12 Jul 2024

Tax Home: IRS Definition And Implications

KEY POINTS OF IRS DEFINITION:

General Area of Business Activity: The IRS defines your tax home as the “entire city or general area” of your regular workplace or place of business, regardless of where your personal residence is located.

Multiple Workplaces: If you have multiple workplaces, your tax home is generally the location where you spend the most time and have the greatest business activity. For example, if you spend more time and conduct more business in New York compared to London, New York would be considered your tax home.
No Fixed Workplace: For those without a fixed workplace, such as itinerant workers or remote employees, your tax home may be the place where you regularly live. This can apply even if this location is not where you conduct the majority of your business activities.

Maintaining a Residence: To establish a tax home, you need to maintain a residence in that location and incur regular living expenses such as rent, mortgage, utilities, and other day-to-day expenses. Using a relative’s address or a nominal rental arrangement does not qualify as maintaining a tax home.

Travel Expense Deductions: The location of your tax home is important because it determines whether your travel expenses away from that location can be deducted as business expenses.
Distinction from Permanent Residence: Your tax home is distinct from your permanent residence or domicile. While your permanent residence is your long-term, permanent home where you intend to return, your tax home is your primary place of business or employment.
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Written by Olivier Wagner

12 Jul 2024

Does the Inflation Reduction Act Give Rise To A New Tax Strategy Called Chaining?

Historical and New Energy Credits Indicate “Potential” New Tax Strategy
Historically, the Code provided two types of credits for renewable energy projects. The first being the production tax credit (PTC) and the other being the investment tax credit (ITC)—both of which fell under the scope of the general business credit of § 38.

These two credits were set to expire in 2021 and 2023. Moreover, the credits covered a limited set of production and investment activities. The Inflation Reduction Act (i) extended the time frame for which the credits are available to taxpayers, and (ii) expanded the activities covered. Understandably, this expansive legislation precipitated the promulgation of some lengthy Treasury Regulations. In that process, the Treasury received comment on “chaining” certain business credits.[1]

To understand the term “chaining”, there are two relevant Internal Revenue Code (Code) provisions that taxpayers are seeking to chain together which serve as the basis for the analysis.

Chaining
To start, under § 6418(a), eligible taxpayers may elect to transfer certain credits to unrelated taxpayers rather than apply the credit against its income tax liability. This process allows a taxpayer to finance its operations and current liabilities with a tax credit that provides no current value to it. Often times, the qualifying taxpayer is a nascent business in an emerging market. Having this newly furnished tax asset provides capital without taking on debt or issuing new shares.
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Written by TaxConnections Admin

12 Jul 2024

Join Us Thursday July 18th For A CPE Webinar On § 174 Updates

Join us Thursday July 18th at 10 AM CST for a CPE Webinar on § 174 Updates.

Participants will gain an understanding of the current landscape, legislative updates, and best practices for advising clients on navigating the amortization of § 174 expenses. This course introduces participants to the amortization of specified research and experimental expenditures (SREs) for federal income tax purposes. The relationship of SREs to the research tax credit will be developed. Other TCJA changes to research-related provisions of the Code will also be discussed.

After this course, the practitioner will:
• Identify taxpayers who are required to amortize under § 174
• Identify the types of expenditures that need to be amortized
• Quantify the impact of that amortization as well as identify mitigating factors

We look forward to your participation in this informative session.
Register for CPE Course!

Prerequisites: At least two years preparing intermediately complex business income tax returns. No advance preparation is required.
Recommended Credit: 1.0 hour CPE in the field of Taxes delivered by Group Internet

Attendance Policy: To receive credit, attendees must sign in and be present for the presentation and respond to at least three instances of the attendance monitoring mechanisms per hour of instruction
Refund Policy: Refunds are not issued as this course is complimentary
Eric Larson
(800) 806-7626

eric.larson@sourceadvisors.com

Written by TaxConnections Admin

12 Jul 2024

Supreme Court Upholds Section 965 Mandatory Repatriation Tax

On June 20, 2024, the U.S. Supreme Court issued its long-anticipated decision in Moore v. United States, in which a 7-2 majority upheld the constitutionality of the mandatory repatriation tax (“MRT”) under section 965 of the Internal Revenue Code, which came into effect as part of the Tax Cuts and Jobs Act of 2017.

As discussed previously here and he96re, the MRT is a one-time tax on U.S. shareholders of a controlled foreign corporation (“CFC”) based on the CFC’s post-1986 accumulated deferred foreign income.

The taxpayers in this case were a U.S. couple that invested in an Indian company that was a CFC. As a result, they were assessed the MRT. The taxpayers challenged the MRT on the grounds that it was a direct tax that was not apportioned as required under the Article I, Section 9, Clause 4 of the U.S. Constitution. Part of their argument was that the MRT did not meet the requirements of an income tax under the Sixteenth Amendment because there had been no realization event that would have caused the Indian CFC’s retained earnings to be taxed as income to the taxpayers. In this, the taxpayers relied on the Court’s 1920 decision in Eisner v. Macomber, which we’ve discussed here.

Delivering the Court’s majority opinion, Justice Kavanaugh found that the MRT was not a direct tax that needed to be apportioned under the Constitution. Kavanaugh argued that the appropriate question in this case was not whether realization is a constitutional requirement but whether the income in question could be attributed to the taxpayer (although he found that a realization event did occur when the Indian CFC earned that income). Kavanaugh looked to a long history of Congress permitting and the Court upholding the attribution of income earned by an entity to the entity’s owners. The taxpayers also conceded that such attribution in contexts other than the MRT was constitutional, including attribution required under Subpart F of the Internal Revenue Code, the subpart in which the MRT is found. Thus, a majority of the Court held the MRT to be constitutional.
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Written by TL Fahring

10 Jul 2024

Register For Complimentary Webinar On Navigating § 174 Expenses (Thursday, July 18, 2024)

Register For Complimentary Webinar On § 174 (Thursday, July 18, 2024)

Webinar Hosted By Source Advisors: Thursday, July 18th 2024
Time: 8:00AM PST/ 10:00AM CST/11:00AM EST/

Speaker is Jim Foster. Jim joined Source Advisors as the Director of Tax Controversy in 2022. He has worked in tax incentives such as the R&D tax credit, disaster relief credits, the Employee Retention Credit, and most recently § 174. Jim has been practicing in the general area of taxation and tax law for fifteen years. In that time, he has produced numerous successful tax credit cases for his corporate clients. Further, he has had successful tax audits that range from IRS audits and appeals to state-level tax audits. Prior to joining Source Advisors, Jim worked at two national consulting firms that operated in niche tax incentives. While in law school, Jim worked at a public accounting office where he helped the firm advance in and maintain double-digit growth. Jim received his Bachelor of Science in Political Science from Texas A&M University and his Juris Doctorate from South Texas College of Law Houston. He is a licensed attorney in the State of Texas.

Meet Source Advisors

Written by TaxConnections Admin

10 Jul 2024

Supreme Court Issues Long-Awaited Opinion In Connelly V. United States About Corporate Owned Life Insurance

The Supreme Court issued its long-awaited opinion in Connelly v. United States (No. 23-146) on whether a corporation’s obligation to apply the amount of proceeds from corporate-owned life insurance to fund a mandatory redemption of stock on the death of a shareholder reduces the value of the corporate assets (i.e., offsets the insurance proceeds received by the corporation) when valuing the stock in the estate of the deceased shareholder. In a resounding taxpayer defeat by unanimous opinion, the Supreme Court said “no” and resolved a split between the Eighth Circuit in Connelly v. United States, 70 F.4d 412 (2023), and the Eleventh Circuit in Estate of Blount v. Commissioner, 87 TCM 1303 (2004), aff’d in part and rev’d in part, 428 F.3d 1338 (2005).

This fall’s Tax Planning Forum programs will discuss Connelly and a workaround that easily can be implemented in many closely held business situations by using a partnership to own the insurance, rather than the corporation, and thereby not increase the value of a decedent’s stock for estate tax valuation purposes by the corporation’s receipt of insurance proceeds. We will discuss how the partnership should be structured to meet the goals of the shareholders, which mirrors what would have occurred from an economic perspective had the policy been owned by the corporation. We also will delve into how to transfer insurance policies out of a corporation and avoid the impact of the §101(a)(2) transfer-for-value rules that can cause taxation of the life insurance proceeds, if those rules are not carefully navigated. Read More

Written by TaxConnections Admin

10 Jul 2024

Understanding Changing Tax Laws 2024

The 2024 tax season brings new legislation that affects businesses of all sizes. Let us provide key post-tax season insights into the recent legislative changes and how they impact different business structures. We’ll also guide accounting firms, CPAs, and tax preparers in identifying proactive tax planning strategies for the upcoming year.
Key Insights of Recent Legislative Changes

The 2024 tax season introduces legislative changes that demand attention from every accounting professional and tax preparer. Accountants & Advisors highlight several crucial updates to businesses. First off, the adjustments to tax brackets and bigger deductions for some business expenses are vital changes. These updates are designed to reduce the tax load on small to medium-sized businesses, helping them as part of wider efforts to boost the economy.

Furthermore, there’s a significant change in how capital gains are taxed, particularly for real estate transactions. This development is critical for firms that manage large real estate portfolios. The new rules can impact the tax liabilities of these businesses, so you must be prepared with strategic planning. Accountants and advisors recommend that you must thoroughly review these changes to make sure you make the most of any tax benefits and gather valuable post-tax season insights for future planning.

Lastly, new tax incentives for eco-friendly practices have been introduced. These incentives encourage sustainable business actions and provide financial benefits through tax credits. Firms committed to proactive financial planning should guide their clients on how to qualify for these rewards, improving their financial health and supporting sustainability.

Evaluate Impacts on Different Business Structures Post-Tax Season

The impact varies widely across different business structures. For sole proprietorships and partnerships, the changes could mean different methods of reporting income and potentially more beneficial tax treatments. These entities must understand these nuances to maximize their tax benefits.

For corporations, particularly S-corporations, and C-corporations, the legislative updates may bring shifts in compliance requirements and opportunities for tax savings on reinvestments. According to Accountants & Advisors, you must emphasize the importance of reviewing how these changes affect their tax liabilities and asset management strategies. The aim is to ensure that corporations comply with the new laws and take strategic actions that align with their financial goals.

Finally, LLCs may see changes in pass-through taxation and deductions that specifically benefit their unique structure. Our accountants recommend that LLC owners closely review these legislative updates. By doing so, they can strategically plan for the next tax season and align their business practices with these new laws.

Identifying Common Post-tax Season Pitfalls

After the tax deadline rush, it’s important to spot and rectify common slip-ups. Now, we’ll dive into how to handle underreported income and missed deductions, as well as understand the consequences of filing extensions and incurring penalties, to ensure financial accuracy and compliance.
Address Underreported Income and Overlooked Deductions

After the tax season ends, it’s common to find cases of underreported income and overlooked deductions. Many accountants suggest that it’s essential to revisit financial documents and ensure all income sources are accurately reported. This not only complies with tax laws but prevents potential penalties related to underreporting.

During the busy tax filing period, businesses often miss out on valuable deductions. These could be for home office expenses, business-related travel, or depreciation. By reviewing tax returns, you can identify these missed opportunities, potentially resulting in significant tax savings for your clients. This will enhance your financial well-being and the value of your expertise.

Proactive review and amendment of tax returns are very important. If underreported income or overlooked deductions are found, filing an amended return might be necessary. This process allows your clients to correct errors and optimize their tax outcomes. Regular communication with clients about the importance of thorough documentation and claiming all eligible deductions is an important part of maintaining strong client relationships.

Assess Implications of Filing Extensions and Penalties
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Written by TaxConnections Admin

25 Jun 2024

Enterprise 720 Quarterly Excise Tax E-File Now Available

Don’t wait until the IRS mandates e-file for forms 720 and 8849. Act now to stay ahead of the game.

Visit and Contact us Today at https://akorefederal.com

Still, filing your Excise Tax Returns through paper? It’s time to switch to digital e-filing and eliminate paper returns. The IRS offers an e-filing option for excise tax forms 720 and 8849, and only Akore Federal Excise Tax E-File Software has the enterprise-level solution.

TaxConnections is excited to introduce AKORE Federal Tax Software by Richard Carrier (CEO):

IRS Authorized: Akore is the only e-file Provider with enterprise-level security for excise tax e-filing.
Top-rated Security: Backed by an AKORE Trust Document, ensuring critical security checks and reliability.
e-File 2024 Q3 and Q4: Get e-File ready now with introductory pricing through 12/31/24.

Flexible E-filing Solutions: Akore Federal provides an e-filing service tailored for everyone—individual tax experts, CPA firms handling hundreds of returns, and large corporate filers. No matter the volume, Akore has you covered.

Join the expanding number of companies utilizing Akore’s Federal e-Filing service to not only expedite your refunds and streamline your tax processes, but also to experience the peace of mind that comes with choosing certified, secure excise tax software. Akore’s existing clients are primarily large enterprises that demand professional support and trusted security certification.

Visit and Contact us Today at https://akorefederal.com

Written by TaxConnections Admin

25 Jun 2024

Is Your Research & Development (R&D) Provider The Right Fit For You?

The Research & Development (R&D) tax credit enables companies of all sizes across various industries to reduce their federal income tax for qualified research expenses. Claiming this credit can potentially result in significant cost savings and an increase in cash flow, making it highly beneficial for startup and existing companies.

Working with an R&D tax credit provider well versed in its nuances is crucial to companies wishing to claim this credit. When seeking credible providers to assist in claiming the credit, keep these questions in mind:

Does Your Provider Assess Their Fee Based on Project Scope or a Percentage of Variable Benefit?

When seeking R&D providers, it is important to understand how their pricing is structured. Most providers expect either a fixed or contingency fee—knowing the difference between the two will assist in selecting the provider that will best suit your budgetary needs.

Fixed Fees: This pricing structure is a predetermined charge that the party receiving the service agrees to pay to the party performing the service, regardless of the time or resources expended. Fixed fees are often scoped out by the provider and provide a clear picture of the costs associated with the service. Fixed fee arrangements simplify budgeting for the agreed-upon work.

Contingency Fees: In this pricing structure, a client is charged a percentage of the outcome of the R&D services performed. Contingent percentages generally range between 25% to 40% of the recovered amount. This structure offers less predictability when it comes to budgeting, as there is no guarantee of the amount that may be recovered after the work has been performed.

The main distinctions between these pricing structures lie in how the payments are organized and the various levels of risk they pose to clients engaging in services. Inquiring about a provider’s payment expectations is crucial in selecting the best provider to align with your company’s budget.

Does Your Firm Defend Its Work During an Audit, and Is It Included in Its Fee?

Written by Deborah Roth

25 Jun 2024

Treasury Department And IRS Target Partnership Basis-Shifting Transactions

On June 17, 2024, the Treasury Department launched “a new regulatory initiative to close a major tax loophole exploited by large, complex partnerships.”[1] The loophole: partnership basis-shifting transactions.

In these transactions, a single business that operates through many different legal entities . . . enters into a set of transactions that manipulate partnership tax rules to maximize tax deductions and minimize tax liability. . . . For example, a partnership might shift tax basis from property that does not generate tax deductions (such as stock or land) to property that does (such as equipment). Taxpayers may also use these techniques to depreciate the same asset over and over.[2]

Treasury claims that such “transactions defy congressional intent to avoid tax liability with little to no other economic consequences for the participating businesses.”[3]

To try to fight this problem, the Treasury is issuing Notice 2024-54, announcing its intent to publish proposed regulations to eliminate the tax benefit from these transactions, Proposed Regulation 1.6011-18, which would require taxpayers and their material advisers to report their participation in partnership basis-shifting transactions, and Revenue Ruling 2024-14, which finds that certain partnership basis-shifting transactions lack economic substance and will not be respected.

Treasury believes that this initiative could raise more than $50 billion in tax revenue the next 10 years.[4] These moves come as the Internal Revenue Service has been increasing audit activity involving partnerships after years of such efforts being “severely underfunded.”[5]

Written by TL Fahring

25 Jun 2024

Is It Too Late To Claim the Stimulus Checks? Details Inside

Is it too late to get your stimulus check? The answer is yes for the checks issued in 2020, but there’s still a window of opportunity for the check issued in 2021. Whether you’re a U.S. citizen living abroad or someone who hasn’t yet filed, you need to act swiftly to meet the IRS deadline and claim what you’re owed. This article will help you understand “is it too late to get stimulus check” and the immediate steps to take to ensure you don’t miss out on the 2021 stimulus payment.

KEY TAKEAWAYS

U.S. expats must file their 2021 tax return by June 15, 2025, through the IRS Streamlined Procedure to claim the missed 2021 stimulus check without penalties.
To be eligible for stimulus payments, individuals must meet criteria such as having a Social Security number, income thresholds, and not being claimed as a dependent on someone else’s tax return.
The unclaimed stimulus check can be recovered by filing a tax return with the Recovery Rebate Credit for the relevant tax years and ensuring all personal information matches Social Security records.

UNDERSTANDING THE STIMULUS CHECK DEADLINE FOR EXPATS

The clock has run out for U.S. expats to claim their 2020 stimulus checks. However, the deadline to claim the 2021 stimulus check is still open until June 15, 2025. If you’re a U.S. expat and haven’t claimed your 2021 stimulus check yet, it’s time to take action.

The U.S. government issued three rounds of stimulus checks as part of its COVID-19 relief measures. While the opportunity to claim the 2020 checks has passed, you can still claim the 2021 check if you meet the eligibility requirements.

THE FINAL COUNTDOWN: LIMITED TIME LEFT

Written by TaxConnections Admin

21 Jun 2024

Courtesy Notice: Prepare For Upcoming IRS Mandate: Get E-File Ready Filing Excise Taxes

This is a courtesy notice regarding IRS mandate requiring e-filing on excise tax filings.

Prepare For Upcoming IRS Mandate: Get E-File Ready Filing Excise Taxes

It’s hard to imagine that many large multinational corporations are still preparing excise taxes manually on paper. This is, in fact, the case and previously left large organizations with few choices solving the challenge of filing excise tax returns. Many of the providers were previously small organizations who could not pass the IT security questions required before their software was implemented in a large enterprise software. Finally, an enterprise software solution vetted and approved by large multinational organizations, and approved by the IRS for enterprise size organizations has been successfully developed.

TaxConnections is pleased to announce AKORE Enterprise Excise Tax Software is IRS approved: https://akorefederal.com/wp-content/uploads/2024/06/Akore-Federal-E-File-Brochure.pdf

AKORE’s Enterprise Excise solution is recognized and rated with high approval given AKORE Trust Document certification. This security guarantee involves passing a security questionnaire that most enterprise software companies will ask prior to implementing an outside organizations software. When you are dealing with elite professionals and software this is just good business. Many small mom and pop organizations may not have passed the security test. Be responsible and check for Trust Document Certification and ensure software is approved by the IRS before you buy any excise tax service from an organization.

The IRS will soon mandate that excise tax returns must be e-filed. Now is the time to position your organization at the front of the line for IRS APPROVED e-filing excise tax return support.

Learn More: https://akorefederal.com/

Know The Benefits:

https://akorefederal.com/wp-content/uploads/2024/06/Akore-Federal-E-File-Brochure.pdf

Please Forward And Share This Courtesy Notice With Tax Colleagues

Written by TaxConnections Admin