ALMOST HERE – Free Webinar: Avoid These Four Costly Tax Planning Mistakes

Almost Here – Free Webinar: Avoid These Four Costly Tax Planning Mistakes

This coming Thursday, on May 16th at Noon CDT, please join Tax Forum for a complimentary Webinar:

Avoiding Costly Mistakes: Four Essential Tax Concepts for the Business Attorney or CPA

Even smaller matters might have big traps and significant tax implications – leading to unexpected tax liabilities for your clients and potential malpractice claims for the professionals.

During this one-hour webinar, the Tax Forum team of Chuck Levun, Michael Cohen and Scott Miller will provide a top-level look at …

  • Converting an existing S corporation to an LLC on a tax-free basis to obtain “charging order” protection
  • Simple business structuring to circumvent the $10k deduction limitation for the portion of state and local income taxes attributable to partnership/LLC and S corporation income
  • How not to cause your client to be one of the estimated 500k+ LLCs that incorrectly thought it was going to be taxed as an S corporation but, because of certain language contained in its operating agreement, is not an S corporation
  • Personal goodwill and the C corporation business sale – identifying situations in which double tax can be avoided

Any one of these could make the difference between you being a hero or creating a significant problem for your clients.

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Governor Newsome Team: California Voters Simply Do Not Have Capacity To Decide Complicated Matters Like Tax Hikes

Governor Newsome: California Voters Simply Do Not Have Capacity To Decide Complicated Matters Like Tax Hikes

‍This week Governor Gavin Newsom asked the California Supreme Court to block the California Taxpayer Protection Initiative from the November ballot. Newsom argued that “voters simply do not have the capacity” to decide on “complicated” matters like tax hikes. What do you think?

Read article: https://reformcalifornia.org/news/gavin-newsom-claims-voters-dont-have-capacity-to-decide-on-tax-hikes

Reform California recently announced a special initiative in 2024 to recruit, train, endorse, and support candidates for state and local offices who will be part of a statewide “Reform Caucus” of elected officials willing to fight aggressively to break the Super-Majority control in the state. Reform California Chairman Carl DeMaio himself is running for a State Assembly seat.

“California’s Super-Majority Democrats have ruined our state, and we need to unite behind the one best candidate in each target seat who can give voters an alternative — and that’s where the Reform California Voter Guide comes in,” says Carl DeMaio, Chairman of Reform California.

Reform California’s Voter Guide has packed a punch in previous elections — and has become the most downloaded endorsement guide in the entire state with almost half-a-million unique downloads during the 2022 election alone.

“Voters from all backgrounds know the problems are bad in California and they are hungry for change — and we’re excited that many are increasingly relying on this voter guide when they cast their ballots,” DeMaio says.

Reform California’s Voter Guide is distributed to target voters in a number of ways each election cycle — including by tens of thousands of the organization’s volunteers who canvass their neighborhoods and use their social media to virally promote it.

Reform California also convenes ballot harvesting events throughout the state — and provides its volunteers with a template for organizing their own ballot harvesting parties. The Reform California Voter Guide is distributed at what is called “Barbeque, Beer & Ballots” events. Contact Reform California to host your own B-B-Q Event: https://reformcalifornia.org/campaigns/stop-the-tax-hikes 

Access the Reform California “Plain English” Voter Guide for your area:

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Citizens Against Government Waste: The Prime Cut Series (#6)

Citizens Against Government Waste: The Prime Cut Series (#6)

Eliminate Funding for the M1A2SEP Abrams Tank Upgrade Program
1-Year Savings: $699.2 million
5-Year Savings: $3.5 billion

Over the objections of senior DOD officials, members of Congress have for many years provided funding for the M1 upgrade program. In FY 2023, legislators added two earmarks costing $699.2 million for the Abrams, including $602 million to upgrade 46 tanks.

Although the tank plant is in Lima, Ohio, its suppliers are spread across the country, which helps to explain the widespread support. Past versions of the DOD bills, including in FYs 2016 and 2017, hinted at a parochial incentive for the program’s continuance: industrial base support. There’s nothing like a jobs program disguised as a national security priority.

The continued funding for the program makes it worth revisiting why the Pentagon has long objected to finite resources being wasted on an unwanted project. In testimony before the HASC on February 17, 2012, then-Army Chief of Staff General Raymond Odierno told Congress that the U.S. possesses more than enough tanks to meet the country’s needs, stating “our tank fleet is in good shape.

“On September 6, 2023, the DOD announced that it intends to move on from the M1A2SEP. Adapting in part from lessons learned in the fighting in Ukraine, the Pentagon intends to redistribute funding once intended for the M1A2SEP program to develop the M1E3. This new version of the Abrams will integrate technologies designed to increase survivability and maneuverability on the battlefield and will likely be fielded in the 2040s and onward.

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What Is Net Investment Income Tax (NIIT)?

What Is Net Investment Income Tax (NIIT)?

As a U.S. expat, understanding and managing both domestic and international tax obligations can often seem overwhelming. Among these obligations is the Net Investment Income Tax (NIIT), a lesser-known yet crucial tax provision. Established as part of the Affordable Care Act in 2013, NIIT imposes a 3.8% tax on certain types of investment income for individuals, estates, and trusts whose incomes exceed specified thresholds.

This tax affects U.S. citizens worldwide, irrespective of their residence or the origins of their income. Grasping how NIIT specifically impacts U.S. expatriates is essential—not only for ensuring compliance but also for effectively managing and potentially minimizing tax liabilities.

This article aims to clarify the intricacies of NIIT, highlight its implications for U.S. expatriates, and offer strategic advice on how to manage this tax efficiently while living abroad.

WHAT IS NET INVESTMENT INCOME TAX?

The Net Investment Income Tax is a 3.8% tax on the lesser of an individual’s net investment income or the amount by which their modified adjusted gross income (MAGI) exceeds specified threshold amounts based on their filing status. NIIT applies to the net investment income of individuals, estates, and trusts that have income above certain thresholds. Considered net investment income includes income from assets like stocks, bonds, rental income, and some annuities, which are essential for calculating the Net Investment Income Tax based on the threshold and the actual net investment income. To determine net investment income, one must subtract eligible deductions from the gross investment income, which encompasses earnings such as brokerage fees, investment advisory fees, tax preparation charges, local and state income taxes, fiduciary expenses, investment interest expenses, and costs involved with rental and royalty income.

FILING AND PAYMENT

Taxpayers may need to adjust their income tax withholding or estimated payments to account for the tax to avoid penalties. The NIIT is reported and paid by individuals on Form 8960, Tax on Net Investment Income, which is filed with the individual’s Form 1040 federal income tax return.

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U.S. Taxpayers May Be On The Hook For $32.6 BILLION State of California Lost Due To Fraud

U.S. Taxpayers May Be On The Hook For $32.6 BILLION State of California Lost Due To Federal Employment Fraud

Washington, D.C.—U.S. Senate Finance Committee Ranking Member Mike Crapo (R-Idaho) and U.S. Senate Health, Education, Labor, and Pensions (HELP) Committee Ranking Member Bill Cassidy, M.D. (R-Louisiana) raised concerns that the U.S. Department of Labor’s (DOL) December 2023 guidance could put U.S. taxpayers on the hook for the approximately $32.6 billion the State of California lost to fraud during DOL Acting Secretary Julie Su’s tenure as California’s Labor Secretary.  The guidance transfers the authority to decide when the federal government forgives lost federal unemployment insurance (UI) funds to California and other states.

In a May 1 U.S. House Education and the Workforce Committee hearing, Julie Su stated that the guidance only allows states “to waive non-fraudulent [UI] overpayments.”  However, the guidance allows states to apply their own finality laws to determine which lost funds they are required to pay back with nothing specifically prohibiting states from waiving funds lost to fraud.

Specifically, California’s losses in federal UI funds due to fraud have been estimated to be as high as $32.6 billion, as much as one third of the nation’s total UI fraud.  Concerningly, the California State Controller found that the state “had inadequate control over its financial reporting for federally funded unemployment insurance benefits … [the State] is unable to provide complete and accurate information” for federally funded UI accounts.  This inability to definitively account for how much was lost to fraud means that it is questionable how fraud can be a limiting factor in the Employment Development Department (EDD) determination of how much of the lost funds should be forgiven.

As California’s Labor Secretary at the time of the widespread fraud, Julie Su was directly in charge of EDD, the agency tasked with distributing UI payments to state residents. At the direction of Su, EDD waived basic fact-checking fraud prevention requirements for UI payments. This was in contradiction to DOL guidance, which clarified these protection requirements “must be adhered to” and were “critical to the operations of the UI-related CARES Act programs.” As a result of lax oversight, California lost an estimated $32.6 billion in fraudulent UI payments. In 2022, the California State Auditor found that, “[d]espite repeated warnings, EDD did not bolster its fraud detection efforts until months into the pandemic, and it suspended a critical safeguard.” The senators requested information from DOL on if and how it ensured California took all proper steps to recover these fraudulently paid funds.

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Complimentary eBook For You: 250+ Best Tax Jokes, Quotes And Fun Tax Forms

Complimentary eBook For You: 250+ Best Tax Jokes, Quotes And Fun Tax Forms

TaxConnections gives our complimentary eBook to you to lift your day. Enjoy a compilation of more than 250+ fun tax jokes, quotes and forms in this complimentary download.

We want to give you something to remind you to take a moment today to enjoy your life with laughter! There are many known health benefits to laughter including: lowers blood pressure, reduces  stress hormones, improves cardiac health, boosts T-Cells, triggers the release of endorphins, and produces a general sense of well-being. Laughing is also very good for your abs:) Add laughter to your life today! You will enjoy your life journey laughing more.

Request your complimentary copy:

250+ Best Tax Jokes, Tax Quotes, Fun Tax Forms.

https://www.taxconnections.com/best-tax-jokes-and-quotes

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LIFO Accounting FAQs: What Is LIFO Accounting?

LIFO Accounting FAQs
What Is LIFO Accounting?

LIFO is an acronym for Last-In, First-Out and it describes a method of accounting based on the assumption that the newest inventory purchases are sold before earlier inventory purchases. Under this approach, the most recently acquired or produced items are the first to pass through cost of goods sold. In other words, the most recent inventory costs are matched against current revenues on the income statement, while the older costs remain on the balance sheet.

This method becomes particularly significant during periods of inflation. When prices are rising, using LIFO typically results in higher cost of goods sold and lower profits, because the newest inventory, which is sold first, is more expensive. As a result, it can reduce a company’s taxable income and therefore, its tax liability. However, it can also result in an inventory valuation on the balance sheet that is out of sync with the current net realizable value.

LIFO & FIFO

FIFO is an acronym for First In, First Out which is the direct opposite inventory method to LIFO as it assumes the first inventory purchased is the first sold. During inflation, the FIFO accounting approach will lead to higher values on ending inventory as opposed to the LIFO approach with more cost capitalization on inventory but lower tax savings benefits.

This makes LIFO a more advantageous method, particularly as prices rise, because it places a lower value on remaining inventory which equals a higher Cost of Goods Sold. That can have a direct effect on reducing a company’s taxable income and the amount of tax owed for the year.

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Preparing For A Sales Tax Audit: Tips And Best Practices For Middle Market Owners

Preparing For A Sales Tax Audit: Tips And Best Practices For Middle Market Owners
Navigating a Sales Tax Audit: A Comprehensive Guide to Protecting Your Business

If you’re reading this, you’ve probably received a letter of audit from a government entity. You’ve also likely now gotten over your initial anxiety and are looking for help with the next steps. You’re in the right place – we’re here to tell you that there’s no need to panic.

So, what exactly is a sales tax audit? And what can you expect?

Definition of a Sales Tax Audit

A sales tax audit is a rigorous examination conducted by state taxing authorities to review a business’s sales tax returns, financial records, and transactions. The primary objective is to ensure compliance with applicable tax laws and regulations regarding the collection, reporting, and remittance of sales tax.

We know, sounds scary. But we can help you navigate the process successfully. In this guide, we’ll unpack various aspects of sales tax audits, including triggers for audits, documentation requirements, strategies for responding to audit findings, the role of tax professionals, and the possible consequences of an unsuccessful audit.

Here’s what you can discover:

  1. Understanding Sales Tax Audits
  • Triggers for a Sales Tax Audit
  • Types of Sales Tax Audits
  • Common Misconceptions about Sales Tax Audits

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Treasury, IRS Issue Frequently Asked Questions Regarding Disaster Relief Related To Retirement Plans And IRAs

Treasury, IRS Issue Frequently Asked Questions Regarding Disaster Relief Related To Retirement Plans And IRAs

The Internal Revenue Service today issued frequently asked questions (FAQs) in Fact Sheet 2024-19, relating to rules for distributions from retirement plans and IRAs and for retirement plan loans, for certain individuals impacted by federally declared major disasters.

The FAQs relate to the SECURE 2.0 Act of 2022 (SECURE 2.0) provision that provides for ongoing disaster relief for certain distributions and loans in the case of federally declared major disasters. Prior to the changes made by SECURE 2.0, there was no disaster relief allowing these distributions and loans that applied generally for all major disasters.

The FAQs are intended to assist individuals, employers, and retirement plan and IRA service providers, and they are divided into four categories:

  • General information
  • Taxation and reporting of qualified disaster recovery distributions
  • Repayment of qualified distributions taken for the purpose of purchasing or constructing a principal residence in a qualified disaster area
  • Loans from certain qualified plans

IRS-FAQ

IR-2024-132

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Bidens Call For The Expiration Of The Tax Cuts And Jobs Act Increases Taxes For The Average Family $1500 Per Year

Bidens Call For The Expiration Of The Tax Cuts And Jobs Act Increases Taxes For The Average Family $1500 Per Year

Last week, President Biden called for the expiration of the Tax Cuts and Jobs Act, President Trump’s signature legislation that jump started the best economy of my lifetime and that continues to provide needed tax relief to working families today. In one statement, the president promised American workers, families, farmers, and small businesses that they would see their taxes go up – breaking his promise that families making less than $400,000 would not receive a tax increase.

In fact, Biden’s plan would increase taxes for the average family of four making $75,000 by $1,500 per year. Why is that? Biden’s plan would slash the child tax credit in half from $2,000 per child to $1,000 per child. It would increase the small business tax rate to 43.4 percent, cut the exemption from the death tax in half, and eliminate the expanded guaranteed deduction for families that greatly simplifies working families’ taxes.

Biden’s plan is a disaster, and it would be bad enough if the economy was in good shape. But “Bidenomics” has resulted in skyrocketing cost-of-living increases. Prices are up almost 20 percent since he took the oath of office. Mortgage payments are now $1,200 higher per month for the median home. The price to put food on the table, clothes on your back, and gasoline in your cars has exploded as real wages are almost 4 percent lower than when Joe Biden was sworn in.

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Cost Segregation For Short Term Rentals

Cost Segregation For Short Term Rentals

As a short-term rental property owner, maximizing your tax savings is essential for the success of your investment. One effective strategy to achieve this is through cost segregation.

Cost Segregation for Short Term Rental Owners

Cost segregation is a tax-saving technique that allows you to accelerate the depreciation of certain assets in your property. Traditionally, real estate is depreciated over 27.5 or 39 years, while personal property is depreciated over 5 to 7 years and land improvements receiving a 15-year treatment. Cost segregation allows you to reclassify certain components of your property, such as appliances, fixtures, and special use electrical & plumbing as personal property, enabling you to depreciate them over a shorter timeframe. This results in larger tax deductions in the early years of ownership, reducing your taxable income and ultimately lowering your tax burden.

The beauty of cost segregation is its versatility, it can unlock tax savings for a diverse range of short-term rental properties, including:

Urban Apartments:

Studio apartments, lofts, and trendy condos catering to business travelers or weekend getaways can benefit from cost segregation on appliances, furniture, smart home systems, and even rooftop amenities like grills and hot tubs.

Shared Accommodations:

Hostels, co-living spaces, and even shared vacation homes can leverage cost segregation for common areas like kitchens, bathrooms, laundry facilities, and entertainment zones.

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TaxConnections Spotlight Interview Part 2: Chuck Levun And Michael Cohen On Partnership Tax Planning Challenges, And Surprising Cases And Mistakes They Have Seen

ax Connections Spotlight Interview Part 2: Chuck Levun And Michael Cohen On Partnership Tax Planning Challenges, And Surprising Cases And Mistakes They Have Seen

For more than thirty-seven years, Charles R. Levun and Michael J. Cohen have been presenting the preeminent seminars on flow-through taxation. The two flagship Tax Forum programs are Fundamentals of Flow-Through® and Tax Planning Forum®.  Tax Forum is expanding its programs to include self-study (on-demand) training, as well as working on an additional course, which they will share with us soon.

Please read through Part 2 of this special interview, featuring Chuck Levun and Michael Cohen. Part 1 is focused on Tax Forum, its flow-through tax planning training programs, and the importance of education for CPAs, attorneys and other tax planning professionals.

To get a sense of how the Tax Forum programs are unique in the partnership, LLC and S Corporation tax training space, please register for Tax Forum’s complimentary webinar:

Avoiding Costly Mistakes: Four Essential Tax Concepts for the Non-Tax Business Attorney or CPA taking place on Thursday, May 16th at Noon CDT

Kat Jennings’ Question: Let’s jump right in …Do you see an increase in controversy in partnership taxation? Why or why not?

Michael Cohen’s Answer: For the most part, not yet. However, with the new budget for the IRS and the commitment to go after “large” partnerships, I would think that controversy will increase. However, for this commitment to be successful in shutting down “abusive” transactions, the partnership knowledge base of the IRS auditors will need to be expanded. I will note that virtually every year we have at least a half dozen IRS professionals attend either our Forum or Fundamentals courses.

Kat Jennings’ Question: What is the biggest challenge for partnerships going forward?

Chuck Levun’s Answer: Staying on top of developments is a biggie. There have been proposals floating around from Senator Wyden and others that would make substantive changes to some of the basic partnership principles. These changes are designed to hit perceived abuses of the partnership rules by large partnerships. Unfortunately, if enacted, they also would complicate life for the smaller partnerships, which are by far a large number of business entities and growing. Moreover, there are always new structuring techniques, new thought processes, etc. that are constantly being developed. Partnerships are such a dynamic area, given, as I said before, that partners have a tremendous amount of flexibility in structuring their transactions. It’s not like the S corporation arena where everything has to be shared on a pro rata basis, there can be only one class of stock, etc.

Kat Jennings’ Question: Tell us about any cases in partnership taxation that really surprised you.

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