Wide Open Borders Will Cost Taxpayers Billions: Understand What Is Happening

TEXAS VS US

With the standoff between the Federal Government and the States regarding immigration, the cost to taxpayers is increasing in many ways.  While all of this is going on we need to pay closer attention and watch the tax increases coming through new tax legislation.  It is time for tax professionals to operate at the top of the profession in protecting taxpayers from the tax increases coming to pay for all of this illegal immigration at the taxpayers expense.

According to an article on Reuters, the U.S. Internal Revenue Service plans to hire nearly 20,000 new employees and deploy new technology over the next two years as it ramps up an $80 billion investment plan to improve tax enforcement and customer service.

You should watch this video so you understand what is actually happening so you are wide awake and work together to help taxpayers. This video is a stunner wake up call for us all!

https://www.infowars.com/posts/watch-former-green-beret-commander-gives-critical-analysis-of-border-invasion-announces-major-convoy/

Be part of the solution and share this article and video above.  Thank God we have men like this in the USA you meet in this video!

If you are a tax professional and support small and medium size U.S. businesses, please join us at https://www.taxconnections.com/membership/sign-up.

We have taxpayers calling us for help and referrals constantly. If your professional profile does not appear on our site, they cannot find you!

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Property Tax Cuts As Large As Texas Unprecedented Revenues Lead To Historic Property Tax Legislation

 

Unprecedented state revenues allowed Texas lawmakers this year to propose reducing school property taxes by billions of dollars to help ease some of the burden on property owners through increased exemptions, reductions in school district tax rates and limitations on appraised values for certain properties. It was an arduous journey, with lawmakers tackling the issue in the regular legislative session and in two of the special called sessions in 2023.

Property taxes accounted for slightly over half of the total tax revenue (PDF) for local and state government in 2021 and slightly under half in 2022 (Exhibit 1). This fall, with the passage of Proposition 4, Texas voters elected to put some money back into property owners’ pockets.

EXHIBIT 1: TAX REVENUE BY SOURCE, 2021-2022
IN BILLIONSTYPE OF TAXTAX AMOUNT / PERCENT OF TOTAL TAX17.5%​17.5%20.3%​20.3%7.1%​7.1%7.2%​7.2%24.8%​24.8%25.5%​25.5%50.6%​50.6%47.0%​47.0%OTHER STATE TAXES (click to hide)LOCAL SALES TAXES (click to hide)STATE SALES TAX (click to hide)LOCAL PROPERTY TAX (click to hide)20212022$0$20$40$60$80$100$120$140$160$180
Type of Tax 2021 Tax Amount Percent of Total Tax 2022 Tax Amount Percent of Total Tax
Local Property Tax $73.5 50.6% $79.4 47.0%
State Sales Tax $36.0 24.8% $43.0 25.5%
Local Sales Taxes $10.4 7.1% $12.2 7.2%
Other State Taxes $25.5 17.5% $34.2 20.3%
TOTAL TAXES $145.4 100.00% $168.8 100.0%

Source: Texas Comptroller of Public Accounts

Investing in Public Programs

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Upcoming Changes To Form 6765: What Taxpayers Need To Know For 2024 And Beyond

Upcoming Changes To Form 6765: What Taxpayers Need To Know For 2024 And Beyond

The Internal Revenue Service (IRS) is proposing revisions to Form 6765 which pertains to the Research and Development (R&D) tax credits. These changes, set to be effective for tax year 2024 onwards, aim to capture more qualitative information, thereby potentially impacting how taxpayers approach their filings.

Let’s delve into the specifics of these proposed changes.

New Additions
PRE-SECTION A ADDITIONS
  • The form will introduce two preliminary questions prior to Section A. Of these, one is entirely new and aims to gather details about whether the organization belongs to a controlled group or is under common control.
INTRODUCTION OF SECTION E
  • It will inquire about the number of Business Components (BCs).
  • The section will gather information on officer compensation.
  • It seeks to understand acquisitions and dispositions.
  • It will inquire if there are any new categories of Qualified Research Expenditures (QREs). If the answer is affirmative, the IRS expects taxpayers to update the base to incorporate these categories.
  • It will ask about the use of ASC 730 Directive – but this can only be utilized by taxpayers whose assets are equal to or surpass the $10M mark.
INTRODUCTION OF SECTION F

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Maximizing Section 1202’s Gain Exclusion

Maximizing Section 1202’s Gain Exclusion

The combination of the 21% corporate federal income tax rate and the possibility of qualifying for Section 1202’s gain exclusion has made operating a business through a C corporation an attractive choice.[1]  This article is one of a series of articles and blogs authored by Scott Dolson addressing planning issues relating to Sections 1202 and 1045.  Additional information regarding qualified small business stock (QSBS) planning and the firm’s tax planning group can be found here and in our QSBS Library and Guidebook.

Section 1202 allows a taxpayer to claim a gain exclusion when QSBS is sold, so long as the taxpayer meets all of Section 1202’s eligibility requirements.  Section 1202 places limits on the amount of gain exclusion that can be claimed by a taxpayer with respect to a corporation’s QSBS.  This article explains how the gain exclusion caps work and provides planning suggestions for increasing the amount of available gain exclusion.

Gain exclusion cap basics (including the standard $10 million per-taxpayer per-issuer cap)

Section 1202(b) provides that, for a specific taxable year, a taxpayer’s aggregate per-issuing corporation gain exclusion is generally limited to the greater of (a) $10 million, minus the aggregate prior Section 1202 gain excluded with respect to such issuer (the “10 Million Cap”), or (b) 10 times the taxpayer’s original adjusted tax basis in the issuer’s QSBS sold during the taxable year (the “10X Basis Cap”).[2]

For purposes of the 10X Basis Cap, a taxpayer’s original adjusted tax basis equals the aggregate cash and fair market value of property exchanged for the shares of QSBS sold during the applicable tax year.  If shares of QSBS sold were originally issued in exchange for services, the original adjusted tax basis would be the value of those shares for Section 83 purposes.[3]  Capital contributions with respect to already issued QSBS are ignored for purposes of calculating the 10X Basis Cap. Therefore, capital contributions without the issuance of additional QSBS should be avoided; instead, additional QSBS should be issued in exchange for each money or property contribution, assuming the issuer is still eligible to issue QSBS.[4]

Several key aspects of Section 1202’s gain exclusion cap are as follows:

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IRS Alert: A Limited Group Of Tax Exempt Organizations Will Not Be Able To File Electronically Form 990-T

IRS Alert: A Limited Group Of Tax Exempt Organizations Will Not Be Able To File Electronically Form 990-T 
IRS: Update for Form 990-T, Form 1120-POL filers with upcoming deadlines; e-file unavailable for small number of organizations with earlier due dates
An extension can be filed for both forms or paper file with Form 1120-POL

The Internal Revenue Service alerted a limited group of tax exempt organizations that they won’t be able to electronically file Form 990-T, Exempt Organization Business Income Tax Return, or Form 1120-POL, U.S. Income Tax Return for Certain Political Organizations, until March 17, 2024.

IRS system upgrades mean e-filing of Forms 990-T and Forms 1120-POL (including returns on extension) with due dates from Jan. 15, 2024, to March 15, 2024, are currently unavailable. The IRS notes previous filing data show only about 2,000 Forms 990-T and 1120-POL were electronically filed during this time period, with the vast majority of those involving 990-T. Entities needing to file in this timeframe should follow the below instructions.

Taxpayers with due dates on April 15, 2024, and later will be able to e-file Forms 990-T and Forms 1120-POL on time.

Returns due from Jan. 15, 2024, to March 15, 2024:

  • Form 990-T, Exempt Organization Business Income Tax Return
    A relatively small number of 990-T filers are affected by this.
    Organizations subject to unrelated business income tax (UBIT) are required by law to file Form 990-T electronically. An organization with a Form 990-T due from Jan.15, to March 15, 2024, should request an automatic six-month extension of time to file by submitting Form 8868, Application for Extension of Time To File an Exempt Organization Return, by the due date of the return. The IRS estimates only about 2,000 of the 200,000 Form 990-T filers have a due date in this time period and are affected by this.
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Learn How To Receive United Kingdom R&D Tax Credits

Learn How To Receive United Kingdom R&D Tax Credits

Companies are currently able to claim tax credits for their Research & Development in the UK via two routes, both administered by HMRC. These UK government incentives are designed to encourage innovation by rewarding businesses who work to improve or overcome challenges and uncertainties in their products and processes.

One route is for small and medium size businesses (SMB), the ‘SME R&D tax credit scheme’ (in the UK SME stands for small and medium enterprises). Whilst for larger companies it’s the ‘Research and Development Expenditure Credit (RDEC)’.

Which UK R&D Tax Credits Scheme is Right for Me?

Usually it is the size of your business that decides which scheme to use, but there are other factors that need to be taken into account so it’s important to get specialist advice.

What is the Value of R&D Tax Credits in the UK?

The calculation for SMBs means that companies could claim back up to 33% of the amount they spent on qualifying R&D, however for expenditure on or after  April 1, 2023, the rates will be lowered. From that date, the maximum will be 18.6% for companies with revenue loss, or up to 27% if the company is R&D intensive. For tax purposes, an R&D intensive SMB has qualifying expenditure which represents 40% or more of their total expenditure.

For SMBs the enhancement rate for R&D expenditure on or after April 1, 2023 will be 86% (reduced from 130%) and the tax credit rate reduced to 10% (from 14.5%). R&D intensive companies can still claim a tax credit at 14.5%.

For companies who claim under the RDEC scheme the expenditure incurred on or after April 1, 2023 will increase from 10% of their R&D spending refunded up to a rate up of 15%.

R&D Tax Credits for SMBs

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Governor Youngkin Unveils A New Tax Plan For Virginia

Governor Youngkin Unveils A New Tax Plan For Virginia

On December 20th, 2023 Virginia Governor Glenn Youngkin (R) unveiled the contours of a tax reform plan incorporated into his forthcoming budget. The plan includes three major structural elements: a reduction in the individual income tax rate, a 0.9 percentage point increase in the sales tax rate, and the broadening of the sales tax base to include some “new economy” digital services. There is also a significant expenditure component to the plan, which we will not consider in detail in this analysis.

Income Tax Rate Reduction

The proposed plan includes significant cuts to individual income tax rates in Virginia without changing the existing bracket structure, starting from the calendar year 2025. Under the plan, the state would continue to have four relatively narrow income tax brackets. However, the current rates of 2 percent, 3 percent, 5 percent, and 5.75 percent will be reduced to 1.75 percent, 2.65 percent, 4.40 percent, and 5.10 percent, respectively. The top marginal rate would go down by 0.65 percentage points (a reduction of 11.3 percent).

Table 1. Current and Proposed Individual Income Tax Rates in Virginia

Source: Governor Youngkin’s tax plan.

According to initial estimates of the plan’s impact on general fund revenues, individual income tax revenues would decline by $2.3 billion in FY 2026, the first full fiscal year in which the rate reductions would be in effect. (Income tax collections would decline by $1.1 billion in FY 2025, which spans half of tax year 2024, before the implementation of rate reductions).

The proposed income tax rate reduction will make the state more competitive, especially considering that many neighboring states have either traditionally had lower tax rates (as is the case for Pennsylvania) or recently reduced their top marginal tax rates and improved their overall tax structure (as is the case for West Virginia and North Carolina).

Sales Tax Rate Increase

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New 2024 California Law: Taxpayers Giveaway To Illegal Immigrants

New 2024 California Law: Taxpayers Giveaway To Illegal Immigrants

According to Carl DeMaio of Reform California,

Illegal Immigrants Will Get a Bunch More Free Stuff at Your Expense!

Despite the fact that California faces a massive $68 billion deficit this year, Gavin Newsom and California Democrats are continuing to divert billions of dollars in state taxpayer funds to provide a wide range of free services and benefits to illegal immigrants – including completely free healthcare.

In 2015, California Democrats started providing free taxpayer-funded healthcare services to illegal immigrants 19-25 and those over 50.  Starting January 1, 2024, there will be no age restriction to the free taxpayer-funded healthcare services to illegal immigrants.

Over 700,000 additional illegal immigrants will receive new healthcare benefits as of January 1, 2024 – making the total number of illegal immigrants eligible for free taxpayer-funded healthcare 2.4 million! The cost to taxpayers? $5-7 billion per year!

That’s not all. To add insult to injury, California Democrats are using $60 million in state taxpayer funds to hire free lawyers that illegal immigrants can use to sue our own government as well as fight deportation.

And now California Democrats are even giving out taxpayer-funded goodies to foreign citizens! Mexican citizens who still live in Mexico will be allowed to receive “in-state tuition discounts” at California colleges!

“California is incentivizing human trafficking by giving away taxpayer-funded welfare to illegal immigrants – and it has to stop if we are to secure the border,” DeMaio says.

Want To contact California representatives? https://www.sos.ca.gov/elections/who-are-my-representatives

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Tax Deductions And Credits Are Available For U.S. Expatriates

There are a few deductions and exemptions available to a U.S. person who lives and works overseas. These will help you to lower your expat taxes and might even get you a refund.

If you meet certain requirements, you may qualify for the foreign earned income and foreign housing exclusions and the foreign housing deduction. The most common deduction is the Foreign Earned Income Exclusion, which is calculated on Form 2555. If you qualify for this you may exclude up to $108,700 of your foreign earned income. To qualify, you will need to meet either the Physical Present Test or Bona Fide Resident Test for living outside of the U.S.

Foreign Housing Exclusion or Deduction is another option that can save you some money on your taxable income. You need to be either a salaried employee, a wage earner or a self-employed individual to qualify for this deduction. It’s in an addition to FEIE and increases the exempted income by the amount of your qualified housing expenses. Depending on the country of your residence, the allowable deductions for the foreign housing will vary and are subject to limitations.

Tax credits allow you to lower the tax due after your taxable income has been fully calculated. Your tax credit may include what you have already paid to your resident country. Foreign Tax Credit is useful for any expat who has paid taxes overseas. This option does not require a person to prove their residence in an overseas location. If a U.S. citizen works overseas or is involved in foreign investments, it is likely that they have paid taxes to a foreign government. If the tax rate of the foreign country is equal to, or greater than, the U.S. tax rate, the Foreign Tax Credit will successfully rid the expat of any U.S. tax obligation on that amount.

Use Form 1116 “Foreign Tax Credit” to figure out the amount of foreign tax paid and calculate the credit. To qualify for this credit, you will need to meet the following requirements:

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Uptick In Cost Segregation Audits (Complimentary Webinar With CPE Credit)

Uptick In Cost Segregation Audits
January 31st, 2024
8:00AM PST I 10:00 A.M. CST | 11:00 A.M. EST
After registering, you will receive a confirmation email containing information about joining the webinar.
Learning Objectives Include:

After this course, the practitioner will:

  • Understand the impact of Inflation Reduction Act funding on IRS staffing
  • Comprehend the procedural and substantive changes in how the IRS approaches cost segregation audits
Prerequisites:
  • Two years prior experience preparing business federal income tax returns. No advance preparation is required.
Recommended Credit:
  • 1.0 hours CPE in the field of Taxes delivered by Group Internet

SPEAKERS:

Brian Coddington

Senior Director of Tax Accounting Methods

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Taxpayers Should Continue To Report All Cryptocurrency, Digital Asset Income

 Taxpayers Should Continue To Report All Cryptocurrency, Digital Asset Income

WASHINGTON — The Internal Revenue Service today reminded taxpayers that they must again answer a digital asset question and report all digital asset related income when they file their 2023 federal income tax return, as they did for their 2022 federal tax returns.

The question appears at the top of Forms 1040, Individual Income Tax Return; 1040-SR, U.S. Tax Return for Seniors; and 1040-NR, U.S. Nonresident Alien Income Tax Return, and was revised this year to update wording. The question was also added to these additional forms: Forms 1041, U.S. Income Tax Return for Estates and TrustsPDF; 1065, U.S. Return of Partnership Income; 1120, U.S. Corporation Income Tax Return; and 1120-S, U.S. Income Tax Return for an S Corporation.

Depending on the form, the digital assets question asks this basic question, with appropriate variations tailored for corporate, partnership or estate and trust taxpayers:

At any time during 2023, did you: (a) receive (as a reward, award or payment for property or services); or (b) sell, exchange, or otherwise dispose of a digital asset (or a financial interest in a digital asset)?

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What Is A 481(a) Adjustment?

What Is A 481(a) Adjustment?

A 481(a) adjustment is required in order to prevent duplication or omission of income or deductions when the taxpayer has changed their method of accounting, according to the IRS.

Any taxpayer filing changes in their accounting methods needs to file an IRC section 481 a adjustment and will need to submit Form 3115. This includes:

  • Corporations
  • S Corps
  • Individuals
  • Trusts
  • Partnerships
How To Report 481(a) Adjustment on Tax Return

To report a 481(a) adjustment on a tax return, IRS Form 3115 is required. This form is also known as the Application for Change in Accounting Method and is required for any taxpayer that either changes their accounting method or revokes or makes certain late elections.

Depending on whether you are filing for an automatic change request or a non-automatic change request will determine the exact information you need to provide.

Completing this form and filing your 481(a) adjustment can be very complicated. It requires a significant amount of detailed information and detailed calculation based on relevant account balances.

The Form 3115 will ask for the following:

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