Tax planning: What’s the good news? It’s never a waste of time… there still are some tax breaks on the books that you can use to your advantage before the end of 2014. Some types of time or monetary investments have risks, but not tax-planning. This is why EVERYONE should do it.

The bad news is that there is no guarantee that all the extenders (there is more than 50 business and individual tax breaks) — including popular things such as the higher education tuition and fees deduction, and itemized claims for state and local sales taxes and private mortgage insurance payments — will be renewed after December 31, 2014. Lawmakers are expected to consider, or extend (hence the laws’ collective name) after the November 4th election. Read More

Iconic mobster Al Capone died in prison after he was convicted of tax evasion. More recently, after the notorious Lufthansa robbery that was immortalized in 1990’s Goodfellas, Jimmy the Gent went to prison not for his alleged role in the robbery but for a point-shaving scandal involving the Boston College basketball team. It could be that crime syndicate figures portrayed by actor Robert De Niro have a certain susceptibility to financial crimes prosecutions, or there could be something else at work.

Tax evasion and other financial crimes in New Jersey are often substitute prosecutions. Traditionally, tax evasion has been easy to prove: there are accurate and timely returns on file, or there are not. “You want to put a murderer in jail for not paying his taxes?” asked a befuddled Elliot Ness in the De Palma version of The Untouchables. Read More

Even though only a few months remain in 2014, you still have time to act so you aren’t surprised at tax-time next year. You should take steps now to avoid owing more taxes or getting a larger refund than you expect. Here are some actions you can take to bring the taxes you pay in advance closer to what you’ll owe when you file your tax return:

• Adjust your withholding. If you’re an employee and you think that your tax withholding will fall short of your total 2014 tax liability, you may be able to avoid an unexpected tax bill by increasing your withholding. If you are having too much tax withheld, you may get a larger refund than you expect. In either case, you can complete a new Form W-4, Employee’s Withholding Allowance Certificate and give it to your employer. Enter the added amount you want withheld from each paycheck until the end of the year on Line 6 of the W-4 form. Read More

CPA’s and other professional tax return preparers are bound to the IRS Code Of Professional Responsibility commonly called Circular 230 which if a tax preparer violates could lead to big penalties and sanctions for that tax preparer.

What penalties could tax preparers face?

A tax preparer who is in violation of these rules could be subject to the following:

Internal Revenue Code § 6694(a) provides that if any part of an understatement of a taxpayer’s liability is due to an “unrealistic position” taken on his return, any income tax return preparer who knew (or reasonably should have known) of this position is subject to a penalty of $250. If the understatement is due to a reckless or intentional disregard of Read More

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It never ceases to amaze me, the wide variety of companies that state agencies attempt to extort money from. Most states impose a sales tax on the sale or rental of tangible personal property. But what happens when the sale is part tangible personal property, part service (“known to the sales and use tax attorney as a “mixed transaction”)? Is the entire transaction subject to tax? Many states take the incredibly helpful, “it depends” approach and look to an even more helpful “object of the transaction” test. In reality, it truly seems like state agencies and courts reach a conclusion and fill in the reasons later.

By way of brief background, since the mid-1900’s, when states enacted their first versions of a sales tax, many courts created this “object of the transaction” test. The test attempted to formulate what the customer was really buying, product vs service. If it was a service Read More

Back on August 13, 2014, the IRS issued an update of the Internal Revenue Manual that sheds some light on what type of submissions might be ripe for audit under the streamlined procedures. For those unfamiliar with the Internal Revenue Manual, it is the “official source of instructions to IRS personnel relating to the organization, administration, and operation of the IRS.”[i] It contains instructions that IRS employees rely upon to carry out their responsibilities, such as procedures for processing and examining tax returns.

The most critical aspect of the update is an instruction that requires submissions containing five or more foreign information returns to be referred for examination.

9. To complete adjustments on Form 1040X filed under the SDO: Read More

Marian Morgan would not play ball with the U.S. government, and she paid dearly for that decision – a 405-month (almost 34-year) prison sentence. Her codefendants both wound up with very different fates.

Marian Morgan and her husband, John Morgan, ran a Ponzi scheme in Sarasota, Florida, called “Morgan European Holdings,” scamming people out of millions of dollars. They were indicted along with two others, but on more serious charges: one count of conspiracy to defraud the United States, seven counts of wire fraud, five counts of transfer of funds taken by fraud, six counts of money laundering, and three counts of falsifying income tax returns. Read More

It’s a fact of life that businesses get sued. Even if they win, there are legal and related fees. What if they lose and have to pay compensatory and perhaps also punitive damages? Perhaps also some fines to the government? What is deductible for tax purposes? A recent case from the First Circuit Court dealt with an action involving the False Claims Act with total damages of just over $486 million!

I had a blog post (9/02/14) about this case a few weeks ago, noting the challenging vocabulary used by the judge and a few quotes from Shakespeare he included.

This topic also raises an important consideration for tax reform purposes. Should any of these damages be tax deductible? Arguably, compensatory damages (for making the Read More

Summary

On January 30, 2014, Treasury and the IRS issued Proposed Regulations with respect to the disguised sale rules and the rules for allocating partnership liabilities (REG-119305-11). A major driving force behind these Proposed Regulations was the IRS’s victory in Canal Corporation and Subsidiaries, formerly Chesapeake Corporation and Subsidiaries v. Commissioner, 135 T.C. No. 9. (2010). In Canal, the Tax Court shot down a leveraged partnership structure by concluding that the contributing partner did not have a payment obligation with respect to the partner’s indemnity in large part because the terms of the indemnity were not commercially reasonable. Read More

The Internal Revenue Service (hereinafter the “Service”) released today new administrative authority for calendar year 2015 within Revenue Procedure 2014-61 that makes adjustments to more than 40 tax provisions, including the tax rate schedules, deduction levels, and many other tax provisions. It should be duly noted that Revenue Procedure 2014-61, is scheduled to be published in the Internal Revenue Bulletin 2014-47 on Monday, November 17, 2014 and can be cited here.

The primary adjustments included within this new administrative authority include, but are certainly not limited to:

• The tax rate of 39.6% affects singles whose income exceeds $413,200 (i.e., $464,850 for Read More

Now when I think of Halloween, I look forward to seeing all of the different costumes that people wear. Some are very extravagant and I am sure pricey. And for some they would like to know how that can be deductible. Since costumes fall under the category of clothing or uniforms, you need to be aware of what the tax law requires.

The tax law requires the following three elements for clothing useful only in the business environment to be deductible:

1. The clothing is required or essential in the taxpayer’s employment;

2. The clothing is not suitable for general or personal wear; and Read More