There have been a few developments since we last looked at cryptocurrency in April, 2017 (Are Bitcoin Users Cheating on Taxes? (Or Are They Just Confounded by the Rules?)). The IRS has increased tax compliance enforcement but unfortunately, guidance from the Internal Revenue Service has not kept up with the advances in the cryptocurrency world continuing tax reporting challenges.
In 2014 the IRS released their position regarding the taxation of cryptocurrency transactions in Notice 2014-21 (https://www.irs.gov/pub/irs-drop/n-14-21.pdf). The IRS notified taxpayers that: (more…)
Historically a taxpayer selling tangible property was not required to collect a state’s sales tax unless the taxpayer had “nexus” within the state. Nexus is generally defined as a “connection to the state”. My prior blog discussed the changing concept of nexus: Do You Meet the Newest Invisible Tax Filing Requirement?. The landmark 1992 Supreme Court case of Quill v. North Dakota established a physical presence standard. For a state to impose an obligation for a taxpayer to collect sales tax, the taxpayer must have a physical presence within the state. In recent years to generate new sources of tax revenue states have sought to expand the concept of nexus far beyond the physical presence test. These new standards look at economic nexus. (more…)
The growth of internet based e-commerce sales and companies offering software as a service has been phenomenal in recent years. The U.S. Commerce Department estimates that e-commerce sales increased from $229 billion in 2012 to $390 billion in 2016. This has impacted traditional retail sales which serves as the base for sales tax revenue and is an important factor in apportioning income of multi-state businesses. Unfortunately, tax rules have not kept up with this changing trend. Federal legislation has not addressed many of the issues created by the digital economy so states have been free to adopt their own rules. As states are anxious to find new revenue sources they have adopted some aggressive tax generating rules. (more…)
In November 2016 the Governor’s Office of Economic Development announced that it had awarded $61 million of California Competes tax credits to 74 taxpayers.
These business entities promised to add over 6,500 jobs and invest $670 million in the California economy.
The credits granted ranged from $8 million to businesses receiving the minimum credit of $20,000. The program is required to grant 25% of the credits to small businesses. It is interesting to note that credits were granted to many taxpayers not operating in manufacturing. Taxpayers receiving credits included entities performing: engineering consulting (Roseville), software development (Folsom); dentist (Fresno), day care services (Oakland); financial planning (Irvine), data analysis (Los Angeles) and architecture (Anaheim). (more…)
Beginning next year several tax filing due dates will be changing. The existing filing schedule has been in place since I manually prepared tax returns with pencil and paper before the computer age began so these changes are significant. The new filing dates were established under the Protecting Americans from Tax Hikes (PATH) Act of 2015 without much publicity outside of the tax practitioner community. The new filing dates are effective for tax years beginning January 1, 2016, so taxpayers unaware of the new dates may have an unexpected surprise next year.
Fortunately, the traditional April 15th due date for individual tax returns has not changed but the due dates of business returns have been modified. The changes were implemented to help smooth the tax filing process for taxpayers owning interests in pass-through entities such as partnerships and S-Corporations. (more…)
Business entities use insurance to provide protection against various risks ranging from natural disasters to cyber threats. As our economy has evolved the risks that can be insured against have grown more complex. An introduction to business insurance was the topic of our August, 2015 Emerging Business Group seminar. One traditional use of insurance is to provide funds to compensate a business in the event of the death of a founder or other key employee. For founders and other stockholders, the life insurance proceeds received by the entity can be used to fund the purchase of the founder’s ownership interest in that entity. In the case of key employees, life insurance proceeds can help to offset potential revenue losses or increased costs incurred while the entity determines how to deal with the knowledge and resources lost due to their employee’s death. (more…)
In a move that surprised many taxpayers Congress enacted legislation in mid-December, 2015 that extended many tax provisions that had lapsed as of January 1, 2015. The President signed the “Protecting Americans from Tax Hikes” (PATH) Act on December 18th. Even more surprising than Congress acting before the end of the year was the fact that many provisions were actually enhanced and made permanent. This action alone will help taxpayers better plan for the future knowing which deductions and credits are available when making business decisions. (more…)
My blog of June 17, 2015 discussed the “100% Penalty” that the IRS may assess against a “responsible person” if their business entity fails to deposit payroll taxes that have been withheld from employee wages. Even “responsible persons” of business entities that use a third party payroll service to process their payroll and make their payroll tax deposits may find themselves subject to this penalty. The IRS does not relieve “responsible persons” of their responsibly to ensure the timely payment of payroll deposits just because a third party was engaged to handle this task.
In our new and ever changing “on-demand” economy it is not often clear who is an employee and who is an independent contractor. With all the legal activity currently taking place, this topic will be the subject of a future blog. Now I want to discuss one of the implications of this issue. Generally, contractors do not receive the fringe benefits offered to employees. Correctly identifying individuals as employees became more important with the passage of the Healthy Workplaces, Healthy Families Act of 2014.