Tax Blog | TaxConnections

19 Sep 2014

Eggshell Audit – What You Need To Know

What is an Eggshell Audit?

An eggshell audit is one in which the taxpayer has filed a fraudulent return in a prior year and the auditor is not aware of potential evidence of civil tax fraud or a criminal tax violation. A tax return is fraudulent if an additional tax is owed due to (i) a deliberate intent to evade tax or (ii) there is a willful and material submission of false statements/documents in connection with the return. It is considered an “eggshell” audit because of the care one must take – i.e. walk on eggshells – to guide the examination and prevent suspicion by the auditor.

What are the Risks of an Eggshell Audit?

Written by Advertorial | Posted in Audit • Tax Fraud/Evasion/Crimes

18 Sep 2014

Lights, Camera, Action and Tax Cut! Spotlight on California’s Film Tax Credit Program

In a highly strategic effort to mitigate the exodus of filming to other states throughout the United States as well as other countries, California lawmakers enacted an increase to its Film Tax Credit Program on September 18th to more than triple the annual credits available from $100 million to $330 million, and to extend the program through the year 2020.

The new California law significantly enhances the California Film Tax Credit Program which will now allocate the available annual pool of credits 5% to independent films; 35% to feature films from major players; 20% to relocating television series; and 40% to new television series, pilots, movies-of-the-week and mini-series. Read More

Written by Peter J. Scalise | Posted in Specialty Tax Incentives • State And Local Tax (SALT)

18 Sep 2014

Lights, Camera, Action And Tax Cut! Spotlight On The Film Incentive Reform Act of 2014

Rep. Collin Peterson, D-Minn., has introduced new legislation that if passed into law would amend I.R.C. § 181 to disqualify certain movie and television producers from receiving tax incentives from the federal government if any of the production is performed outside the United States or its possessions. The bill, known as the Film Incentive Reform Act of 2014, would amend I.R.C. § 181, to change the requirements required to expense the cost of qualified film, television, and theatrical productions.

As a background, The American Federation of Musicians (hereinafter “AFM”) strategically lobbied Congress in 2003 and 2004 to add § 181 to the Code through the American Job Creation Act of 2004 which outlines the treatment of qualified film and television production expenditures for the purposes of providing tax incentives for domestic film Read More

Written by Peter J. Scalise | Posted in Specialty Tax Incentives

18 Sep 2014

Transfer Pricing: 25% Rule of Thumb Not Applicable To Determining Royalty Rates

Attached please find a recent U.S. Court of Appeals for the Federal Circuit case (September 16, 2014 in VirnetX, Inc. v. Cisco Sys., Inc.) in which a U.S. court finds again the “25 percent rule of thumb” to determine royalty rates inadmissible:

“[W]e agree with the courts that have rejected invocations of the Nash theorem without sufficiently establishing that the premises of the theorem actually apply to the facts of the case at hand. The use here was just such an inappropriate “rule of thumb.” Previously, damages experts often relied on the “25 percent rule of thumb” in determining a reasonable royalty rate in a hypothetical negotiation. That rule hypothesized that 25% of the value of the infringing product would remain with the patentee, while the remaining 75% would go to the licensee. [W]e held the “25 percent rule of thumb” to be inadmissible Read More

Written by Daniel Erasmus | Posted in International • OECD • Transfer Pricing

18 Sep 2014

Charity Begins At Home – Part 1

I had a strange experience on my door step with a man selling magazine subscriptions for a Charitable Organization the other day. To confirm his legitimacy he even showed me a check a neighbor had written for $50 and advised my donation to his organization would be tax deductible!

Most of us, through out the year are approached by various charities either personally or on the telephone or through letters. The callers may want you to pledge an amount that instant.

Financial stress has hit hard all round, both charities & donors are strapped for funds. My policy when approached thus in most cases is to ask for more information about the Read More

Written by Manasa Nadig | Posted in Tax Deductions • Tax Tips

18 Sep 2014

Taxpayers Rights When Audited By Tax Authorities In South Africa (Chapter 7.2)

Posted in sections, this is my Doctoral Thesis on taxpayers rights when audited by the tax authorities in South Africa – equally applicable to many English-based law systems in Africa and abroad (eg. India). This will be of particular use to any tax practitioners doing work in Africa and in other English-based legal systems around the world.

Analysis of Challenging The Commissioner’s Discretionary Powers In Auditing Taxpayers under The Constitution of The Republic of South Africa

CHAPTER 7 – CONCLUSION

7.2 SECTION 33 OF THE CONSTITUTION AND PAJA Read More

Written by Daniel Erasmus | Posted in Africa • Audit

17 Sep 2014

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After four years of development of TaxConnections, we are ready to reveal the major impact our company will have on every tax professional in a corporation, public accounting firms, tax law firms, tax services firms, independent tax services providers, enrolled agents, tax educators, CPAs and Chartered Tax Accountants. We are bringing everyone together to one main tax connected highway and improving the lives of tax professionals everywhere. We developed technology, tools, services for tax professionals that did not even exist four years ago. The title of this webinar “Most Exciting Tax Webinar of The Year” Read More

Written by Kat Jennings | Posted in TaxConnections

17 Sep 2014

Illinois Tries Again With Nexus Law

On March 28, 2013, Overstock and Amazon lost their challenge of a state tax on online sales in New York’s highest court. Further, the the Supreme Court of United States declined hearing the case, because the court determined that such a law did not violate the federal Commerce Clause. Following the Amazon decision, we expected the states to follow New York’s lead and enact its own click-through-nexus laws.

In 2011, Illinois did just that. Specifically, Illinois has a nexus law that required any company with a place of business in Illinois to collect and remit tax to Illinois. In 2011, Illinois enacted its so-called “Click Through” nexus law, which required a business to collect and remit tax if it has contact with a person or business in Illinois who referred customers to the business’s website for a commission. In this case, the trade group Read More

Written by Jerry Donnini | Posted in Sales/Use Tax • State And Local Tax (SALT)

16 Sep 2014

Truncating Taxpayer Identification Numbers – Is It Enough?

In July, the IRS issued the final rules allowing most payee statements issued either in paper or electronically to use a truncated Social Security Number or Employer Identification Number. So, it would be XXX-XX-1234, or ***-**-1234. The issuer’s TIN can’t be truncated and no truncation is allowed on the forms that go to the IRS – only to the payees. And, because of statutory wording, no truncated TIN on a Form W-2, something that about 85% of individual filers receive.

So, this is a good step among many in trying to reduce the ease of identity thieves obtaining your tax ID number. But it is not enough. Consider the following:

• Unlike truncating on receipts for credit or debit card purchases, truncating tax IDs on Read More

Written by Annette Nellen | Posted in Individual • IRS