Based on an IRS investigation, taxpayers numbering only in the 800’s in each of the years 2013 through 2015 reported a transaction description likely related to Bitcoin on the form used to report capital gains or losses from property transactions. In 2013, the IRS issued guidance to say that virtual currency transactions were property transactions, rather than currency transactions, and followed that up with practical guidance in April 2014 in their Virtual Currency Guidance, Notice 2014-21. (more…)
CPAs Talk Tech Biz
For better or worse, the public face of blockchain technology has been Bitcoin, the polarizing crypto-currency. While Bitcoin’s detractors point to high-profile criminal activities and price volatility to question its ultimate long-term viability, a broader base of people knowledgeable in the foundational blockchain technology see potential applications beyond the creation and trading of currency not controlled by any centralized authority. (more…)
By Erika Diebert, ASL Tax Senior
There is an opportunity for Qualified Small Businesses (QSBs) to utilize their unused federal 2016 R&D credits against their 2017 payroll tax liability (Employer portion of FICA). This was enacted as part of the PATH Act of 2015 but is just now becoming available starting with the income tax filings for the 2016 tax year.
The offset of payroll taxes will be available for R&D credits generated on the 2016 tax return from R&D expenses incurred in 2016. R&D credit carryovers from years prior to 2016 cannot be used. The maximum benefit allowed to be claimed in a tax year is $250,000. An election to use the credit against payroll taxes is made on an originally and timely filed (including extensions) Form 6765 by completing section D of the form. (more…)
As we enter into another audit busy season, I have started my standard exercise of compiling a list of frequently encountered audit and accounting issues that require research, additional analysis and often times detailed disclosures and even material adjustments to my client’s financials. An oft-recurring theme is the existence of related party transactions and how such transactions are recorded and disclosed.
Below are a few frequently asked questions on this subject that merit our attention: (more…)
We all have heard and know of people becoming millionaires overnight with “stock option” money, especially in Silicon Valley. Stock options are an important part of the compensation package for many employees in the technology sector. For companies, it is a tool to retain employees and motivate them to perform better as the company’s growth and success translates to their success.
The most common types of stock options are Incentive Stock Options (ISO’s) and Non-Qualified Stock Options (NQSO’s). The tax consequences to employees are as follows:
Incentive Stock Options (ISO) (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…)
Diversity in practice led the FASB to revisit the GAAP guidance for the Statement of Cash Flows that has been around since 1987 with the issuance FASB No. 95. Many people thought aspects of these rules were confusing (and contradictory, at times), or even missing entirely. In fact, restatements of public company financial statements often relate to issues with the Statement of Cash Flows (as noted in an earlier post).
Originally planned as a comprehensive project, the FASB altered course to focus efforts on just the most confusing areas, resulting in new guidance covering nine specific issues. The good news is that most of these issues rarely apply to nonpublic tech companies in the Silicon Valley. Eight issues are covered in ASU No. 2016-15 “Classification of Certain Cash Receipts and Cash Payments” issued in August 2016. Several of the issues that might be encountered include handling proceeds from insurance claims, distributions from equity method investees, and contingent consideration payments made after a business combination. Mid-sized companies outside of specific industries would rarely run into the remaining issues. (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…)
I have previously discussed tax opportunities for selling the business by a C corporation. I would like now to switch our focus to options available to S corporations.
One of the options for an S corporation to sell its business is to sell its underlying assets. This is often a preferred option by a potential buyer as it provides a step up in acquired assets. Unlike a C corporation, the S corporation is a pass-through entity and its federal taxable income is only taxed at a shareholder level. Thus, double taxation is usually avoided with some limited exceptions. (more…)