You Unable To Resolve Your Tax Debt?

Very few things in life are as stressful as owing the IRS money, especially if you do not have the funds to pay what you owe. “So what should I do?” You are probably wondering. Well, this should not be a complicated issue if you can get the services of a proficient tax defense attorney. Since what you do at this juncture will matter a lot, it is important that you do the right thing to avoid legal trouble. Here are a couple of things to keep in mind if you are unable to resolve your debt.

The Don’ts

1. Failing To File Returns

The first and most tempting mistake that most people make when they realize they are unable to pay their taxes is not filing returns at all. While this seems like a good idea, it will lead to more penalties. The IRS automatically places a 5% penalty each month up to 25% if you do not file your taxes. Furthermore, you will also be expected to pay interest on the total bill until it is paid in full.

Written by Venar Ayar

18 Apr 2019

IRS Issues Guidance Relating To Deferral of Gains For Investments In A Qualified Opportunity Fund

The Internal Revenue Service issued guidance providing additional details about investment in qualified opportunity zones.

The proposed regulations allow the deferral of all or part of a gain that is invested into a Qualified Opportunity Fund (QO Fund) that would otherwise be includible in income. The gain is deferred until the investment is sold or exchanged or Dec. 31, 2026, whichever is earlier. If the investment is held for at least 10 years, investors may be able to permanently exclude gain from the sale or exchange of an investment in a QO Fund.

Qualified opportunity zone business property is tangible property used in a trade or business of the QO Fund if the property was purchased after Dec. 31, 2017. The guidance permits tangible property acquired after Dec. 31, 2017, under a market rate lease to qualify as “qualified opportunity zone business property” if during substantially all of the holding period of the property, substantially all of the use of the property was in a qualified opportunity zone.

Written by IRS

17 Apr 2019

National Taxpayer Advocate: Expanding Pay-As-You-Earn Tax Collection Could Bring Significant Benefits

Imagine it’s tax filing season. You’re dreading figuring out your tax liability this year, because in the last few years you’ve been earning sporadic capital gains and dividends that sometimes have led to a surprise tax bill at year-end. This year, though, is the first year that pay-as-you-earn (PAYE) tax collection has been expanded beyond wage income to cover additional types of earnings, causing your capital gains and dividends to be withheld at source, as well as some key deductions and credits, so that you don’t have to retrospectively reconcile your income, withholding, and deductions—all you need to do is fill out and file your Form 1040. There is no big bill, because withholding at source was applied on all of your income, and because it accounted in advance for the standard deduction and for the deduction you knew you would claim for student loan interest.

Written by Nina Olson

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