What is Cancellation of Debt?
Cancellation of debt is the release from collection activity on a debt by a lender without consideration from the debtor. In other words, the person or institution you borrowed money from releases you from the responsibility to repay that debt. Normally, if you have the use of money, that you are now not obligated to repay, it must be treated as income. There are lots of exceptions and exclusions to that statement and we will review many of them.
As with most things in taxes, you must move through this subject in a specific order and not jump around. You must make certain determinations in a specific order to see how Read More
On June 18, 2014, IRS Commissioner John Koskinen disclosed that the 2009, 2011, and ongoing 2012 offshore voluntary disclosure programs have resulted in more than 45,000 disclosures and the collection of about $6.5 billion in taxes, interest, and penalties. On its face, the OVDIs appear to be bringing into the government’s coiffures an average of approximately 9,000 taxpayers a year with approximately $1.3 billion in revenue.
However, the last six months paint a very different picture. That period is marked by anemic growth. Indeed, there were only 2,000 additional disclosures and $500 million in additional revenue. That may lead one to speculate that the OVDI, at least for high net Read More
On Monday, July 21 of 2014, the Department of Treasury and Internal Revenue Service (hereinafter the “Service”) issued Final Treasury Regulations under T.D. 9680 to amend the definition of research and experimental expenditures pursuant to I.R.C. § 174. These Final Treasury Regulations finalized and replaced the previously issued Proposed Treasury Regulations that were published on September 6, 2013. As a reminder, Treasury Regulations provide the official interpretations of the Internal Revenue Code by the Department of Treasury and have the force and effect of law. The most common forms of Treasury Regulations include: Read More
Over the years in executive search, I had the pleasure to meet extraordinarily talented tax professionals all over the world in corporations, public accounting firms, law firms, independent tax services firms, academia and government. During this time, I learned how highly educated tax professionals are and continue to be throughout their tax careers. What I also discovered is that many of the very finest tax technicians enjoyed looking through the tax code to “ figure out the tax problem and solve it like a puzzle”. These great tax technicians are masters at solving tax problems yet many are shy about promoting themselves. Four years ago, I decided to develop a platform that would bring tax professionals out from behind the scenes and make them visible to the people who are searching for them. In order to ensure the most success for tax professionals, we decided Read More
If you are late to the party, Colorado has fully legalized marijuana and in the first five months of legal retail sales, Colorado has sold a staggering $90 million worth of marijuana. We thought you may find it interesting to discover there are plenty of taxes attached to these sales. We recently received this receipt to our offices outlining all the taxes on the purchase of marijuana in Colorado. The Colorado Department of Revenue announced that the state earned $35 million in taxes, licensing and other fees from July 1, 2013 to June 30, 2014. The state collected nearly $5 million in taxes this June, an increase from the previous month. Governor John Hickenlooper expects sales to reach $1 Billion in the first fiscal year of legal marijuana. He also expects around $114 Million in taxes during this year. Colorado is proof that marijuana sales can benefit the state and generate revenue. We would greatly appreciate your comments regarding the taxes associated with this purchase.
Under US tax laws, any individual with a “substantial presence” in the United States runs the risk of being classified as a US person for tax purposes. Those who are physically present in the United States for a long enough time may find themselves owing taxes on their worldwide income to the IRS even if they are neither a US citizen nor a green card holder, and even if they earn no income from US sources.
The Substantial Presence Test
The criteria often cited for meeting the substantial presence test is residing in the US for more than 182 days in a given calendar year. This is very misleading, as the actual calculation used by the IRS is more complicated and looks at US residency over a Read More
This is the beginning of a 15 part series on Cancellation of Debt.
With the plunge in the economy over the last several years we, as tax professionals, have seen an increasing number of our clients coming in with cancellation of debt, foreclosures and bankruptcies. From canceled credit cards, repossessed cars, defaulted payday loans, and bad business loans, to our clients losing their homes, we have seen it all. What most clients don’t realize is that along with these issues come tax consequences. It is our job, as tax professionals, to help reduce or eliminate those consequences to the greatest extent possible.
We will discuss and review the following procedures: Read More
The Internal Revenue Service issued instructions July 21 for U.S. withholding agents who must request a series of Forms W-8 under the Foreign Account Tax Compliance Act.
The instructions have been deemed critical for agents trying to comply with FATCA, which requires foreign financial institutions to disclose U.S.-owned accounts to the IRS or possibly face a 30 percent withholding tax on their U.S.-source income. U.S. withholding agents must determine whether, when and how much to withhold.
The form, Instructions for the Requester of Forms W-8BEN, W-8BEN-E, W-8ECI, W-8EXP, and W-8IMY, is viewed as an essential part of that work. These instructions supplement the instructions for the following forms and provide, for each form, notes to assist Read More
Non-cash charitable contributions can be of great benefit at tax time. However, both donors and the recipients frequently overlook required IRS rules which could would to the taxpayer’s detriment. In addition, the taxpayer frequently may often understate the deductible amount of the contribution.
In order to deduct a contribution of $500 or more, the donor must list the property being donated, the date of the donation, as well as the name and tax ID number of the organization. This should be recorded on Form 8283. It has been my experience that many organizations do not make the tax ID number readily available to the donor. It should be placed on the receipt for the donation to make it easier for the donor to properly claim the contribution. When the number is not available, an Internet search may often yield Read More
Taxpayer’s Other Payment Options
Determining other payment options for your client takes serious research, compilation of records and information, and then sitting the client down and having a coming to reality meeting with them. Of course, you already did all of this when reviewing for the case, but let’s do a quick review of the options and the statute tolling events:
1. The Fresh Start Initiative – Full Pay Installment Agreement or Partial Pay Installment Agreement
2. Offer in Compromise
3. Letting the CSED run and letting the levy be foreclosed Read More