Tax Season Stress Relievers –

It’s almost that time of year that we all look forward to, especially accountants buckling down with their survival kits! It goes without saying that money and stress go hand in hand. For that reason it is easy to understand that the tax preparation season can be a stressful time of year for CPAs. It is not uncommon for them to put in 70-80 hours/week during the tax season including sleepless nights, lots of coffee, and weekends at the office. To help reduce some stress for our CPAs this tax season, we have put together a list of tips to help ease the stress and make these coming weeks as painless as possible: Read More

Today’s posting will be a bit shorter than most. Although they lost the Humana case, the service continued to file challenges to various captive insurance arrangements. The Harper case — which was a 1991 decision — is important because it gives us a three prong test which a captive must comply with in order to be a “bona fide” captive. The following is from my book:

The court introduced a new three-prong test to determine “the propriety of claimed insurance deductions by a parent or affiliated company to a captive insurance company.” The three prongs are:

(1) whether the arrangement involves the existence of an “insurance risk”; Read More

Calculating the Depreciation Using GDS –

Once you have determined an asset’s class life, recovery period, and convention it is time to refer to the depreciation tables at the back of your text. If the asset you are calculating depreciation for is not a newly placed asset, you must know the date the asset was placed into service so that you use the appropriate recovery percentage. You will find the depreciation tables in IRS Pub 946 starting on page 70, all table references are from that publication. (http://www.irs.gov/pub/irs-pdf/p946.pdf) Table A-1 will be used for all GDS HY convention property.

For Example: Using table A-1, if a piece of 5 year property was placed into service in 2012 Read More

Because of the complexity of Internal Revenue Service Code Section 6050I, this article is broken down into five parts: (1) Enactment of Section 6050I, (2) Operation of Section 6050I, (3) Use of Section 6050I in Law Enforcement, (4) Form 8300 Disclosures, and (5) Tax Policy. So hold onto your seats as we peel off the layers of Section 6050I to expose its true purpose.

A. Enactment of Section 6050I

Congress enacted section 6050I to attack and unearth the underground economy. As enforced, however, section 6050I has been used as a weapon in the IRS’s criminal arsenal. The underground economy is comprised of “those persons outside the tax system who deal in currency.” While money launderers are certainly participants in the Read More

TaxConnections Blog Post
More Facts Resolve Tax Risks –
How to Question the IRS –

IN CERTAIN CIRCUMSTANCES it may become apparent that the IRS query is a “fishing expedition.” The taxpayer has rights to ask the IRS what the relevance of their questions is and to clarify ambiguous requests. The taxpayer is entitled to know precisely what the administrative purpose of the query is. In this regard the taxpayer may pose questions set out in the TQQ in the Tax Risk Management Dictionary” at the beginning of this special report (please take note of the disclaimer at the end of the definition of TQQ at the beginning of this special report).

Read More

The 2014 filing season will begin January 31, 2014. The Internal Revenue Service will begin accepting and processing returns and refunds on that date. There is no advantage to filing on paper before the opening date and you will receive your refund much faster by using e-file with direct deposit. Once the filing season begins, the Internal Revenue Service expects to issue more than nine out of ten refunds in less than twenty one days.

Under federal law, all tax payment and filing deadlines remain in effect. This includes the April 15, 2014 deadline for most taxpayers.

Read More

My friend Roger Botterbusch recently put together a most excellent presentation on the tax implications of owning Publicly Traded Partnerships (PTPs), also commonly referred to as Master Limited Partnerships (MLPs). As a result I developed a new profound distaste for investment brokers pedaling these things for their ‘prospective’ fat returns whilst simultaneously poo-pooing the heavy, heavy administrative burden they bring at tax time.

The most interesting point of the presentation was that all but two PTP’s traded in the United States kick out incredibly complicated year end K-1′s to the owner for reporting on the 1040. In preparation for the presentation a ridiculous case study was bandied around about a taxpayer who engaged in ‘day trading’ PTP’s. The ‘trading’ activities on their face were moderately successful but when taking into consideration that the tax practitioner Read More

The United States Foreign Account Tax Compliance Act (FATCA) will definitely come into effect on July 1 this year with no possibility of further delay, according to officials of the US Internal Revenue Service (IRS).

The difficulties include negotiations with foreign governments and problems in setting up the necessary administrative systems, for example a website where foreign banks can register their compliance.

FATCA affects not only Banks but also trusts and other entities.

Rumors and media speculation of yet another postponement have circulated in the past month, after some US official bodies criticized the IRS’s state of preparedness. Read More

On Tuesday, January 21, 2014, Governor Andrew Cuomo of New York announced his executive budget for 2014-2015. Included in the budget are a number of tax reforms geared towards accomplishing the policy goals also outlined in the budget announcement, among them simplifying the tax code and reducing rates and assessments. Manufacturers are the recipients of a few of these reduced assessments. The budget provides for a 20% credit on property taxes paid by manufacturers who own property, and “upstate manufacturers” have their tax rate on income eliminated entirely, from a previous rate of 5.9%. Similarly, the 18-a temporary assessment on utilities has been eliminated for industrial customers, three years in advance of its scheduled expiration date. Read More

TaxConnections Blog Post
More Facts Resolve Tax Risks –
The IRS Query –

THE INITIAL LETTER from the IRS will usually request from the taxpayer a list of documentation and information.

Whenever the IRS requires a taxpayer to furnish documentation and information, the IRS must state the administrative purpose for which it is sought.

All information provided must be of a factual nature; and the IRS is not entitled to information that extends to the realm of ideas, opinions, or judgments. Read More

For background, please see Humana Part I and Humana Part II:

By way of background, in Part I, we looked at the background facts of the case, and learned that Humana was a near-perfect set-up for a captive. The company was forced by business circumstances to form a captive, considered a variety of options (and obviously documented same) and then formed a stand-alone company that was adequately capitalized, independently managed and charged a fair price for its insurance. In Part II, we see a very well tried case for the plaintiff who take full advantage of the facts. In addition, we get the first real explanation (at lease in a case record) of the thinking behind the economic family doctrine. Finally, we see the first real cracks in the economic family doctrine, thanks to some of the insureds not being owners of captive stock. As such, the Read More

Once you have determined your property is depreciable you must determine the class life assigned by the IRS. The Table of Asset Class Lives and Recovery Periods (CLDR) is used for this purpose. It can be located on the IRS website.

There are two methods of determining class life for a piece of non-real property, the General Depreciation System (GDS) or the Alternative Depreciation System (ADS). GDS uses a method that allows the expense for the property to be recovered more quickly in the earlier years of it”s class life. And ADS is a straight line method which basically takes the number of years of the class life and depreciates an equal amount each year over the entire life of the property. Read More