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Corporate Executive Compensation Compliance: Focus (Part II)

Compliance Focus

I. When are deferred amounts includible in an employee’s gross income?

a. Constructive Receipt Doctrine — Unfunded Plans Cash basis taxpayers must include gains, profits, and income in gross income for the taxable year in which they are actually or constructively received. Under the constructive receipt doctrine [codified in IRC § 451(a)], income although not actually in the taxpayer’s possession is constructively received by him in the taxable year during which it is credited to his account, set apart for him, or otherwise made available so that he may draw upon it at any time, or so that he could have drawn upon it during the taxable year if notice of intention to withdraw had been given. However, income is not constructively received if the taxpayer’s control of its receipt is subject to substantial limitations or restrictions. See § 1.451-2(a) of the regulations. Read More

Written by | Posted in FICA • IRS • TaxConnections

The Tax Reform Impact On Meals, Entertainment, And Automobile Parking

If you’ve formed certain habits related to how you handle meals, entertainment, transportation, and parking as it relates to your business and taxes, the time to change those habits has come.

As this report notes, tax reform law commonly referred to as H.R. 1 Tax Cuts and Jobs Act of 2017 has changed the deductibility of certain meals, entertainment and transportation expenses. Before 2018, a taxpayer could deduct 50 percent of business meals and entertainment and 100 percent of meals provided through an in-house cafeteria or meals provided for the convenience of the employer (i.e., also known as a de minimis fringe benefit). Read More

Written by | Posted in Entertainment Tax • Tax Reform

A Review Of Significant TCJA Provisions Affecting Small Businesses

Now that small businesses and their owners have filed their 2017 income tax returns (or filed for an extension), it’s a good time to review some of the provisions of the Tax Cuts and Jobs Act (TCJA) that may significantly impact their taxes for 2018 and beyond. Generally, the changes apply to tax years beginning after December 31, 2017, and are permanent, unless otherwise noted.

Corporate Taxation

  • Replacement of graduated corporate rates ranging from 15% to 35% with a flat corporate rate of 21%
  • Replacement of the flat personal service corporation (PSC) rate of 35% with a flat rate of 21%
  • Repeal of the 20% corporate alternative minimum tax (AMT)

Read More

Written by | Posted in Tax Cuts Jobs Act

Corporate Executive Compensation Compliance: Unfunded Vs. Funded (Part I)

A nonqualified deferred compensation (NQDC) plan is an elective or non-elective plan, agreement, method, or arrangement between an employer and an employee (or service recipient and service provider) to pay the employee or independent contractor compensation in the future. In comparison with qualified plans, NQDC plans do not provide employers and employees with the tax benefits associated with qualified plans because NQDC plans do not satisfy all of the requirements of IRC § 401(a).

Under a nonqualified plan, employers generally only deduct expenses when income is recognized by the employee or service provider.  In contrast, under a qualified plan, employers are entitled to deduct expenses in the year contributions are made even though employees will not recognize income until the later years upon receipt of distributions. Read More

Written by | Posted in IRS • Non-Qualified Deferred Compensation • TaxConnections

Effective Use Of The Offer In Compromise (OIC) Program Will Save Valuable IRS Resources While Bringing Finality To Taxpayers

When a taxpayer can’t afford to pay a tax liability in full, Internal Revenue Code (IRC) § 7122 authorizes the IRS to accept less than the full amount due in the form of an offer in compromise (OIC). As a condition of acceptance for an OIC, the taxpayer must agree to remain compliant with his or her filing and paying requirements for the five years following the acceptance of the OIC. So, although the IRS agrees to settle a tax debt for less than the full amount due, the IRS secures future filing and payment compliance for the next five years, hopefully developing better taxpayer habits, while also collecting an amount that it is unlikely to collect otherwise. On the other hand, the taxpayer is no longer saddled with a debt that cannot be satisfied in full. Read More

Written by | Posted in IRS • National Taxpayer Advocate

Sales Tax Consultant Having Success Recovering Georgia Sales Tax Refunds For Hospitals And Healthcare Industry

Georgia sales tax exemptions for healthcare providers, including hospital, clinics, and medical practice groups include several categories of purchases. One Georgia sales tax exemption for healthcare providers that a sales tax consultant from Agile Consulting Group has been recovering a significant amount of refunds for relates to prosthetic devices. Georgia Code Ann. § 48-8-3(54) states that prosthetic devices that are sold or used pursuant to a prescription are exempt from Georgia sales and use tax. Our sales tax consultant has learned that the prosthetic device may be purchased exempt from Georgia sales and use tax by a hospital, clinic, or medical practice group if it is sold or used pursuant to a prescription under federal or state law and title and possession is permanently transferred to a natural person to whom a prescription for the device is issued, per Georgia Comp. Rules & Regulations § 560-12-2-.30(5)(a). Read More

Written by | Posted in Georgia Tax • Sales Tax

The Latest In Online Sales Tax: Wayfair Vs. South Dakota Oral Arguments

Last week the U.S. Supreme Court heard oral arguments in the Wayfair v. South Dakota online sales tax case. While the court’s decision regarding the matter isn’t expected until June, the Justices’ questions in the matter reveal that it’s far from already settled, and they’re divided on whether or not Quill should be overruled.

South Dakota’s Arguments Regarding Quill

South Dakota’s Attorney General Marty Jackley began his statement, Read More

Written by | Posted in Online Sales Tax

The Truth On Accumulated Payroll Taxes

This is the absolute top of the food chain of priority cases for IRS Collection employees.

Succumbing to the temptation to use IRS as your involuntary banker is rewarded at best with steep penalties–not deductible, thank you–and interest charges that together make credit cards look like a bargain.

Prosecution is possible for severe offenders as this official Department of Justice News Release shows. In the criminal justice system, failing to turn over withholding taxes is considered just the same as embezzlement. Read More

Written by | Posted in IRS • Payroll Tax

More States Impose Sales Tax On E-Commerce Sales

Over the last few decades, states have had the opportunity to broaden their income and franchise tax base by ensnaring a larger proportion of out-of-state taxpayers in their taxing regime through adoption of broad economic or factor-based economic nexus standards.

However, states have traditionally struggled to do the same with respect to their sales and use tax base because of the long-standing United States Supreme Court nexus decision in Quill Corp. v. North Dakota (1992).” 1 For nearly three decades, the dicta contained in Quill have prevented states from adopting economic-based nexus
standards with respect to sales and use taxes, requiring instead a more stringent physical presence standard (or “substantial nexus”).
The Supreme Court has repeatedly declined to hear challenges or cases related to Quill, until recently. Read More

Written by | Posted in E-Commerce • Sales And Use Tax

2017 IRS Data Book Shows Chances Of Being Audited

The IRS has published the 2017 version of its annual IRS Data Book, which contains statistical information about the IRS and taxpayer activities during the previous year. The IRS Data Book helps illustrate the breadth and complexity of the U.S. tax system. According to the Data Book, during fiscal year 2017 (Oct. 1, 2016 to Sept. 30, 2017), the IRS collected overall more than US$ 3.4 trillion from taxpayers, processed more than 245 million tax returns and other forms, and issued more than $436 billion in tax refunds.

The IRS also audited almost 1.1 million tax returns during fiscal year 2017.  Almost 90% of the audited returns were individual income tax returns. While the percentage of overall returns audited was relatively low at 0.5% overall, the percentages were significantly higher for two types of taxpayers – wealthy individuals and individuals filing international returns. Read More

Written by | Posted in Audit • IRS

Newly-Revised Estimated Tax Form And Publication Can Help People Pay The Right Amount

WASHINGTON – With tax reform bringing major changes for the year ahead, the Internal Revenue Service today reminded the many self-employed individuals, retirees, investors and others who need to pay their taxes quarterly that the first estimated tax payment for 2018 is due on Tuesday, April 17, 2018.

The Tax Cuts and Jobs Act, enacted in December 2017, changed the way tax is calculated for most taxpayers, including those with substantial income not subject to withholding. Among other things, the new law changed the tax rates and brackets, revised business expense deductions, increased the standard deduction, removed personal exemptions, increased the child tax credit and limited or discontinued certain deductions. As a result, many taxpayers may need to raise or lower the amount of tax they pay each quarter through the estimated tax system. Read More

Written by | Posted in IRS • Tax Cuts Jobs Act • Tax Reform • Withholding Calculator

What Is Wrong With IRS User Fees?

The IRS has been increasing user fees to fund its operations. It recently increased or proposed to increase a wide range of fees including the fees for installment agreements (IAs), offers-in-compromise (OICs), pre-filing agreements (PFAs), private letter rulings (PLRs), and special enrollment examinations (SEE). I raised concerns about these increases in my 2015 and 2017 Annual Reports to Congress.

On Feb. 9, 2018, Congress enacted the Bipartisan Budget Act of 2018 (P.L. 115-123), which addresses concerns about the IRS’s largest fee revenue generator – the IA fee increases. The law prevents the IRS from increasing the IA fee again without legislation. It also requires the IRS to waive or refund the fee for taxpayers with income below 250 percent of the federal poverty level who authorize the IRS to directly debit the IA payments (DDIA) from a bank account or who cannot set up a DDIA (e.g., because they do not have a bank account). This legislation suggests that Congress shares some of my concerns. This blog summarizes our concerns. Read More

Written by | Posted in IRS • Taxpayer Advocate • Taxpayer Rights • User Fees
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