Archive for Tax Policy

California “Goes Criminal” With Revenue Recovery And Collaborative Enforcement Team

California Governor Jerry Brown signed Assembly Bill 576 into law on October 7, 2013, authorizing a pilot program to create the “Revenue Recovery and Collaborative Enforcement Team” (RRCET) consisting of an alliance primarily between the California Department of Justice (DOJ), the Franchise Tax Board (FTB), the State Board of Equalization (BOE), and the Employment Development Department (EDD) in an effort to combat “criminal tax evasion associated with the underground economy.”

In addition to the agencies listed above, the following agencies may participate in the pilot program in an advisory capacity to the team:

• California Health and Human Services Agency. Read More

Written by | Posted in North America • Tax Fraud/Evasion/Crimes • Tax Policy

The President’s Budget Proposal Attempts To Permanently Extend The Research And Experimentation Tax Credit

President Barrack Obama unveiled his $ 3.9 trillion Fiscal Year (hereinafter “FY”) 2015 budget proposal on March 4th. The President’s FY 2015 budget proposal reflects the framework set out in his 2014 State of the Union Address to promote job creation and economic growth. Clearly, the Research and Experimentation Tax Credit (hereinafter “RTC”) was a focal point of his budget as the RTC recently expired on December 31, 2013. It should be duly recalled that the RTC was originally added to the Internal Revenue Code (hereinafter “the Code”) in 1981 as a temporary provision of the Code at a time when research and experimentation based jobs were alarmingly declining in the United States and the RTC was designed to stimulate job growth and investment within the United States and its possessions (e.g., Puerto Rico and Guam). Read More

Written by | Posted in Federal • IRS • Tax Policy

The White House Releases its Fiscal Year 2015 Budget Proposal

President Obama released a fiscal year 2015 budget proposal on March 4th of 2014 that includes tax increases primarily targeting multinational corporations and high-income individuals to pay for lower- and middle-class tax relief, increased spending on transportation infrastructure, and deficit reduction. As part of that process, the White House also released what’s known as the “Green Book,” which provides the Treasury Department’s explanations of the revenue provisions in the budget proposal.

Key Provisions Affecting Individual & Corporate Tax Consequences

While the tax section of the President’s budget renews a number of provisions from his previous annual submissions, it does include some new and noteworthy revenue raisers, such as proposals to: Read More

Written by | Posted in Corporate • Expatriate • International • Tax Policy • Tax Provision/Tax Reporting

2015 Fiscal Year Budget Request Released To Congress

President Barack Obama released his fiscal year 2015 budget request to Congress on Tuesday March 4, 2014 and lawmakers will promptly ignore it.

But the annual ritual highlights his policy priorities for the coming year and serves as a Democratic Party manifesto as Democrats seek to draw a contrast with Republicans ahead of congressional elections in November which include Overseas Tax Proposals.

The administration wants new limits on overseas tax avoidance by corporations by seeking to prevent them from playing one country’s tax rules against anothers.

At the moment, big corporations must pay the top 35 percent corporate tax rate on foreign profits, but not until those profits are brought into the country. Read More

Written by | Posted in Corporate • Expatriate • International • Tax Policy

Casualties Involving Law Violations

This article is a follow-up to my previous article “Casualties” on casualty loss deductions in which I set forth the nature of a casualty, qualifying events, how to determine the amount of the loss, and the allowable deduction.

[This case was reported in J.K. Lasser’s Monthly Tax Letter, February, 2014].

Taxpayers built two homes but did not obtain the necessary building permits because they wanted to live without government interference. Several years later, the homes were destroyed by a fire and the taxpayers claimed a casualty loss in the year of destruction. [Note: the article did not say when this occurred].

The IRS disallowed the loss on the grounds that the taxpayers did not comply with state Read More

Written by | Posted in Real Estate • Tax Policy

To Roth Or Not To Roth… That Is The Question

Are you wondering what Hamlet has to do with Individual Retirement Accounts (IRA)? I have an answer for that!! Recently revisiting the Shakespeare play ‘Hamlet’ and listening to the opening of the soliloquy in the “Nunnery Scene”, “To be, or not to be, that is the question–” etc., I wondered how many times we face the same questions albeit in not such dire straits as Hamlet!

The question I get asked most of the time in my practice, is whether to pick a Traditional IRA or a Roth IRA! Let’s quickly touch upon the basics:

Who Can Open A Traditional IRA: According to the IRS’ Pub 590, “You can open and make contributions to a traditional IRA if: Read More

Written by | Posted in Individual • Tax Policy

Broken Tax Code Offered As Reason For Tax Reform

The House Ways and Means Committee has a new website to promote tax reform. There is also a two minute video (see below). The three reasons for reform are interesting as to what they might mean.

1. Make the Tax Code simpler and fairer. The video notes that the getting “rid of junk” in the Tax Code would reduce it by about 25%. So, what does “junk” mean? I think there are several special rules that do not need to be in our tax law, but I’m doubtful as to whether they are considered part of the “junk.” For example, there is no reason to allow for interest expense deductions for a home equity debt or debt on a vacation home. These are also costly deductions. But, they seem to be popular, even though they are claimed by less than one-third of individuals. Read More

Written by | Posted in Federal • IRS • Tax Policy

What’s New In The 2013 Form 1120-S?

The Internal Revenue Service has released a final version of the 2013 Form 1120-S, U.S. Income Tax Return for an S Corporation, and final instructions reflect what is new on as described below:

Form 1125-E, Compensation of Officers. For tax years beginning after 2012, use Form 1125-E if the S corporation deducts an expense for compensation for officers and has total receipts of $500,000 or more. See the instructions for lines 7 and 8.

New Schedule B-1 (Form 1120S), Information on Certain Shareholders of an S Corporation. S Corporations that check the “Yes” box for question 3 of Form 1120S, Schedule B, will need to complete new Schedule B-1 (Form1120S). See Schedule B-1 Read More

Written by | Posted in IRS • Tax Policy

What Is A “Qualifying Relative” For U.S. Tax Purposes: IRC 152

Wading through the convolution required to identify specifically who qualifies as a relative for income tax reporting purposes oftentimes can be difficult, not because the actual tax code is difficult to understand in these regards or even subject to much interpretation. No, it is difficult because the subject matter is best addressed with discretion gained only through experience, particularly in mixed company. In fact I charge hazard pay for the pleasure as the topic usually tends to incite cockles.

Today a husband/wife came in and the husband asked point blank whether “that mouth being feed across the table every night is a qualifying relative” for federal tax purposes. After picking myself up off the floor I proceed to explain as gracefully as possible that a qualifying relative is an individual who meets all of the following requirements: Read More

Written by | Posted in Federal • IRS • Tax Policy

A Weapon In The IRS’s Criminal Arsenal – Section 6050I – Part V

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.

E. Tax Policy

Does section 6050I represent good tax policy? The Internal Revenue Code has long been used for non-tax reasons. Economically and socially desirable conduct is encouraged through exclusions from tax and an allowance of deductions. For example, the Code encourages donations to charity by providing for charitable deductions. At the same time, Read More

Written by | Posted in IRS • Tax Fraud/Evasion/Crimes • Tax Policy

A Weapon In The IRS’s Criminal Arsenal – Section 6050I – Part IV

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.

D. Form 8300 Disclosures

Section 6050I’s use as a weapon in the IRS’s criminal arsenal began in 1998. That year, Congress authorized the Secretary of the Treasury to disclose Form 8300s to officers and employees of any federal agency for the administration of federal criminal statutes not Read More

Written by | Posted in IRS • Tax Fraud/Evasion/Crimes • Tax Policy
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