Mandatory tips and gratuities are generally subject to sales tax in California when:

• An amount is automatically added to the bill without first consulting with the customer after the meal is served. Think about group meals, banquets, etc. Generally when serving more than 8 at one table in one ticket.

• The customer and the business agree to a suggest tip amount before the service or event. Think preplanned gathering, education meeting with a meal, conference, etc.

• Menus, brochures, ads, or other materials state that tips, gratuities, or service charges will automatically be Read More

TaxConnections Worldwide Tax Blogs gives our readers an opportunity to get to know these tax experts better through their writing. We highly recommend you read TaxConnections Worldwide Tax Blogs to stay informed of emerging tax trends. We highly recommend you interact with our bloggers through your comments on their blog posts. Commenting on a tax bloggers post is a great way to let them know you appreciate the knowledge they have shared. We also recommend you connect with our bloggers on their TaxConnections Microsite. Simply click on their name on their blog post and you will be guided directly to their Microsite where you can connect with them easily on the “ Connect With Me” button.

Here are TaxConnections Top Twenty Worldwide Tax Bloggers:

Peter Scalise
Daniel Erasmus
Harold Goedde
Kathryn Morgan
Hale Stewart
William Richards
Steven Potts
Virginia La Torre Jeker
Michael DeBlis
Annette Nellen
John Dundon
Manasa Nadig
Jerry Donnini
Ronald Cappuccio
Betty Williams
Claire McNamara
Robert McKenzie
James McBrearty

Congratulations to Peter Scalise of Prager Metis CPAs, LLP who received the highest number of searches to his tax professional profile page on TaxConnections during 2013. With more than 7125 views in the year, everyone would like to know how Peter had so many prospective clients paying attention to his tax services. The answer is he utilized every feature available on to build visibility and trust for his tax services and expertise. Marketing experts know that you need to build familiarity with clients first, familiarity builds trust, and trust is why people come to you for tax services. There are many of our gold annual members who made it to the top of the search results in TaxConnections including: Brian Mahany, Hugo van Zyl, Kathryn Morgan, Howard Liebman, Larry Langdon, Steven Potts and so many others who took the lead in marketing their tax reputations online Read More

TaxConnections Picture - U.S.Treasury To Insure Money Market Mutual FundsThe United States Department of the Treasury and the Internal Revenue Service ruled that same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as married for federal tax purposes. (Revenue Ruling 2013-17) The ruling specifically states that it applies only to “legally married” same-sex couples, and not to registered domestic partnerships, civil unions, or similar formal relationships recognized under state law. However, it does apply regardless of whether the couple lives in a jurisdiction that recognizes same-sex marriage or a jurisdiction that does not recognize same-sex marriage.

Under the ruling, same-sex couples will be treated as married for all federal tax purposes, including income, gift, and estate taxes. The ruling applies to all federal tax provisions where marriage is a factor, including filing status, claiming personal and dependency exemptions, taking the standard deduction, employee benefits, contributing to an IRA, and claiming the earned income tax credit or child tax credit.

These taxpayers must file their 2013 federal income tax returns using either the married filing jointly or married filing separately filing status. For years prior to 2013, these taxpayer may, but are not required to, file original or amended returns choosing to be treated as married for federal tax purposes for one or more prior tax years still open under the statute of limitations.

TaxConnections Picture - Money EggSince 1976 we have all been told that the 401K was the best retirement concept since sliced bread. After all, you get to put money away pre-tax, reducing your current taxes, your employer may even match a portion of it and you will be able to withdraw it when you need it, in retirement, at a lower tax rate than before.

Hogwash! Lets look at the numbers. For the sake of argument you put in the maximum amount allowed into your 401K. Today that is $17,500 if you are under fifty years of age and $23,000 if you are over 60 years of age. The amount you set aside is still subject to social security and medicare tax so we won’t even discuss that issue.

If you are 40 years old and you put $17,500 aside you are probably in the 25% tax bracket which means that contribution saves you $4,375 in income taxes in a year. Do that for the next ten years and you have saved $43,750, always assuming that tax rates stay the same for the next ten years and that the benefit is still available for the next ten years. President Obama has already made suggestions along the line of taxing or limiting your benefit if your account balance could finance an annuity paying $205,000 per year. Currently, for a 60 year old, that would be $3.2 million. You say great, I will never have that sort of money. You will if you saved the money judiciously during your entire working career, or if you are a [union] pension holder, which is another category that the President is talking about taking. [See MarketWatch, September 9, 2013]. For simplicity sake, we will ignore the change in tax rate issue and the loss of the benefit if you save too much. Read More

TaxConnections Picture - Blue CarIt’s not speeding. It’s not driving while under the influence. It’s not talking on your cell phone.

In New York State, it just got a whole lot easier to lose your license – for not paying your tax debt. Beginning this year, drivers who owe more than $10,000 in state taxes face losing their license until the debt is paid.

The crackdown is reflects a revenue raising measure in the state budget approved by lawmakers in March of this year.

Gov. Andrew M. Cuomo said, about the initiative:

Our message is simple: tax scofflaws who do not abide by the same rules as everyone else are not entitled to the same privileges as everyone else. These worst offenders are putting an unfair burden on the overwhelming majority of New Yorkers who are hardworking, law-abiding taxpayers. By enacting these additional consequences, we’re providing additional incentives for the state to receive the money it is owed and we’re keeping scofflaws off the very roads they refuse to pay their fair share to maintain.

Why such drastic measures? Money, of course. The Empire State boasts a 96% voluntary compliance rate for businesses and individuals but the remaining 4% remains a sore spot. The Tax Department estimates that it will increase collections by $26 million this fiscal year alone – about $6 million each year thereafter – by pushing this program. Read More

iStock_Hand On BibleXSmallAs Second IRS Official Pleads The Fifth, Congress Pushes For “Lerner Rule”.

Greg Roseman, a Deputy Director at the Internal Revenue Service, didn’t make any friends on the Hill last month when he refused to testify at a House Oversight Committee hearing. It was the second time in recent memory that an Internal Revenue Service employee had invoked a Fifth Amendment right not to testify.

Roseman follows hot on the heels of Lois Lerner’s invocation of the Fifth Amendment a month earlier in the wake of the IRS tax exempt scandal. Roseman, like Lerner, is still employed by the IRS. It’s important to note, however, that Roseman’s testimony was solicited as part of an ongoing investigation about his relationship with a contractor who won big dollar federal contracts. The testimony was not related to the tax exempt scandal – though the timing is close enough that it has cast a dark shadow over the already beleaguered agency.

Kelly Erb, as The Taxgirl, has published a blog speaking about the “Lerner Rule” which would handle federal employees testifying before a congressional hearing.The bill, H.R. 2458, has been referred to the House Committee on Oversight and Government Reform. The text of the bill is pretty short and to the point. It says: Read More

job searchSummer is often a time when people make major life decisions. Common events include buying a home, getting married or changing jobs. If you’re looking for a new job in your same line of work, you may be able to claim a tax deduction for some of your job hunting expenses.

Here are seven things you should know about deducting these costs:

1. Your expenses must be for a job search in your current occupation. You may not deduct expenses related to a search for a job in a new occupation. If your employer or another party reimburses you for an expense, you may not deduct it.

2. You can deduct employment and job placement agency fees you pay while looking for a job.

3. You can deduct the cost of preparing and mailing copies of your résumé to prospective employers.

4. If you travel to look for a new job, you may be able to deduct your travel expenses. However, you can only deduct them if the trip is primarily to look for a new job.

5. You can’t deduct job search expenses if there was a substantial break between the end of your last job and the time you began looking for a new one. Read More

iStock_business diceXSmallIf you plan to start a new business, or you’ve just opened your doors, it is important for you to know your federal tax responsibilities. Here are five basic tips the IRS provides that can help you get started.

1. Type of Business. Early on, you will need to decide the type of business you are going to establish. The most common types are sole proprietorship, partnership, corporation, S corporation and Limited Liability Company. Each type reports its business activity on a different federal tax form. You should consult with an attorney and you’re your Enrolled Agent prior to making the decision.

2. Types of Taxes. The type of business you run usually determines the type of taxes you pay. The four general types of business taxes are income tax, self-employment tax, employment tax and excise tax.

3. Employer Identification Number. A business often needs to get a federal EIN for tax purposes. Check and/or your Enrolled Agent to find out whether you need this number. If you do, you can apply for an EIN online.

4. Record keeping. Keeping good records will help you when it’s time to file your business tax forms at the end of the year. They help track deductible expenses and support all the items you report on your tax return. Good records will also help you monitor your business’ progress and prepare your financial statements. You may choose any record keeping system that clearly shows your income and expenses. Good records are essential to surviving an audit. Read More

iStock_usa umbrellaXSmallThe requirement that businesses provide their workers with health insurance or face fines – a key provision contained in President Barack Obama’s sweeping health care law – will be delayed by one year the Treasury Department said Tuesday.

The postponement came after business owners expressed concerns about the complexity of the law’s reporting requirements the agency said in its announcement. Under the Affordable Care Act, businesses employing fifty or more full-time workers that don’t provide them health insurance will be penalized.

We recognize that the vast majority of businesses that will need to do this reporting already provide health insurance to their workers, and we want to make sure it is easy for others to do so. We have listened to your feedback. And we are taking action,”

Mark J. Mazur, assistant secretary for tax policy wrote in a post on the website of the Treasury Department, which is tasked with implementing the employer mandate. Mazur said the extra year before the requirement goes into effect will allow the government time to assess ways to simplify the reporting process for businesses. Penalties for firms not providing health coverage to employees will now begin in 2015 – after next year’s congressional elections. Read More

Our tax system is, at its core, a voluntary system. Since World War II we have had mandatory payroll withholding and quarterly estimated tax payments for the self-employed but it must be remembered this is not the payment of taxes. It is only a down payment on what we voluntarily self-assess ourselves when we file a tax return. We all know that some people voluntarily self-assess themselves large credits at the expense of other taxpayers.

A voluntary tax system is dependent on the credibility of the agency that is collecting the self-assessed taxes and making sure that the self-assessments are correct. In the 1960s the Internal Revenue Service was held up as a model government agency, a place you wanted to work. The credibility of the IRS has sunk to new lows due to the latest scandal to rock the Obama administration.

Today morale in the IRS is very low. Some of the reasons are that the IRS is under-staffed, under-funded and watching the revolving door as senior, experienced, people retire. The agency is grossly underfunded to handle its current workload, let alone the addition of the astounding amount of additional requirements imposed on it by Obamacare. Read More

By a vote of 69-27, the United States Senate has passed yet another tax hike. Instead of curbing spending, they have decided that raising taxes on the Internet is the best way to pay the debt.

The bill aims to enforce a sales and use tax on businesses that rely on the Internet to reach their customers. While the specifics of the bill are about as long as Obamacare, here are the top three problems with the Internet sales tax:

•  Online businesses would be responsible for collecting and filing their sales tax from customers that don’t reside in their state.

•  Businesses would be forced to use software that will generate a database to keep track of their tax paying customers. This also puts their customers at risk should the database be hacked, spilling millions of sensitive personal information records into the wrong hands.

•  States might no longer seek to lower their taxes for business friendly environments. They’d be encouraged to raise their taxes in order to collect tax money from other states, thus hurting potential business development. Read More