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19 Dec 2023

Qualifying Expenditures For The R&D Tax Credit

Qualifying expenditures for the R&D tax credit include salary and wages, supply costs, computer rental or lease, and contractor costs.

Salary & Wages

There are generally three categories of employees performing research:

Employees that perform Direct research. This includes people specifically performing the activities, (researchers, engineers, CAD associates, project managers, etc.) and is the core of the credit.
Employees that Directly Supervise research. This includes anyone who is directly supervising the employees doing the direct research.
Employees that Directly Support research. This includes anyone who is directly supporting research efforts. For example, let’s say a researcher has a direct assistant who is strictly taking notes and accumulating data. Their time assisting the direct researcher is also included. Similarly, a person testing prototypes and first articles would also be considered direct support.

Supply Costs

If you are prototyping and testing materials, the cost of those materials can be included. For example, the materials associated with prototype builds are research costs as are the costs of materials used in the evaluation of new formulations of beauty products can be included as supply costs.

Written by Rachel Bishop

19 Dec 2023

Student-Athletes Involved In Name Image Likeness (NIL) Agreements Should Be Aware Of Their Tax Obligations

Collegiate athletics is a competitive and popular multibillion dollar business industry. With television rights deals, conference realignment, recruitment, and much more, collegiate athletics garner significant media coverage. One topic receiving significant recent attention is the area of Name, Image, and Likeness (NIL) agreements, which allow student-athletes to financially benefit from their NIL. Because of the growing influence of student-athletes as celebrities in social media and their communities, the attention surrounding NIL is not surprising. NIL opportunities have provided new revenue sources for student-athletes that, in some instances, may reach significant sums according to some media outlet rankings of the highest estimated financial value of student-athlete NIL agreements. Due to the potential tax consequences, student-athletes should exercise appropriate due diligence before entering into NIL agreements. It is crucial to follow relevant IRS and state guidance on how to report and pay taxes on NIL income.

TAS has developed and published educational tax resources for student-athletes on our NIL Get Help page to highlight general information, including federal tax reporting, federal tax withholding, estimated tax payment, and return filing requirements associated with NIL income. I want to bring additional attention to this issue to help educate prospective and current student-athletes and their families regarding important federal tax considerations.

National Collegiate Athletic Association Case Law and NIL Interim Policy Create New Challenges

NIL contracts are a relatively new phenomenon, which may have legal implications on all parties involved. The landscape of collegiate athletics changed on June 21, 2021, when the U.S. Supreme Court ruled in National Collegiate Athletic Association v. Alston that student-athletes could benefit from their NIL. After Alston, the National Collegiate Athletic Association (NCAA) enacted an Interim NIL Policy, many states enacted NIL legislation, and for the first time, student-athletes were able to benefit from their NIL. On October 26, 2022, the NCAA issued new guidance clarifying institutional involvement in enrolled student-athletes’ NIL activities.

With so much activity during its infancy, it did not take long for NIL agreements to present complicated issues, including governing legal authority. In some instances, respective state NIL laws may conflict with the NCAA’s universally applied NIL legislation and policies. On June 27, 2023, the NCAA published an NIL Update Memo providing answers to frequently asked questions and maintaining that NCAA legislation and policy is the governing authority when applicable state NIL laws conflict.

Written by National Taxpayer Advocate

19 Dec 2023

Cryptocurrency: Tax Basics And Income Considerations

Cryptocurrency and other digital assets such as nonfungible tokens often feel like an unexplored universe, where the laws of nature haven’t yet been discovered. Where the system that is being developed, and the rules that will govern, have the potential to upend the current economic structure. As that monumental shift continues to grow, and current rules, such as existing tax law, are being applied to digital assets, certified public accountants, tax attorneys, and enrolled agents are acquiring the skills and experience necessary to assist cryptocurrency holders with their tax compliance requirements. Some advisors are even navigating the sparse but developing IRS rules and notices to provide planning advice and tax management strategies. While it is key to have knowledgeable advisors helping you manage your tax responsibility, it is also helpful for the cryptocurrency owners and investors themselves to have a basic understanding of the following ways in which their cryptocurrency transactions may generate a tax bill.

INCOME EVENTS:

The federal government currently considers cryptocurrency to be a form of property, rather than currency. As a result, certain transactions, such as making a payment using cryptocurrency or exchanging one type of cryptocurrency for another, might actually generate an income tax liability. Some potential income recognition events include the following:

Receiving cryptocurrency as payment for goods or services: A recipient is taxed on the value of the crypto that such recipient receives as payment for selling goods or performing services. The taxable amount is based on the value of the coin at the time it is received. Cryptocurrency values continue to fluctuate dramatically, so it’s possible that by the time the recipient’s tax payment is due, the coin has decreased in value to where it’s worth less than the tax that’s due on it. It is therefore important to set aside sufficient cash in US dollars to pay income tax on cryptocurrency that is received as payment for goods or services. In addition to being subject to income tax, the value of the coin received as payment may be subject to self-employment tax if the payment is connected to a trade or business.
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Written by Michael Cohen

15 Dec 2023

250 Motivational Quotes To Inspire You – A Great Inspiration Gift!

Inspiration is a great gift with this complimentary eBook! Inspiration propels a person to greater possibility, and transforms the way one views their own capabilities. Highly successful people use a daily dose of inspiration to motivate themselves and their passion for their work. You can use this eBook to start your day with inspiration.

We have compiled a complimentary eBook of more than 250 Motivational Quotes from famous people for you to read each day. View them for yourself or distribute them daily to your team members. Great thoughts create great results.

“Be kind whenever possible.It is always possible.” ~ Dalai Lama

“Victory belongs to the most persevering.” ~ Albert Einstein, Theoretical Physicist

“Believe you can and you are halfway there.” ~ Theodore Roosevelt, 26th U.S. President

“Strength does not come from physical capacity. It comes from indomitable will.” ~ Mahatma Gandhi

“An investment in knowledge pays the best interest.” ~ Benjamin Franklin, Inventor, Author, Politician

REQUEST 250 MOTIVATIONAL QUOTES AND INSPIRATIONS eBOOK

This is the time of year we receive many referral requests from taxpayers. Make certain you are a TaxConnections Member today.

Written by TaxConnections Admin

15 Dec 2023

Highest Corporate Tax Rates Around The World: Learn How U.S. Presidential Candidates Propose To Tax U.S. Taxpayers

(VERY SPECIAL SURPRISE AT END OF THIS BLOG POST- LIMITED TIME ONLY AVAILABILITY FOR NEW TAXCONNECTIONS MEMBERS ON DECEMBER 15th or 16th ONLY, 2023)

According to the Tax Foundation, the Highest Statutory Corporate Income Tax Rates in the World, 2023 are:

20 TOP CORPORATE TAX RATES IN 2023

Also, we recommend you visit the Tax Foundation sites analysis on each 2024 Presidential candidates view on taxes. The non-profit Tax Foundation provides excellent insight on what you are actually voting for with each Presidential candidate’s views regarding tax increases or decreases.

Go to this link before you vote: https://taxfoundation.org/research/federal-tax/2024-tax-plans/ . You can compare the tax views of Presidential candidates: Joe Biden, Donald Trump, Ron DeSantis, Vivek Ramaswamy, Nikki Haley, Chris Christie, Robert Kennedy Jr., Marianne Williamson, and Dean Phillips at this link. Good luck to you all during your heartfelt and hardworking journey across the United States of America discussing your views on taxes.

Commentary by the tax professional community is greatly appreciated by our loyal readers. If you are not a member of TaxConnections, everyone joining us now and on December 15th or 16th will receive an extra year membership if they join on December 15th 2023 only. All new members who join on December 15th or 16th only will benefit from this one time only offer.

Contact kat@taxconnections.com via email to ask for help in optimizing your Professional Page and to position yourself in the direct path of taxpayers searching for your tax expertise on www.taxconnections.com. You can also call 858.999.0053 or text me at 858.232.4415 in advance to set up a time to walk you through membership set up. We want to meet you and learn about your specific needs. We offer firm packages, too.

Merry Christmas,

Kat Jennings, CEO

www.taxconnections.com

Written by Kat Jennings

15 Dec 2023

IRS Issues Standard Mileage Rates For 2024

IRS Mileage rate increases to 67 cents a mile, up 1.5 cents from 2023

The Internal Revenue Service issued the 2024 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2024, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

67 cents per mile driven for business use, up 1.5 cents from 2023.
21 cents per mile driven for medical or moving purposes for qualified active-duty members of the Armed Forces, a decrease of 1 cent from 2023.
14 cents per mile driven in service of charitable organizations; the rate is set by statute and remains unchanged from 2023.

These rates apply to electric and hybrid-electric automobiles as well as gasoline and diesel-powered vehicles.

The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

It is important to note that under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Taxpayers also cannot claim a deduction for moving expenses, unless they are members of the Armed Forces on active duty moving under orders to a permanent change of station. For more details see Moving expenses for members of the armed forces.

Written by TaxConnections Admin

14 Dec 2023

Common Misconceptions About R&D Tax Credits

The Research & Development (R&D) tax credit can enable businesses to increase cash flow and savings, reduce the Federal income tax rate, and receive Federal and State dollar-for-dollar income tax reductions. Specifically, a wide variety of businesses can potentially offset up to $500,000 in payroll tax liability for qualifying activities.

However, there are many misconceptions about the R&D tax credit that prevent businesses from taking advantage of it.
Here are the 6 most common myths:

Myth 1: The R&D Tax Credit is Only For Businesses with a Large Amount of Revenue

Many people falsely believe the R&D tax credit is only for businesses with a large amount of revenue. However, businesses with a revenue of less than $5 million in the current year are able to claim the credit.

Myth 2: Start-Ups Can’t Claim the R&D Tax Credit

Start-ups and small businesses can claim the R&D tax credit. If your business has 5 years or less in revenue, you are eligible for the credit (as long as you meet the additional qualifying criteria, which include having $5 million or less in revenue in the current year and conducting qualifying research activities).

Myth 3: The Business Must Conduct Scientific Research to Claim the Tax Credit

A business does not have to conduct scientific research in order to claim the R&D tax credit. There are a large number of activities that qualify, including (but not limited to) automating or improving internal manufacturing processes, designing tools or fixtures, integrating new equipment, developing financial pricing models, developing data centers, integrating APIs and similar technologies, and many more.

Written by Deborah Roth

14 Dec 2023

U.S. Senate Committee On Finance: Enlightening Discussions On Increasing Your Taxes

The US Senate Committee On Finance just held a hearing readers will find very revealing on where the U.S. government stands about taxing the American taxpayer even higher. The Us. government has called in their own witnesses and you should know what they are saying. After you learn what is going on we encourage our tax expert community to express their own point of view and post it in the comments below prior to sending their Statement For the record to enlighten TaxConnections readers even further.

Statement By Chairman Ron Wyden, Democrat, Oregon – https://www.finance.senate.gov/imo/media/doc/11092023_wyden_statement.pdf

Statement By Mike Crapo, Republican, Idaho – https://www.finance.senate.gov/imo/media/doc/11092023_crapo_statement.pdf

Testimony By Witness, Chye-Ching Huang, Director Tax Law Center, New York University, NY: https://www.finance.senate.gov/imo/media/doc/11092023_huang_testimony.pdf

Testimony By Witness, Morris Pearl, Patriotic Millionaires, New York, NY: https://www.finance.senate.gov/imo/media/doc/11092023_pearl_testimony.pdf

Testimony By Witnesses, William McBride, VP Federal Tax Policy and Stephen J. Entin Fellow In Economics: https://www.finance.senate.gov/imo/media/doc/11092023_mcbride_testimony.pdf

How do I submit a statement for the record?

Any individual or organization wanting to present their views for inclusion in the hearing record should submit in a Word document, a single-spaced statement, not exceeding 10 pages in length. No other file type will be accepted for inclusion. Title and date of the hearing, and the full name and address of the individual or organization must appear on the first page of the statement. Statements must be received no later than two weeks following the conclusion of the hearing.

Statements can be emailed to:

Statementsfortherecord@finance.senate.gov

Statements should be mailed (not faxed) to:

Senate Committee on Finance
Attn. Editorial and Document Section
Rm. SD-219
Dirksen Senate Office Bldg.
Washington, DC 20510-6200

Written by TaxConnections Admin

13 Dec 2023

A Supremely Big Court Case Affecting American Taxpayers- Moore V. United States

The U.S. Supreme Court Case is considering a case involving taxing unrealized gains that would change how all wealth is taxed in the United States. The Moore V. United States case is now under consideration with an answer to come likely in June 2024. The case is about the 2017 Tax Cuts and Job Act(TCJA) and the Moore case argues it unconstitutional.

The one-time tax is levied on U.S. Taxpayers with ownership in foreign corporations.
The Moore’s did not receive income from their ownership in a foreign corporation, and argue only realized income can be taxed under the 16^th Amendment of the U.S. Constitution.
“ARTICLE XVI. The Congress shall have the power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”

According to broadcaster Mike Adams of Natural News(starts at 14:44 at his broadcast): https://www.brighteon.com/866e521a-a44a-48b0-9cc2-302347bf0490

If the U.S. Supreme Court sides with the Federal Government on the Moore V. United States case, it will allow the Federal Government to essentially confiscate virtually all assets of the American people Including your stocks, land, home, gold, almost everything! Adams says this case is challenging the constitutionality of a tax law which was part of a law enacted in 2017 under the Tax Cuts and Jobs Act. This law requires a one-time repatriation on unrealized profits that are held overseas. For instance, if you were an investor in an overseas company and that company never paid you profits but reinvested its own dividends, and you maintain your ownership of the company, you are supposed to pay taxes on the unrealized gain, even though you never got paid. So this couple, Charles and Kathy Moore sued the U.S. government after they were billed fourteen thousand seven hundred dollars or so as a tax obligation because this company they invested in India have rolled over some dividends, but the company never paid the Moore’s any money but the IRS said ‘”You owe us fourteen thousand seven hundred dollars.” The Moore’s challenged this and the case has gone to the U.S. Supreme Court, in fact, oral arguments have already taken place about a week ago. The U.S. Supreme Court is set to rule on this case by June 2024.

Written by TaxConnections Admin

13 Dec 2023

10 Commandments For Travel Time As Hours Worked

The Fair Labor Standards Act (“FLSA”) is a statutory regime with teeth. Employers are wise to understand the ins and outs of the FLSA and how it demands that employers properly classify employees and compensable work time, deduct from pay, and record keeping.

This Freeman Law Insights blog addresses when a non-exempt employee must, under the FLSA, be paid for time spent in travel. If a state law provides greater benefit than the FLSA, the state law may control in a particular situation.

Cory’s 10 Commandments for Travel Time as Hours Worked (or Not) under the FLSA:

General Rule. Normal travel from home to work and back is not worktime.
General Rule Elaborated. Time spent in home-to-work travel by an employee in an employer-provided vehicle, or in activities performed by an employee that are incidental to the use of the vehicle for commuting, generally is not “hours worked” and, therefore, does not have to be paid. The general rule applies only if the travel is within the normal commuting area for the employer’s business. An exception is where an employee travels home from work and then is called back to work for an emergency matter; that time in travel is compensable.
Travel During Work Hours. Time spent traveling during normal work hours is considered compensable work time.
One-Day Assignment. Travel from home to work on special one-day assignment in another city is compensable. Normal deductions for meal periods.
Travel is Principal Activity. Time spent by an employee in travel as part of the employee’s principal activity, such as travel from job site to job site during the workday, constitutes hours worked.
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Written by Cory Halliburton

12 Dec 2023

FBAR Penalties: Everything You Need To Know

If you’re required to file an FBAR (Foreign Bank and Financial Accounts Report) and fail to do so in a timely and accurate manner, you may face significant consequences, including civil monetary penalties, criminal penalties, or both.

For U.S. persons who discover they should have filed an FBAR in previous years, it’s important to take immediate action. The recommended course of action is to electronically file the overdue FBAR using the BSA E-Filing System. This article will delve deeper into the types of penalties associated with FBAR non-compliance, how these penalties are assessed, and the steps to become compliant.

UNDERSTANDING FBAR AND ITS FILING OBLIGATIONS

The FBAR is a critical reporting requirement for U.S. persons holding foreign bank accounts. This requirement is triggered when the total value of an individual’s foreign financial assets exceeds the reporting threshold of $10,000 at any time during the calendar year. It’s crucial to understand that these assets include not just bank accounts, but also other financial assets held overseas. Failing to meet these filing obligations can lead to significant penalties, as detailed in the sections below.

CIVIL PENALTIES FOR FBAR NON-COMPLIANCE: AN OVERVIEW

The civil monetary penalties for failing to comply with FBAR requirements come with various upper limits, but there is no set minimum. These limits are subject to annual adjustments for inflation, as mandated by the Federal Civil Penalties Inflation Adjustment Act of 1990 and its subsequent amendment, the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015. For penalties assessed after August 1, 2016, linked to violations that occurred post-November 2, 2015, the adjusted maximum penalty amounts are outlined in Title 31 of the Code of Federal Regulations (CFR), section 1010.821, under the Penalty Adjustment Table. This section details the inflation-adjusted civil penalties that can be imposed for failing to meet the FBAR reporting and recordkeeping obligations.

FBAR PENALTIES FOR NON-WILLFUL FAILURE TO FILE

Written by Olivier Wagner

12 Dec 2023

IRS Extends R&D Tax Credit Claims Transition Period

What Does the IRS Extending the R&D Tax Credit Claims Transition Period Mean?

The IRS extended the transition period for taxpayers to perfect their refund claims for R&D Tax Credits through January 10, 2024. Taxpayers are now provided 45 days to perfect a research credit claim for a refund prior to the IRS’s final determination on the claim, according to the IRS.

The transition period was initially listed at 30 days and was set to expire on January 10, 2023.

An R&D tax credit provides businesses with a tax benefit for conducting qualified research activities. When submitting an R&D claim for refund, it’s essential to provide specific details and supporting information.

Information Required for Submitting an R&D Tax Credit Claim

According to the IRS, to claim a Section 41 R&D tax credit refund, taxpayers are required to provide the following information:

Taxpayers can submit their R&D tax credit claim by attaching IRS Form 6765 Credit for Increasing Research Activities to their amended return and a statement with the above information. The above information may sound like a lot, but with the proper assistance, it is very manageable.