Tag Archive for TaxConnections Blog

Cancellation of Debt, Foreclosures, And Bankruptcy – Part 10

Exceptions and Exclusions to CODI

There are five exceptions to CODI. An exception means that the debt is not included on the tax return on its own merits and does not need to meet any other exclusions or calculations. The exceptions are as follows:

1. Non-Recourse debt. As indicated in the earlier text and non-recourse debt is not the responsibility of the debtor over the amount of the collateral seized, unless the debtor does a “workout” with a different lender than the original creditor, than the CODI is included. But it may meet one of the exclusions later in the text.

2. Gifts. If the debt cancellation was intended as a gift from the creditor to the debtor there Read More

Written by | Posted in Individual

OVDP Hotline Nixes Practical Use of New Streamlined Program

The inflexibility of the IRS in the offshore area is starting to get some professionals down. I am one of them, but there are some others voicing similar frustration.

Taxpayers and professionals alike, were very pleased when the IRS announced the new Streamlined procedures in mid-June. You can learn more about the new Procedures here.

It seemed that sensibility and reason were beginning to prevail over at the IRS! Finally, “benign actor” (as opposed to “bad actor”) taxpayers with undisclosed offshore assets, could obtain relief and come into tax compliance without driving themselves into both fiscal and physical bankruptcy. Read More

Written by | Posted in OVDP • Tax Fraud/Evasion/Crimes

Preventing Fraud And Embezzlement

In the past year there have been numerous reports of fraud and embezzlement, mostly involving small businesses. These can be prevented by a few low cost controls.

One of the most important is separation of responsibilities of asset custody and record keeping for these assets. For example, someone other than the person who receives and disburses cash and writes checks should record these in the accounting records.

Other essential controls include, but are not limited to:

(1) approval of payments by the owner or other responsible person who does not write the checks, or authorize credit card payments and maintain the accounting records. Read More

Written by | Posted in Tax Fraud/Evasion/Crimes

The Unknown Tax Comic – Part 7

♦ Children may be deductible, but they are still taxing.

♦ Income tax forms should be printed on Kleenex
because so many of us have to pay through the nose.

♦ Q: Ever wonder why the IRS calls it Form 1040?
A: Because for every $50 that you earn, you get $10 and they get $40.

♦ “Today the IRS gave some guidelines on how to avoid getting audited. Number one, don’t list deductions that will raise a red flag. Number two, make sure you file on time. Number three, don’t make any stupid anti-war speech at the Academy Awards.” – Jay Leno Read More

Written by | Posted in Tax Humor • TaxConnections

Taxpayers Rights When Audited By Tax Authorities In South Africa (Chapter 5.5 – 5.5.1)

Posted in sections, this is my Doctoral Thesis on taxpayers rights when audited by the tax authorities in South Africa – equally applicable to many English-based law systems in Africa and abroad (eg. India). This will be of particular use to any tax practitioners doing work in Africa and in other English-based legal systems around the world.

Analysis of Challenging The Commissioner’s Discretionary Powers In Auditing Taxpayers under The Constitution of The Republic of South Africa

CHAPTER 5 – JUDICIAL REVIEW WITH REFERENCE TO SS 74A AND 74B –

5.5 REVIEWING UNCONSTITUTIONAL CONDUCT
5.5.1 Introduction Read More

Written by | Posted in Africa • Audit

Payments To Independent Contractors

Payments to Independent Contractors can be a very grey area within the tax law. Often times I am asked the question, “Should my employees be given a W-2 or Form 1099-MISC for there pay?” There’s really no clear-cut answer to this question. It’s important to answer other questions to even begin to get some clear direction on the proper way to classify a worker as an employee or an independent contractor.

There are two types of business relationships which may exist between an employer/owner and a employee/worker. They are 1. Independent contractor and 2. Employee (common-law employee).

These business relationships are established based on common-law rules: Read More

Written by | Posted in Individual • Small Business

Cancellation of Debt, Foreclosures, And Bankruptcy – Part 9

Chapter 13

A chapter 13 bankruptcy is often called a “wage earner’s” bankruptcy. It enables individuals with regular income to develop a plan to repay all or part of their debts over three to five years. During this time the law forbids creditors from starting or continuing collection efforts.

Advantages – A particular advantage of chapter 13 is that it provides debtors with an opportunity to save their homes from foreclosure by allowing them to “catch up” past due payments through a payment plan.

Effect on collections – Individuals may use a chapter 13 proceeding to save their home Read More

Written by | Posted in Individual

Could Tax Reform Lead To A More Complex System?

Congressman Camp’s discussion draft of the Tax Reform Act of 2014, released in February 2014 aims to broaden the income tax base and lower tax rates. Broadening the tax base means that some special deductions and credits could be eliminated. It also means that some deductions could be stretched out over longer periods. In the long run, that doesn’t raise revenue as it is just timing. But when you only measure the effects out 10 years, it raises revenue.

One stretched out deduction would be advertising expenses of large companies. Under Camp’s proposal, 50% would be deducted in the year incurred and the balance would be deducted over ten years. That might sound simple, but you need to dig deeper. This proposal will require a definition of advertising. Camp’s is fairly complex. Also, the small Read More

Written by | Posted in Tax Policy

Canadians With US Rental Property – What Are The Cross-Border Tax Implications?

Canadians earning income from US rental property can be fraught with unexpected tax problems, which could severely hurt their after-tax return on investment. It is important to consult a cross-border tax professional before the purchase to understand all the US and Canadian tax implications of owning US rental property and to make the best decision for their situation on the right structure to own and finance the purchase of US rental property.

This is the first of a series of articles on the cross-border tax considerations of investing in US rental property. If you are planning to purchase US rental property, you need to have some basic understanding of the following US and Canadian tax law before you can make a sound decision on how you should own and finance the purchase of US rental property. Read More

Written by | Posted in Corporate • Estate Planning Tax • Income Tax • Individual • International • North America • Partnership • Real Estate

Take It Off!

I had put it on some time ago. I kept it on everywhere I had a presence. I was submissive and had a desire to be obedient. The ramifications of not doing as the master said weren’t nearly as pleasurable as complying with my master’s commands.

Having become a creature of habit, and not wanting to displease my master, I had put it on everywhere. Having quite the presence online, I had it on in lots of places. You could see on me in my blog posts, my web page, my social media posts. Everywhere I was, I had it on.

Now, after months of making sure I’d covered my a**, I’m told to TAKE IT OFF!

Yep. In a webinar presented by the Office of Professional Responsibility, Karen Hawkins Read More

Written by | Posted in IRS • Tax Policy

Taxpayers Rights When Audited By Tax Authorities In South Africa (Chapter 5 – 5.4)

Posted in sections, this is my Doctoral Thesis on taxpayers rights when audited by the tax authorities in South Africa – equally applicable to many English-based law systems in Africa and abroad (eg. India). This will be of particular use to any tax practitioners doing work in Africa and in other English-based legal systems around the world.

Analysis of Challenging The Commissioner’s Discretionary Powers In Auditing Taxpayers under The Constitution of The Republic of South Africa

CHAPTER 5 – JUDICIAL REVIEW WITH REFERENCE TO SS 74A AND 74B –

5.4 REVIEW APPLICATION DIRECTLY TO THE TAX COURT Read More

Written by | Posted in Africa • Audit

Cancellation of Debt, Foreclosures, And Bankruptcy – Part 8

Bankruptcy and CODI

All bankruptcy falls under USC Title 11. There is also a bankruptcy Chapter 11. This similarity causes a lot of confusion. Since we are mainly dealing with personal tax returns, we will not deal with the Chapter 11 bankruptcy in this course. We will be talking about Chapter 7 and Chapter 13 of the Title 11 Code.

Chapter 7

Chapter 7 is the “discharge” chapter. In a Chapter 7 bankruptcy all included debts are theoretically discharged. If there are assets secured by those debts the assets are usually forfeit. The Deemed Sales and CODI rules apply in those cases. Read More

Written by | Posted in Individual
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