Posted on September 10, 2018 in Taxation Law

Websites such as Airbnb, VRBO, and HomeAway make it easier than ever to generate income by renting out a private residence, meeting the huge demand for home rentals, especially during the summer months when people go on vacation. However, the income collected from rental of a residence is typically subject to taxation, and there are special tax rules that must be followed. If you are a homeowner who plans to rent your property seasonally, you should be sure to understand whether your situation meets certain IRS requirements for taxation. 

Residential Rental Property Defined

The first step in determining how rental income will be taxed is understanding if the property you are renting is a residential rental property under the definition provided by the IRS. A dwelling will be classified as a residence if it is utilized for personal purposes during the tax year for 14 days, or for 10 percent of the total number of days the residence has been rented to tenants at its fair rental value, whichever is greater. Personal use could include the use of the dwelling by:

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 Posted on August 17, 2018 in Small Business Taxes

If you are considering opening a business with your spouse, there are several important areas to consider. One such area is what type of business should be formed. There are different reasons why one would select a corporation, an LLC, or a partnership for his or her business. Additionally, there may be legal constraints on this decision. 

With regard to a business operated with a spouse, people may wonder if a partnership is the correct type of business to form given that the two people operating the business are married. While the IRS has given guidance on this issue, it is always best to contact a tax and business formation attorney to understand what is required under law based on the facts of your case.

According to the IRS, if the business is a sole proprietorship, it must be owned only by one spouse. The other spouse can work at the business as an employee. If the business is owned and operated by both spouses, the business must be a partnership. All partnerships must file IRS Form 1065, U.S. Return of Partnership Income.

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 Posted on August 10, 2018 in Taxation Law

The IRS will soon be ending its Offshore Voluntary Disclosure Program for undisclosed foreign assets. Failure to utilize this disclosure program by the date of its termination on September 28, 2018, means that taxpayers who have not reported foreign assets can no longer do so with assurance of avoiding criminal prosecution.

What is the Offshore Voluntary Disclosure Program?

The Offshore Voluntary Disclosure Program (OVDP) was developed as a way for taxpayers to come into compliance with fewer legal consequences in situations where the taxpayer had previously not disclosed foreign assets and the income generated on those assets. The OVDP has existed in some iteration since 2009.

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 Posted on July 25, 2018 in Taxation Law

The tax laws in the United States are complex and ever-changing. As the Internal Revenue Service (IRS) works to ensure that taxpayers are paying their fair share, the agency regularly announces compliance campaigns to address new issues that arise. Recently, the Large Business & International (LB&I) division of the IRS noted several areas it would be focusing on, and one notable compliance campaign involves taxes on foreign earnings under Code Section 965.

Transition Taxes on Repatriated Foreign Earnings

Section 965 of the Internal Revenue Code requires taxpayers who are shareholders in certain foreign corporations to pay a transition tax on foreign earnings when these earnings are repatriated to the United States. Depending on the profits and losses of the foreign corporations taxpayers hold shares in, they may be able to reduce the amount of these earnings that are included in their income. The transition tax rates are 15.5 percent for inclusions equal to the taxpayer’s aggregate foreign cash position and 8 percent for gross income above that amount.

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 Posted on July 18, 2018 in Taxation Law

Over the last few years, more and more people have begun to invest in virtual currencies such as Bitcoin, use them to pay for goods and services, and exchange them with others. However, even though the use of cryptocurrencies has increased, many people have not been properly reporting these virtual currencies on their taxes. In fact, out of the 132 million electronically filed tax returns in 2016, only 802 reported virtual currency income. This activity has not escaped the notice of the IRS, and the agency is looking to enforce tax laws on virtual currencies.

IRS Compliance for Cryptocurrencies

The IRS’s Large Business & International (LB&I) division recently identified virtual currencies as one of five new compliance campaigns it will be conducting. The LB&I division will begin using outreach to educate taxpayers about their requirements for reporting income from virtual currencies, as well as examinations (audits) of taxpayers who do not correctly report income.

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 Posted on July 10, 2018 in Taxation Law

The Large Business & International (LB&I) division of the IRS has announced several new compliance campaigns that signal where the IRS will allocate its audit resources. If you are a business owner concerned about the ramifications of a tax audit, it is advisable that you contact a qualified business tax attorney who can give you customized legal support. 

What is an IRS Compliance Campaign? 

The LB&I division of the IRS creates compliance campaigns in an effort to keep taxpayer examinations centered on issues. These campaigns, which are rolled out periodically, are meant to zero in on areas that present the greatest risk of non-compliance.

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 Posted on June 22, 2018 in Employment Taxes

While no one enjoys doing so, everyone has to pay taxes. For many people, taxes are automatically withheld from their paychecks by their employer, and their primary concern is filing their annual tax return. However, paying taxes can become more complicated for small business owners and those who are self-employed. These individuals should be sure to understand the best way to meet their tax obligations in a way that allows them to maintain financial security.

Concerns for Self-Employed Taxpayers

A person is considered self-employed if he or she is the owner of a sole proprietorship, if he or she works as an independent contractor, or if he or she otherwise operates his or her own business. People who are self-employed will not only need to file an annual tax return if they earn a net income of at least $400 in a year, but they must also make estimated tax payments on a quarterly basis.

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 Posted on June 12, 2018 in Taxation Law

Tax fraud is common in the United States; however, this type of activity often goes unreported or undiscovered. Tax fraud not only affects the government’s ability to obtain funds used to provide essential services to citizens, but fraud can also take the form of tax scams that seriously harm many individuals. If you suspect that a person, business, or organization is committing tax fraud, you should understand the steps you can take to report this fraud to the IRS.

Reporting Tax Fraud

Depending on the type of fraud, there are different methods of reporting information to the IRS:

• To report an individual or business that fails to pay taxes, improperly withholds taxes, claims false deductions or exemptions, does not report income, or files false tax returns, use Form 3949-A (Information Referral). As much relevant information as possible should be included, such as the name and address of the offender, his or her Social Security number or tax identification number, and a description of the violation that includes the time period during which it occurred and the amount of income that was not reported or taxed correctly. While you are not required to identify yourself, the IRS encourages you to do so, and you may be asked to serve as a witness if the tax evasion case goes to trial.

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 Posted on June 05, 2018 in Taxation Law

U.S. taxpayers who own assets held in foreign countries are required to report the assets to the Internal Revenue Service (IRS) and pay taxes on income from the assets. For taxpayers who have not met their reporting requirements, the IRS has provided a variety of methods for compliance, including the Offshore Voluntary Disclosure Program (OVDP). However, the IRS has announced that the OVDP will end September 28, 2018.

Offshore Tax Compliance Options

The current version of the OVDP, which was instituted in 2014, allows taxpayers with undisclosed foreign assets to become compliant with IRS requirements, thus minimizing the civil penalties they are required to pay and avoiding the possibility of criminal prosecution for tax evasion. This program is meant to allow those who have willfully failed to report foreign assets to achieve compliance and pay any taxes that are owed, as well as applicable penalties. 

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 Posted on May 26, 2018 in Tax Appeals

People and organizations can violate tax laws in the United States in a variety of ways, thus leading to disputes with the Internal Revenue Service (IRS) regarding tax assessments, collections, or other issues. After the IRS makes a decision following an audit or sends a notice of a collection action, taxpayers may be able to contest the decision through the IRS Office of Appeals. One method to begin the tax appeal process is by filing a written protest.

Requirements for a Written Protest

When the IRS makes a decision about the taxes a person owes or the methods of collecting payments, it will send a notice to the taxpayer. The taxpayer can then file a formal written protest that should include the following information:

• The taxpayer’s name and address, and a phone number indicating where he or she can be reached during the daytime;

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