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Tax Advice & News

|Tax Advice & News

The IRS Wants More Of Your Gambling Winnings

June 2015 The taxation of gambling winnings is widely misunderstood (or at least widely not followed).  Gambling gains are included in gross income, reported on “other income” on form 1040.  Losses from gambling are allowed to the extent of gambling gains, but only as an itemized deduction.  The amount spent to generate any win reduces [...]

Tax Advice & News|

How Likely Are You To Get Audited?

January 2015 Tax season is gearing up, an annual source of tension for many Americans. The Internal Revenue Service (“IRS”) looms in the background, with a mission to “Provide America’s taxpayers top-quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all”. Yet the benevolent [...]

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IRS Can’t Find $2.3 Billion In Alimony Payments

May 2014 Tax reporting for alimony payments is a relatively straightforward process.  Those who pay alimony deduct the amount on their tax return when calculating their taxable income.  Those who receive alimony must report the amount received as taxable income.  These requirements should result in a shifting of taxable income without changing the total amount. [...]

Tax Advice & News|

Whistleblower Tax Dispute Illustrates What Constitutes A Business And Related Expenses

September 2013 A federal district court, in the matter of Bagley, No. 2:10-cv-00483-RT-FMO (C.D. Cal. 8/5/13), has determined that Richard Bagley was engaged in the trade or business of pursuing False Claims Act lawsuits against his former employer and was thereby entitled to deduct legal expenses related to that endeavor as ordinary and necessary business expenses. Mr. Bagley was the chief financial [...]

Tax Advice & News|

Private Annuity Transaction Upheld As An Estate Planning Tool

February 2013 In the Estate of Virginia Kite vs. IRS, T.C. Memo 2013-43 (February 7, 2013), affluent taxpayers were given support for a potentially substantial estate planning tool. This is a significant decision. The decision involved Mrs. Kite’s lifetime revocable trust, and the family partnership interests it held which were transferred to Mrs. Kite’s children [...]

Home Office Deduction Just Got Easier

January 2013 The home office deduction is one which many taxpayers consider utilizing.  In today’s world, what professional is not also working from home, at least on occasion?  However, slaving away on your laptop from bed does not qualify as a home office, no matter how many hours are spent toiling instead of sleeping.  The [...]

Tax Advice & News|

Whistleblower Recovery Is Ordinary Taxable Income

August 2012 The Ninth Circuit decided a taxation case of first impression involving whether a qui tam or whistleblower recovery provides a taxable capital gain from a sale of property, or ordinary taxable income. The District Court in Los Angeles, and the Ninth Circuit both agreed with the IRS that the higher rate of taxation [...]

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Understanding The New Investment Tax

July 2012 Now that the Supreme Court has ruled that the Patient Protection and Affordable Care Act (PPACA, aka ObamaCare) is constitutional, it is time to understand the PPACA’s aspects that everyone agrees really are a tax. Interestingly, the acknowledged taxes in ObamaCare are much larger than are currently expected to be collected under the [...]

Tax Advice & News|

Reasonable Compensation Analysis Needed For Closely-Held Corporations

March 2012 Reasonable compensation questions affect millions of closely-held corporations whose owners actively participate in the business.  The issue involves how much payroll taxes are due from the earnings of the business.  Amounts not characterized as salary are reported as S-corporation income on the shareholder’s personal tax return, where it is not subject to payroll [...]

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Qualifying for the Home Office Deduction

November 2011 More employers are allowing telecommuting as a work option. Additionally, these economic times cause some to work out of their homes as a way of making ends meet. Consequently, more people are working out of their homes. This article reviews the complex rules for taking a home office deduction. Business expenses unrelated to [...]

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Tax Proposals In The American Jobs Act

September 2011 On September 12, President Obama provided the legislative text for the “American Jobs Act” that he summarily described during a September 8 speech to a Joint Session of Congress. In terms of taxes, the following summarizes the primary items, all of which are described in this article: The bill’s Title IV, entitled “Offsets”, [...]

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Goodwill Impairment Tests Become Easier

September 2011 In September 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2011-08, entitled “Testing Goodwill for Impairment”.  This amends guidance in Generally Accepted Accounting Principles (GAAP) Topic 350 involving goodwill and other intangible assets.  Because early adoption is allowed, and the new guidance significantly simplifies the current procedures, expect the new [...]

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Controversial 1099 Reporting Repealed

By wide margins, both houses of Congress repealed both (i) the expanded Form 1099 information-reporting requirements mandated by last year’s Patient Protection Affordability and Care Act (PPACA, aka ObamaCare) and (ii) the expansion of 1099 reporting requirements to rental operations pursuant to the Small Business Jobs Act of 2010. The bill (H.R. 4) passed the [...]

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IRS Report Provides Candid Assessment Of Major Problems

January 2011 Nina E. Olson is the current head of the U.S. Taxpayer Advocate. This is a government office dedicated to helping taxpayers solve their problems with the Internal Revenue Service (IRS). On January 5, 2011, she issued her required annual report to Congress (hereinafter called the “Report”). The Report is really long, with merely [...]

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Details And Costs Of The Year-End Tax Act

The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (HR 4853) (the “Act”) is now law. The press has already written much about the political circumstances that gave rise to this law. Because understanding what these changes cost requires reviewing detailed accounting summaries, most press coverage repeats political ideologue from talking heads, [...]

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Small Business Law Creates Tax Breaks and “Tarp 2” Lending

September 2010 President Obama signed the Small Business Jobs Act of 2010 (H.R. 5297) on September 27, 2010. The law contains the following major provisions that collectively are worth more than $12 billion in tax relief: Removes the heightened substantiation requirements and special depreciation rules for employer-provided cell phones under IRC §280A; currently, employers are [...]

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New Economic Substance Test Eliminates Certain Judicial-Based Confusion, But Still Allows Significant Judgment

The recent health-care legislation (H.R. 4872) will be partly paid by a tax increase associated with an unclear tax provision aimed at tax shelters, but which could be used by the Internal Revenue Service (IRS) for much broader tax assessments. Taxpayers are now subject to a 40% penalty on tax underpayments related to transactions that [...]

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Software No Longer Subject To California Sales Tax

May 2011 In mid-May 2011, the California Supreme Court denied the State Board of Equalization's petition for review of the Court of Appeal decision in Nortel Networks, Inc. v. State Board of Equalization (Case no. B21341, filed January 11, 2011). The Nortel case has broad implications for California’s taxation of software. The amount charged for [...]

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California Service Firms Must Now Register With BOE, And File Annual Use Tax Returns

October 2009 Use tax occurs whenever California sales tax is not paid. Sellers having no physical presence in California are not required to collect California sales tax. Consequently, purchases made from out-of-state catalogs and over the internet may initially escape California’s sales tax. Nevertheless, California use tax is owed by the purchaser when the merchandise [...]

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Last Compliance Warning To Numerous Non-Profits

August 2010 Hundreds of thousands of small nonprofit organizations are at risk of losing their tax-exempt status because they failed to file required informational returns for 2007, 2008, and 2009. The Internal Revenue Service (IRS) is offering an opportunity for these organizations to preserve their tax-exempt status by filing delinquent returns by October 15, 2010. [...]

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Prepare Now For 1099 Reporting Under The Health Care Act

July 2010 In order to pay for the health care benefits of the Patient Protection and Affordable Care Act (PPACA), the scope of Form 1099 was considerably extended by PPACA Section 9006. Internal Revenue Code Section 6041 currently contains numerous exceptions from Form 1099 reporting requirements. In general, current 1099 reporting covers only services paid [...]

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IRS Needs Significant Additional Controls In Its Role As Disbursing Agent For Refundable Tax Credits

January 2010 In two reports made public in December 2009, the Treasury Inspector General for Tax Administration (“TIGTA”, but usually referred to in the rest of this article as the IRS Inspector General) found that: The IRS ignored previous recommendations as to how to administer the First-time Home Buyer’s Credit, causing significant refundable tax credits [...]

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IRS To Finally Require Tax Preparer Registration, Continuing Education, And On-Site Visits

January 2010 For the 2007 tax year, about 60% of the 143 million individual tax returns filed with the IRS were done by paid preparers. Tax preparer registration for these paid preparers has been considered for years. The Government Accountability Office (GAO) and the Treasury Inspector General for Tax Administration both previously reported that unlicensed [...]

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Tax Relief For Employment-Law Plaintiffs

Tucked away in the 600-plus pages of the American Jobs Creation Act of 2004 is something called "Civil Rights Tax Relief".  This is an important provision for employment lawyers. By way of background, successful plaintiffs who are not businesses face an unintended and unfair tax result.  This occurs because the gross proceeds from a settlement [...]

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