TaxConnections


 

Understanding Multiple State Taxation

Jim Marshall - Multiple State Taxation

We often think that having a home in multiple states is a great idea, and sometimes we contemplate working while traveling between these homes.  In some cases, our jobs take us to multiple locations.  What happens when we work in multiple states throughout the year?

It is important to determine if you are considered domiciled in a particular state.  If so, you will be subject to that state’s income tax rules and regulations.  We tend to think of domicile as where we spend the most amount of our time, however, each state has different rules regarding the terms and conditions of what is considered a domicile.  Your domicile typically is where you have a “true, fixed, and permanent home”.  Your domicile will not change provided you have a home that you consider the place “to which you intend to return whenever absent”. Your domicile can be different from your residence.  Your residence is based upon how much time you spend in a state. These definitions of time that qualify you to be a resident, and therefore subject to taxation, differ from state to state.

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What Is A Specified Service Trade or Business (SSTB)?

John Dundon - What Is A Specified Service Or Trade Business

When not riding my mountain bike in the Rocky Mountains I tend to hang out with tax nerds … pretty much all the time, to the extent that tax nerds actually ‘hang out’ that is.  At one of our most recent ‘meetups’ (think band camp without the instruments) we had a lot of fun indulging in freshly picked peaches & poking holes in the bizarrely nuanced albeit new ‘concept’ (if you will) of what a Specified Service Trade or Business (SSTB) is ‘proposed to be’ according to our esteemed ‘rule-writers’ from the US Treasury.

Worth noting is that there were a LOT of smart people in the room, many of whom spent their entire adult lives reading and writing about (as well as applying) the US Tax Code/Regulations. 

We all generally agreed that no business wants to be deemed a SSTB (as the acronym alone sounds like a disease) and that as a result there will be all sorts of skulduggery rearing its ugly head in the not too distant future from US Taxpayers and perhaps our beloved federal government alike.

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The States Are Going Too Far With Wayfair: Commentary From A Recently Retired CPA

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This Very Thoughtful Commentary Was Provided In Yesterday’s Post – We Want To Know What You Think!

“I continue to be greatly disturbed by what is occurring regarding this extremely complex and current economic issue. I understand fully that the US Supreme Court has given approval to the actions being undertaken by states all across this country through its decision concerning Wayfair. But, I believe that the states are going too far. I have dealt with states and sales tax audits and auditors for 50 years. Both in industry and in public accounting. I have represented clients as an expert witness in court cases.
I have said and written this before. I will say it to anyone that will listen. To require companies that have no tangible connection with a state that merely sell into a state on the internet to register then collect then remit then be audited then be assessed for any tax inadvertently not paid plus a penalty and interest for having nothing in the state for which the state provides services to the company is not right. It akin to the oppressed system that existed in England more than 100 years ago.

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The United States Imposes A Separate And Much More Punitive Tax On U.S. Citizens Who Are Residents Of Other Countries

John Richardson - The United States Taxes Citizens Who Reside In Another Country

On February 28, 2019 TaxConnections kindly posted my first post comparing the way that 19th Century Britain and 21st Century America Treated Its Citizens/Subjects. The post received a great deal of interest resulting in more than 120 comments (largely reflecting the frustration of Americans abroad and accidental Americans).

The purpose of that post focused largely on citizenship and the fact that the United States imposes worldwide taxation on U.S. citizens who are tax residents of other countries and do NOT live in the United States. What that post did NOT do was to focus on HOW the Internal Revenue Code applies to U.S. citizens who do NOT live in the United States.

The Bottom Line Is:

The United States is in effect imposing a separate and more punitive tax system on its citizens abroad. Strange but true. The purpose of this post is to explain how that works and to provide specific examples.

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What You Need To Know: States’ Online Sales Tax And Marketplace Facilitators

Monika Miles - What You Need To Kno

Across the country, states continue to update their sales tax laws in an effort to clarify provisions and increase state income. Of course, because company sales extend beyond state borders, it’s extremely important for your business to be aware of various multi-state tax issues and how they may affect your organization.

One major trend we’re seeing (unsurprisingly) is more states’ adoption of economic nexus and online sales tax provisions based on the Wayfair Supreme Court case. In addition, states that had adopted marketplace facilitators as part of their tax code are beginning to clarify their new role. What does this mean? Keep reading for the details!

Marketplace Facilitators-Their Role In State Sales Tax

As this blog post explains, marketplace facilitators are companies that facilitate:

  1. A seller’s product and payment
  2. The transaction between a buyer and seller by bringing them together
  3. The transaction by processing payment, storing inventory, listing products, setting prices, etc.

Amazon and eBay are two prominent companies that are often designated as marketplace facilitators.

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Register For Complimentary Webinar On ASC 740 – Now Is The Time To Get Ready For 1st Quarter Tax Provision Reporting

Tax Provision Webinar - Complimentary

Q1 is right around the corner! Be ready for Q1 with an overview of the interim tax accounting rules and other important topics like the new GAAP lease accounting standard. Internationally recognized tax provision expert Nick Frank will walk you through what you need to know about tax reform and the tax provision.
Recently, we asked Nick what happened with Tax Reform and the corporate tax provision. What he shared with us privately is what the auditors are identifying in the tax provision under the Tax Cuts And Jobs Act. Learn what the auditors are saying regarding your readiness for the tax provision audit.

You will benefit from attending this COMPLIMENTARY SESSION. 

ASC 740 Be Ready For Q1 – What You Need To Know – March 22nd  2019

REGISTER NOW

 

Be Tax Wise With Your Charitable Contributions

Charles Woodson - Charitable Contributions

Donations to charities can be deducted as an itemized deduction on your tax return. This means that to achieve any tax benefit from your charitable donations, you cannot use the standard deduction and instead must itemize your deductions. However, if the total of all your itemized deductions does not exceed the standard deduction amount for the year, then you are better off taking the standard deduction, but in doing so, you will get no tax benefit from your charitable contributions.

As a rule, most taxpayers just wait until tax time to add up their potential deductions and then use the higher of the standard deduction or their itemized deductions. If you want to be more proactive, here are some strategies that might work for you.

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Understanding Your IRS Notice Or Letter

IRS Notices

Your IRS notice or letter will explain the reason for the contact and give you instructions on how to handle the issue.

If you agree with the information, there is no need to contact us.

Enter your notice or letter number above to get more information on IRS notices and letters, along with answers to many notice-related questions. If your notice or letter doesn’t return a result using the Notices & Letters Search on this page, contact us at the toll-free number 800-829-1040.

Why Was I Notified By The IRS?

The IRS sends notices and letters for the following reasons:

  • You have a balance due.
  • You are due a larger or smaller refund.
  • We have a question about your tax return.
  • We need to verify your identity.
  • We need additional information.
  • We changed your return.
  • We need to notify you of delays in processing your return.

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Being Audited By The IRS But Don’t Have Any Receipts?

Venar Ayar - Records For A Tax Audit
IRS Record Keeping Guidelines

The Internal Revenue Service generally advises taxpayers to retain copies of all tax returns and any relevant supporting documentation for at least the previous three tax years. The IRS also provides an extensive list of the types of records they may request if you are audited. These include:

  • Receipts
  • Bills
  • Checks
  • Legal paperwork and documentation
  • Loan agreements
  • Tickets
  • Medical or Dental Records
  • Employment documents

The IRS accepts electronic records in some instances, namely if the electronic records were produced by tax software. If you have any questions about whether your electronic documents and files are acceptable to the IRS, you should contact an experienced tax attorney right away.

Can Lack Of Receipts Derail Your Audit?

While it is imperative that you maintain all your records relating to your tax returns, especially for the last three tax years, if, for some reason, you do not have all the necessary documentation before an audit, you aren’t out of luck completely.

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Recent Tax Law Changes Affecting Small Business

IRS - Tax Law Changes Affecting Small Business

The Internal Revenue Service wants business owners and the self-employed to know that a publication on IRS.gov has information they can use to learn which recent tax-law changes impact their bottom line.

This news release is part of a series called the Tax Time Guide, a resource to help taxpayers file an accurate tax return. Additional help is available in Publication 17, Your Federal Income Tax, and the tax reform information page.

Publication 5318, Tax Reform: What’s New for Your Business, is a 12-page electronic document. Pub. 5318 provides a general overview of many of the Tax Cuts and Jobs Act (TCJA) changes enacted in December 2017 that impact business taxes.

Publication 5318 Includes Sections On:
  • Qualified Business Income Deduction
  • Depreciation
  • Business related losses
  • Business related exclusions and deductions
  • Business credits
  • S corporations
  • Farm provisions
  • Miscellaneous provisions
A Few Key Provisions Include:
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1099 Reasons To Hire Independent Contractors

William Rogers - 1099 Reasons To Hire Independent Contractors

Maybe not 1099 reasons. But there are good reasons to go the independent contractor route versus hiring employees. Of course, there are also compelling reasons to go the other direction on that. There’s a lot to consider when you make this choice, so let’s dive in.

Independent Contractors Versus W2 Employees

Before we get into the reasons to hire independent contractors, we need to understand the essential differences between the two, especially from the point of view of the IRS. Straight from IRS.gov, an independent contract is “an individual is an independent contractor if the payer has the right to control or direct only the result of the work, not what will be done and how it will be done.” With a W2 employee, the business must pay income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax. There are also insurance costs involved. With a 1099 contractor, the business simply pays contracted rates, and the contractor pays all associated taxes. It’s obviously important to get this right, as the business may face penalties, fines, legal fees and even an audit otherwise.

Read More: I’m Hired! Going Entrepreneur

Pros And Cons Of Hiring Independent Contractors

Depending on the business model, there are several advantages and disadvantages to hiring a contractor versus an employee.

Pros of Hiring Independent Contractors:

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Earned Income Tax Credit And Child Tax Credit – What Changed

IRS On Child Tax Credits And Earned Income Tax Credits

Are you planning on claiming the Earned Income Tax Credit (EITC) or the Child Tax Credit (CTC) on your federal tax return this year? If yes, then you should know some things have changed since last year.

Child Tax Credit

The first thing you need to be aware of is that the Tax Cuts and Jobs Act changed the requirement for claiming the CTC. Eligible children must have a Social Security Number (SSN) that is valid for employment. If you have a newborn or other child for whom you do not have a SSN yet, you may want to visit your local Social Security office or apply online soon and get one before you have to file.

Earned Income Tax Credit

Under the EITC, eligible families with three or more qualifying children could get a maximum credit of up to $6,431. EITC for people without children could mean up to $519 added to their tax refund.

All workers who earned around $54,000 or less should learn about EITC eligibility and use the EITC Assistant to find out if they qualify before filing. The Assistant will help determine your filing status, if you have a qualifying child or children, if you qualify to receive the EITC, and estimate the amount of the credit you could get. If you don’t qualify, the Assistant explains why.

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