TaxConnections


The Unknown Tax Comic – Part 6

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♦ Every year, I include a piece of chicken in the envelope with my taxes. Not as a bribe, but a treat for the guy at the IRS who opens it. – Jimmy Kimmel

♦ Regis Philbin is back in primetime, hosting 11 new episodes of ‘Who Wants To Be a Millionaire.’ But because of Obama’s tax plan, it’s been re-titled to ‘Who Wants To Win Just Under $250,000.’ – Jimmy Fallon

♦ The U.S. Senate is considering a bill that would tax Botox. When Botox users heard this, they were horrified. Well, I think they were horrified. It’s difficult to tell. – Craig Ferguson

♦ Abracadabra, thus we learn the more you create, the less you earn. The less you earn, the more you’re given, the less you lead, the more you’re driven, the more destroyed, the Read More

A Practical Guide To The New Circular 230 Amendments

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Introduction

On June 12, 2014 the Department of Treasury and Internal Revenue Service (hereinafter the “Service”) issued final regulations that made noteworthy amendments to Circular 230. As a reminder, Circular 230 sets forth the requirements and responsibilities of tax professionals (e.g., Certified Public Accountants, Attorneys, Enrolled Agents, and Enrolled Actuaries) admitted to practice before the Service. The final regulations recognize that the Covered Opinion Rules are no longer necessary, and have been replaced with new standards for issuing written tax advice. As a consequence, the “Circular 230 Disclaimer” will no longer be required on written correspondence. The general consensus is that removal of the disclaimer is a positive step for tax professionals by reducing the Read More

How Harry Potter Can Help You Navigate The Labyrinth of Overlapping Rules Within OVDP

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Nary a day goes by that I don’t talk to a client who is confused about one or more aspects of the OVDP program. Most of the time, it’s not the client’s fault. Usually, the confusion lies in the fact that the rules themselves are like a tangled web or labyrinth on the scale of what Harry Potter had to endure in the triwizard competition. So grab your broom. It’s time to navigate the labyrinth of overlapping rules within OVDP. The only difference is that your tour guide on this journey is not a famous teenage wizard who wears glasses, is an ace Quidditch player, has an impenetrable patronus, and speaks Parseltongue. Instead, it’s a very ordinary tax attorney who can no more get a snake to listen to him than he can his dog, Fido.

For as tedious as the rules can be, surprisingly that is not the primary source of Read More

LIFO Repeal – Tax Savings For The Small Business?

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LIFO REPEAL – TAX SAVINGS FOR THE SMALL BUSINESS?

The Tax reform Act, 2014 calls for a repeal of the Last in First Out (LIFO) method of inventory valuation. Despite the promise of reduced tax rates associated with LIFO repeal and other proposed changes, there has been strong opposition to the proposed repeal particularly from a group of over 120 companies coming together to form the LIFO Coalition in 2006. (LIFO Coalition, 2014)

The group contends that getting rid of LIFO would cause severe economic hardship to businesses and lead to loss of jobs. (Whitehouse, 2009).

WHAT IS LIFO?

Read More

Cancellation of Debt, Foreclosures, And Bankruptcy – Part 4

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Deemed Sales

As we mentioned earlier, any time a property is seized or abandoned the owner has a “deemed sale” of that piece of property. As with any tangible asset, if there is a sale, there is a gain or loss. Whether or not that gain or loss is reportable and the manner in which it is reported will depend on the type and use of the property.

This is treated completely separately from the calculation of CODI and may occur in a separate tax year if the foreclosure takes an extended period of time. Unless both the seizure of the property and the cancellation of debt occur in the same tax year the debtor should receive a Form 1099A when title to the property is transferred to the lender who Read More

Taxpayers Rights When Audited By Tax Authorities In South Africa (Chapter 4 – 4.2.7)

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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 4 – SECTION 195(1) OF THE CONSTITUTION AND PUBLIC ADMINISTRATION DUTIES WITH REFERENCE TO SECTIONS 74A AND 74B

4.2.7 Limitations to s 195(1) Read More

5 Basic Tax Tips For New Businesses

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If you start a business, one key to success is to know about your federal tax obligations. You may need to know not only about income taxes but also about payroll taxes. Here are five basic tax tips that can help get your business off to a good start.

1. Business Structure. Prior to start up, you’ll need to choose the structure of your business. Some common types include sole proprietorship (Form 1040), partnership (Form 1065) and corporation (Form 1120). You may also choose to be an S corporation (Form 1120-S) or Limited Liability Company. You’ll report your business activity using the IRS forms which are right for your business type. A Limited Liability Company (created by state statute) may be taxed as a sole proprietorship (single member), a partnership (multiple members), or other taxable entity. Read More

Cancellation of Debt, Foreclosures, And Bankruptcy – Part 3

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How Do I Know if My Client Has CODI?

As with any information for your clients, the key is a thorough interview. Lending institutions are notorious for sending out reporting documents late or, in the case of the client moving, never.

The courts and the IRS have been very specific about what triggers a forgiveness of debt by a lender. They set forth examples and used them as precedence in the IRC and recent Bankruptcy Court cases. These are called “identifiable events” and are defined as follows:

In general. An identifiable event is– Read More

SCOTUS Decides to Hear CSX – But Why?

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Each year, the Supreme Court punts on dozens of cases. Included in the dozens of cases which the court elects not to hear each year are sales tax cases. They are uninteresting to the majority of the population and just not the type of cases the justices want to hear. In fact, despite having a significant affect in most multi-state businesses, the Supreme Court has not heard a sales tax nexus case since Quill in 1992.

If there was ever a case to hear, it was Amazon and Orbitz versus New York. At issue was the two large online retailers versus the mighty state of New York. To the dismay of many State and Local Tax (“SALT”) critics, the Supreme Court decided to punt on this case at the end of 2013. Perhaps, it thought Congress was going to shock the world and actually do something. Or, perhaps, it just really didn’t care about sales tax nexus. Read More

Israel Will Transfer Detailed Information on American Held Financial Accounts to The U.S. Tax Authorities!

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On Tuesday, April 1, 2014 we posted “IRS Targets Americans Living In Israel!“where we discussed that according to The Jewish Daily Forward, this upcoming tax season could entail some unpleasant surprises for United States citizens who either live in Israel or who hold bank accounts there.

Filing requirements for these Americans have become more rigorous and the odds of being audited by the Internal Revenue Service are higher than they’ve ever been.

“I’ve seen more audits in the past year or two than I’ve seen in the previous 30 years combined,” said Philip Stein, an American CPA working in Israel. “It created a difficult atmosphere both for honest tax preparers and for honest families filing their returns.” Read More

Form W-8BEN And What It’s Used For

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Non-U.S. persons must pay U.S. tax on certain kinds of income they receive from U.S. sources. Typically, the income is taxed at a flat rate of 30%. The only way for this tax to be alleviated is if an income tax treaty exists between the U.S. and another country and that treaty authorizes a lower rate of tax.

You might be wondering how the United States collects this tax. For example, the non-U.S. person might decide not to pay it, thus thumbing his nose at the government. In that case, does the U.S. government dispatch secret service agents to all four corners of the globe to track down the tax evader, who may owe only a small amount of tax? Of course not. The U.S. knows all too well that it would be a waste of time and resources to take on the role of a bounty hunter. Read More

Taxpayers Rights When Audited By Tax Authorities In South Africa (Chapter 4 – 4.2.6)

South Africa waving flag against blue sky

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 4 – SECTION 195(1) OF THE CONSTITUTION AND PUBLIC ADMINISTRATION DUTIES WITH REFERENCE TO SECTIONS 74A AND 74B

4.2.6 Transparency must be fostered Read More