IRS Shifting More Attention Onto High Income Earners, Partnerships And Large Corporations Following Passage Of Inflation Reduction Act Funding

IRS Shifting More Attention Onto High Income Earners, Partnerships And Large Corporations Following Passage Of Inflation Reduction Act Funding

IRS Shifting More Attention Onto High Income Earners, Partnerships And Large Corporations Following Passage Of Inflation Reduction Act Funding

Learn How To Protect Your Clients With This Invitation To A Complimentary Partnership Tax Planning Strategy Session 

Capitalizing on Inflation Reduction Act funding and following a top-to-bottom review of enforcement efforts, the Internal Revenue Service announced the start of a sweeping, historic effort to restore fairness in tax compliance by shifting more attention onto high-income earners, partnerships, large corporations, and promoters abusing the nation’s tax laws.

The effort, building off work following last August’s IRA funding, will center on adding more attention on wealthy, partnerships and other high earners that have seen sharp drops in audit rates for these taxpayer segments during the past decade. The changes will be driven with the help of improved technology as well as Artificial Intelligence that will help IRS compliance teams better detect tax cheating, identify emerging compliance threats, and improve case selection tools to avoid burdening taxpayers with needless “no-change” audits.

The Inflation Reduction Act Funding Increases scrutiny on high-income, partnerships and corporations. The IRS states it will shift attention to wealthy from working class taxpayers; key changes coming to reduce burden on average taxpayers while using artificial intelligence and improved technology to identify sophisticated schemes to avoid taxes.

“This new compliance push makes good on the promise of the Inflation Reduction Act to ensure the IRS holds our wealthiest filers accountable to pay the full amount of what they owe,” said IRS Commissioner Danny Werfel.

Major Expansion In high-Income/High Wealth And Partnership Compliance Work

Prioritization of high-income cases. In the High Wealth, High Balance Due Taxpayer Field Initiative, the IRS will intensify work on taxpayers with total positive income above $1 million that have more than $250,000 in recognized tax debt. Building off earlier successes that collected $38 million from more than 175 high-income earners, the IRS will have dozens of Revenue Officers focusing on these high-end collection cases in FY 2024. The IRS is working to expand this effort, contacting about 1,600 taxpayers in this category that owe hundreds of millions of dollars in taxes.

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Exempt Non-resident Citizens From FBAR

Exempt Non-resident Citizens From FBAR

OMB Control No: 1506-0009 / ICR Reference No: 202403-1506-001 / Federal Register: 2024-06697
Reports of Foreign Financial Accounts Regulations and FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR)

An earlier post alerted people to the opportunity to submit comments (due April 29, 2024) about whether the FBAR rules should be applied to the local accounts of Americans abroad. What follows is my comment …

Outline:

Treasury should explain precisely what it is about the status of U.S. citizenship (regardless of residence or connection to the United States) that creates a presumption of tax evasion, terrorism and money laundering.

The time has come for Treasury to recognize the obvious injustice and stop requiring an FBAR to report the “local” bank accounts of Americans abroad to the Financial Crimes Division of U.S. Treasury!!

Part I – Introduction and Context- Understanding The April 29, 2024 Deadline For FBAR Commentary Submissions
Part II – Comment: Statement Of Purpose
Part III – Looking For Mr. FBAR – Where are the rules found?
Part IV – Understanding FBAR: “U.S. Persons” are required to file an FBAR. Who is a “U.S. Person”?
Part V – FBAR and U.S. Citizens: The World of Mr. FBAR in 1970 is NOT The World Of Mr. FBAR 2024
Part VI – Non-application of the FBAR rules to U.S. citizens who reside in U.S. territories
Part VII – The application of FBAR to non-citizens who do NOT live in U.S. territories
Part VIII – Conclusion: If ALL U.S. citizens (regardless of connection to the United States) are to be subject to the FBAR requirement …

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What Is A TPR (Tangible Property Regulation) Study?

What Is A TPR (Tangible Property Regulation) Study?

A Tangible Property Regulation (TPR) study is an analysis that examines a company’s compliance with the Tangible Property Regulations. In this context, tangible property refers to real property such as land and improvements to land (e.g., site improvements and buildings), as well as personal property that can be felt or touched, and be physically relocated, such as furniture and equipment.

The main objective of a TPR study is to ensure that a company is in compliance with the final TPR regulations to accurately classify its costs, distinguishing between capital expenditures (which are typically depreciated over time), deductible expenses, and dispositions by a thorough review of taxpayers’ documentation. This strategic approach can result in significant tax savings, mitigate audit risk, and bolster overall tax planning strategies for businesses.

What Do TPR Studies Involve?

A TPR study is typically conducted by seasoned tax professionals or consultants who deeply understand the regulations. They meticulously examine a company’s financial and tax records, identify misclassifications, and recommend necessary adjustments to ensure compliance with the rules.

Such studies may involve:

Legal Analysis: Reviewing statutes, regulations, case law, and other legal materials related to tangible property.

Compliance Assessment: Assessing whether businesses or individuals comply with relevant Tangible Property Regulations.

Policy Evaluation: This involves evaluating taxpayer’s capitalization policy on treatment of expenditures and proposing potential revisions or improvements.

Impact Analysis: A TPR study aims to provide insight into tangible property’s legal framework and its implications for taxpayers to accelerate deductions or reduce tax compliance burdens.

When Should Businesses Consider Conducting a TPR Study?

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Interview Guide: Preparing For An Interview

Interview Guide: Preparing For An Interview

With three decades of experience preparing professionals for interviews, I want to teach you techniques and strategies that will help you excel at the interview process. Taking the time to plan-ahead and prepare for an interview is essential to your success. When you want to make a good impression, you must prepare for each interview thoughtfully in advance. Preparation is the key to successful interviews which lead to offers with companies. The primary purpose of this Interview Guide is twofold: 1) Prepare you for questions you should ask during the interview process and 2) Prepare you for questions you may be asked.

Preparation Prior To Interviews

Research the company prior to an interview and gather as much information as possible.  The interviewer(s) appreciate the fact you have done your homework on the company upfront. Your advance research demonstrates you have taken an interest in the company and are prepared to start a conversation with them. Research in advance also helps you to build a list of questions you will want to ask the people you meet in the company. Research the backgrounds of the key people who will be interviewing you; this enables you to discover if there are any similarities in your backgrounds or common ground on topics of discussion. Did you go to the same school, work for the same organization or type of firm, or enjoy the same sports or activities, etc.?

The more information you have about the company and people who will interview you, the quicker you can establish common ground during the interview. Each person who interviews you will view you through their own personal lens and they will be looking at what you may have in common with them. This is perfectly natural to do. The psychologist Donn Byrne was the first to develop a study that proved the impact of similarity on the early stages of relationships. His studies explain that most of us have a need for a logical and consistent view of the world. We tend to favor ideas and beliefs that support and reinforce that consistency.  Therefore, we are attracted to people more when they share our ideas and beliefs.

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IRS Form 1116: How To Claim The Foreign Tax Credit (With Examples)

IRS Form 1116: How To Claim The Foreign Tax Credit (With Examples)

When talking about US taxes and taxation of US citizens who live abroad, you may have heard of the Foreign Tax Credit. A U.S. citizen or resident alien who pays income taxes in another country can claim a tax credit against their U.S. federal income tax bill to avoid double taxation, ensuring they are not taxed twice on the same income. Double taxation refers to the situation where income is taxed both in the country where it is earned and again in the U.S. You can offset your US tax liability by claiming the foreign taxes paid to another country. This way, you can bring your tax owing down to zero.

WHAT IS FORM 1116 AND WHO NEEDS TO FILE IT?

You must complete Form 1116 in order to claim the foreign tax credit on your US tax return for foreign income tax paid. The form requests information about the country your foreign taxes were paid in, the value of foreign income tax paid, and the types of income.

Most of the US international tax experts prefer claiming a Foreign Tax Credit (Form 1116) on a client’s U.S. tax return rather than the Foreign Earned Income Exclusion

Read further to learn about how to file Form 1116 Foreign Tax Credit and why it is a better way to save money on your US expat taxes.

Related: Foreign Earned Income Exclusion vs. Foreign Tax Credit: which one is better? 

ADVANTAGES OF FOREIGN TAX CREDIT AND GENERAL RULES

Claiming the Foreign Tax Credit will not only bring your tax owing to zero, it will allow you to make tax-deductible IRA contributions, claim the additional child tax credit and carryforward those excess credits to future years. Individuals who pay foreign taxes may be eligible for significant benefits under the Foreign Tax Credit, highlighting the importance of understanding one’s legal obligations and opportunities when living abroad.

THE ADDITIONAL CHILD TAX CREDIT

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How Can A Nexus Review Provide Peace Of Mind?

How Can A Nexus Review Provide Peace Of Mind?

In this day and age, nearly every company conducts business across state lines. Are you aware of all the additional taxes and fees you may be liable for?

We assist companies with state sales tax and income tax matters. As companies expand their operations and send salespeople across the country, or sell to consumers in other states via the internet, they create into nexus (or taxable presence) and have to think about filing in other states. That’s where Miles Consulting Group comes in.

We help companies answer questions on multi-state tax compliance:

  • Where do you have nexus creating activities?
  • What are the rules? What are next steps?
  • When was nexus created? When should you begin filing?
  • How much retroactive exposure has been created? Can we help you reduce it?

    As state tax rules change, we help our clients address these questions by bridging the gap between your business and complex state tax laws.

    We are often asked these three questions:

    1.  Why Is A Nexus Review Important?
    2.  Which Activities Cause State Tax Issues?
    3.  Are We Out of Compliance or Being Audited?

      Why Is A Nexus Review Important?

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IRS Releases Final Guidance On Transfers Of Certain Credits Under The Inflation Reduction Act

IRS Releases Final Guidance On Transfers Of Certain Credits Under The Inflation Reduction Act

The Department of Treasury and Internal Revenue Service issued final regulations today describing rules and definitions for the transfer of eligible credits in a taxable year, including specific rules for partnerships and S corporations.

The Inflation Reduction Act and the Creating Helpful Incentives to Produce Semiconductors act (CHIPs) enable taxpayers to take advantage of certain manufacturing investment, clean energy investment and production tax credits through elective pay or transfer provisions.

For tax years beginning after Dec. 31, 2022, eligible taxpayers can choose to transfer all or a portion of eligible credits to unrelated taxpayers for cash payments.

The unrelated taxpayers are then allowed to claim the transferred credits on their tax returns. The cash payments are not included in gross income of the eligible taxpayers and are not deductible by the unrelated taxpayers.

The final regulations also describe special rules related to excessive credit transfers and recapture events, including rules for determining whether an event has occurred, the resulting tax impact and the person responsible for that tax impact.

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Want To Gain Expert Knowledge And Skills Converting An Existing S Corp To An LLC? Complimentary Webinar

Want To Gain Expert Knowledge And Skills Converting An Existing S Corp To An LLC? Complimentary Webinar

On Thursday, May 16th 2024, three leading experts are inviting you to a free webinar to learn cutting edge strategies on:

  • Converting an existing S corporation to an LLC on a tax-free basis to obtain “charging order” protection.
  • Simple business structuring to circumvent the $10k deduction limitation for the portion of state and local income taxes attributable to partnership/LLC and S corporation income.
  • How not to cause your client to be one of the estimated 500k+ LLCs that incorrectly thought it was going to be taxed as an S corporation but, because of certain language contained in its operating agreement, is not an S corporation.
  • Personal goodwill and the C corporation business sale – identifying situations in which double tax can be avoided.

Any one of these strategies could make the difference between you being a hero or creating a significant problem for your clients.

Please Register Here For This Complimentary Presentation filled with valuable information that will surely help your tax clients.

Read the blog previously posted about this amazing yet free learning opportunity from leading partnership experts.

 

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Secrets To Learn Working With A Retained Tax Recruiter Vs. Contingency

Secrets To Learn Working With A Retained Tax Recruiter Vs. Contingency

Learn How You Benefit Retaining A Tax Recruiter

There are many things that can go right in a tax search and there are many things that can go wrong during a tax search. There is a mile wide divide in how search firms operate on your behalf. This post is about things that can happen to you while recruiting for the best tax candidates for your tax organization or connecting with an organization who needs your tax expertise. Either way, you are smart to work with the best tax recruiter you can find who has a proven track record in tax professional search. You should first ask for a tax recruiters’ experience. We always show our client list of successes: https://www.taxconnections.com/tax-executive-search-services

One Question You Should Never Ask A Retained Tax Recruiter

Whenever an experienced recruiter hears this one question, they feel minimized. The question is “Can you go to your files and send me some resumes?” The hiring authority asks, as if it is easy, to find a technically skilled tax candidate from files of thousands of potential prospects. It is not easy to do this work since an expert in tax search must do a labor intensive job of researching thousands of potential candidates, calling tax candidates to present the client tax job description, obtaining permission from a candidate before presenting to a client, screen the tax candidate for hard skills( technical) and soft skills (interpersonal skills),help tax candidates to clean up their resume to highlight their technical knowledge, making an introduction between client and tax candidate and so much more. This is not a five-minute scan of resumes in your database, it could easily take an expert 5 hours, 5 days,  5 weeks or 5 months to identify and screen the right tax candidate(s).

An expert retained tax recruiter takes pride in doing a great job screening tax candidates for a company, they never just pull a random resume like it is a 5-minute job. The job of an expert in tax executive search is much more than that. So please do not ask an expert tax recruiter to just pull resumes from their database about top tax talent since the  search process is much more involved. The tax recruiter feels minimized when a hiring manager communicates they want to see resumes. Finding tax professionals with qualified technical skills, interpersonal skills and meets the needs of both parties is an important part of the tax search and screening process.

What A Good And Bad Tax Recruiter Will Do For You

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Legal Post: Texas Sales And Use Tax For Equipment Rentals

Legal Post: Texas Sales and Use Tax For Equipment Rentals

Many businesses in Texas involve the performance of services that require the use of machinery and equipment.  While these businesses may purchase the necessary equipment outright, others opt to rent equipment from third-party rental companies, or to completely outsource the equipment-related services to another service-provider.  These transactions seem simple on the surface, but may be more complex when determining how to treat them for Texas sales and use tax purposes.

General Sales Tax Treatment of Equipment Rental

In determining how equipment rental should be treated, the first place to look is whether the equipment is being rented by itself (on a “standalone” basis), or whether it’s being rented with an operator.

  • Standalone Basis – Comptroller Rule 3.294(c)(1) states that “receipts from the lease of tangible personal property without an operator are taxable.” [1]
  • With an Operator – Comptroller Rule 3.294(c)(2) states that “[t]he furnishing of tangible personal property with an operator for which a single charge is made to the customer shall be presumed to be the performance of a service…” [2]

An “operator,” in turn, is defined as a “person who actively guides, drives, pilots, or steers tangible personal property” and does not include one who merely provides maintenance, repair, or supervision. [3]

Under Rule 3.294(c)(2), the rental of equipment with an operator, billed as a single charge, is treated as the performance of a service.  The taxability of this service, in turn, will depend on the nature of the service itself.  Additionally, if equipment is rented with an operator, but there are separate charges for the equipment and operator, each charge will be treated differently for tax purposes – one as a rental of equipment on a “standalone” basis under Rule 3.294(c)(1), and one as a charge for the provision of services by the operator.

Additional Rules and Complications

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Canada Just Passed Law Increasing Exclusion Rate For Capital Gains To 66.6%

Canada's Trudeau Wants To Raise Capital Gains Taxes To 66.6 %

Here is word for word a copy of an email sent to my inbox recently.  Beware of all the swearing in case you may be offended. These are the types of emails I receive.

“My home and native land has officially gone to hell… And in this case, I mean it literally.

Canada just passed a new budget act upping the exclusion rate for capital gains to 66.6%

“By increasing the capital gains inclusion rate, we will tackle one of the most regressive elements in Canada’s tax system,” the government said in the budget document. The current 50% inclusion rate on capital gains disproportionately benefits the wealthy, who earn relatively more income from capital gains compared to the middle class, the government said.

It’s incredible they think that a “50% tax” is the wealthy getting off easy, and that they needed to fix the situation by raising it to 66.6%.

My inbox has exploded with private client work over this, and of my 8 consulting calls yesterday, 7 of them discussed this (even my American clients are looking to protect themselves if something like this comes to the US.)

Quickly, I want to say that if you are sitting on large capital gains in Canada, you should consider realizing those capital gains before June 25th, 2024; basically before this goes into effect.

And while you’re at it, I would tell these Satan worshippers to go fu8k themselves and move your money offshore.”

What do you think?

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Biden Proposes Highest Capital Gains Tax in Over 100 YEARS

Biden Proposes Highest Capital Gains Tax in Over 100 YEARS

Bidens 2025 budget proposal raises the top marginal rate on long term capital gains and qualified dividends to 44.6 percent.

The Biden administration has proposed the highest top capital gains tax in over a century.

According to Biden’s 2025 budget proposal the top marginal rate on long-term capital gains and qualified dividends would rise to 44.6%.

The proposal, which marks the highest tax increase since the creation of the capital gains tax in 1922, could significantly curtail the financial returns of investors in stocks and crypto.

“For example, a taxpayer with $1,100,000 in taxable income of which $200,000 is preferential capital income would have $100,000 of capital income taxed at the preferential rate and $100,000 taxed at ordinary rates,” the proposal states.

Additionally, the proposal when combined with state capital gains tax would exceed 50% in many (mostly blue) states and would not account for inflation’s erosion of purchasing power.

From Americans for Tax Reform:

Under the Biden proposal, the combined federal-state capital gains tax exceeds 50% in many states. California will face a combined federal-state rate of 59%, New Jersey 55.3%, Oregon at 54.5%, Minnesota at 54.4%, and New York state at 53.4%.

Worse, capital gains are not indexed to inflation. So Americans already get stuck paying tax on some “gains” that are not real. It is a tax on inflation, something created by Washington and then taxed by Washington. Biden’s high inflation makes this especially painful.

Many hard working couples who started a small business at age 25 who now wish to sell the business at age 65 will face the Biden proposed 44.6% top rate, plus state capital gains taxes. And much of that “gain” isn’t real due to inflation. But they’ll owe tax on it.

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