Tag Archive for Tax Blog

7 Habitual Mistakes Companies Make – Chapter 6 (8)

TaxConnections Blog Post
Internal Audits Fix Financial Accounting Problems –
Compiling the Tax Pack –

THE TAX MANAGER will usually receive the basic components of the tax pack from the various financial managers in the various divisions of the business. The purpose behind this step is for each financial manager to review the financial accounting treatment of various accruals for accounting purposes and deductions for accounting purposes, so as to determine what accrual and deduction adjustments must be made for tax purposes in compiling the tax return for that year of assessment. Simple enough?

A tax manager of a major international consumer product multinational decided to review Read More

Written by | Posted in Tax Risk Management

Employment Taxes And The Self-Employed Global Worker – So “Un”Happy Together – Part II (3)

Social Security Taxes: The Bane of the Existence of Self-employed U.S. Citizens Who Work Abroad – continued –
i. Existence of a Totalization Agreement

Consider the same facts as discussed above, except that the hotel that John has been contracted to design is located in Germany, not China. Unlike China, Germany has its own social insurance program. That program is similar to the U.S. social security program. In addition, a totalization agreement exists between the United States and Germany. That agreement governs every aspect of social security taxation for U.S. citizens working abroad in Germany. Read More

Written by | Posted in International

Canada Limits Model I FATCA Agreement

On Monday, February 10, 2014, we posted US Signed 22 FATCA Agreements – Unimpeded By Republicans!, where we discussed that the Treasury Department announced February 5, 2014 Canada and Hungary to implement the Foreign Account Tax Compliance Act, or FATCA, in an effort to discourage offshore tax evasion.

The agreement is of the Model I type under which Canadian banks will report the affairs of their American clients to the Canada Revenue Agency (CRA). The CRA will then forward the information annually to the United States Internal Revenue Service.

This arrangement is similar to that adopted by the five main European countries early in 2012. It also includes reciprocal information exchange provisions under which United Read More

Written by | Posted in FATCA

The Intergovernmental FATCA Schema Version 1.1 User Guide is Now Available on the FATCA Website

On Thursday, December 19, 2013, we posted FATCA FFI List Resources and FFI List FAQs are Now Available where we discussed that what taxpayers representatives should be paying attention to in these FATCA discussions, among other things, is that the form of the FATCA submissions entitled “Schema” is a uniform computer readable report. This is the same language/requirement which is being utilized in discussions regarding intergovernmental agreements.

So effectively, in the not-too-distant future, we may be seeing foreign banks submitting their “Schema” to their government to be shared with the United States and other foreign governments; which can then be used by the IRS or the other home country to match up the information in the “Schema” against that depositors local tax report! Read More

Written by | Posted in FATCA

Is Buried Treasure Taxable?

A Northern California couple unearthed $10 million worth of gold coins in their backyard and may be giving half of their jackpot away in the form of State and Federal taxes. While walking their dog, the couple discovered six steel cans that were filled with thousands of mint condition gold coins that date from 1847 to 1894. There has been speculation that these coins were buried in conjunction with a bank heist in the early 1900s.

In 1969, the United States Federal Court ruled that treasure is taxable the year that it was discovered. “If you find and keep property that does not belong to you that has been lost or abandoned (treasure-trove), it is taxable to you at its fair market value in the first year it is in your undisputed possession.” Read More

Written by | Posted in TaxConnections

Employment Taxes And The Self-Employed Global Worker – So “Un”Happy Together – Part II (2)

Social Security Taxes: The Bane of the Existence of Self-employed U.S. Citizens Who Work Abroad – continued –
b. U.S. Citizens Working Abroad as Self-Employed Individuals

This section explores the self-employment taxes that face a U.S. citizen who works abroad as a self-employed individual. The self-employed U.S. citizen or resident faces self-employment taxes on all qualified earned income. In other words, the self-employed individual must always pay U.S. Social Security tax. Exclusions for foreign earned income under 26 U.S.C. 911, while reducing the amount of federal taxable income due, do not apply in calculating the self-employment tax. Read More

Written by | Posted in International

S Corp Tax Deposits

Generally speaking, S-Corporations do not pay tax. If they were previously a C-Corp it’s possible they could run into some built-in gains, but those are somewhat unusual. A true S-Corp shouldn’t pay any tax, but sometimes they do need to make a tax deposit. No tax liability, but a tax deposit required? Yes it’s as strange as it sounds.

For fiscal year S-Corps that have individual shareholders, a deferral period occurs between the fiscal year-end and the calendar year-end that the individual shareholders have. That deferral creates a tax benefit the IRS wasn’t too pleased about. So they created a tax deposit system where the S-Corp calculates the tax being deferred and makes a deposit with the IRS for that amount. Every year the company re-calculates and if the deferral decreases, the S Corp gets a refund or a partial return of their deposit. If the Read More

Written by | Posted in Corporate

7 Habitual Mistakes Companies Make – Chapter 6 (7)

TaxConnections Blog Post
Internal Audits Fix Financial Accounting Problems –
Management Override of Controls –

MANAGEMENT MAY FROM time to time override controls put into place to ensure proper corporate governance. This usually happens with nonrecurring or nonstandard transactions or events. But this in turn leads to an override of established policies and procedures, usually with the intention of enhancing the business’s financial situation. Any such transgressions must be prohibited, unless with the approval of the board of directors, who should be made aware of the potential consequences.

This type of transgression in tax compliance takes place every month in most businesses Read More

Written by | Posted in Tax Risk Management

Condemnations of Business and Income Producing Property

This article will explain the tax rules for determining a gain or loss from condemnations, how much of the loss is deductible or amount of gain taxable, and in what tax year, deferring gains from condemnations, and basis of replacement property when a gain is deferred. Also, an important aspect of replacement property is what qualifies as like-kind property to be able to defer the gain.

A condemnation is the threat or imminence of or the actual taking of property without the owner’s consent for public domain by a governmental agency through its power of eminent domain. Depending on the amount received and the adjusted basis of the property, a gain or loss may result. Part or all of a gain may be recognized and/or deferred. Read More

Written by | Posted in Property Tax • Real Estate

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

Can I Deduct Sammy The Shih Tzu?

Man’s Best Friend is his dog. That’s the cat’s meow! Just a bird in a gilded cage. A horse of a different color, Elsie the milk cow and lipstick on a pig. Animals are a huge part of our everyday lives. For some folks their world revolves around these four-legged friends. (Not all of which have legs, I had a client in the office once, for a very short time, with a boa constrictor around her neck, shudder….) So that got me thinking about my other favorite subject, taxes.

Pets have long been the subject of some of the tax professions best “Let me tell you what my client tried to deduct” stories. Who hasn’t heard of the “Cat lady” who wanted to take her babies as dependents and actually applied for SS numbers for them? Or the homeowner who wanted to deduct the costs of his dog because he was a guard dog, all Read More

Written by | Posted in Individual • Specialty Tax Incentives • Tax Tips
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