Posted on January 31, 2019 in Small Business Taxes

Historically, business owners have been able to utilize tax deductions based on the cost of assets bought for business use and the depreciation of those assets. However, the recent Tax Cuts and Jobs Act (TCJA) modified the rules regarding the deduction of expenses under Section 179(a) and the deduction of depreciation under Section 168(g). These changes affect business taxes filed for years 2018 and beyond.

Section 179(a): Business Asset Deductions

This law permits businesses to deduct the purchase price of certain assets as an expense for the year the business begins to use the property. The recent updates to the law raised the maximum expense deduction to $1 million (up from $500,000). The updated law also raised the phase-out limit to $2.5 million (up from $2 million).

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 Posted on January 21, 2019 in Taxation Law

The federal government has long been concerned with assets and businesses based abroad but owned by United States citizens. The IRS regularly looks to address income that is purposefully generated outside the country to avoid taxation. As part of the efforts to ensure that foreign investments are taxed correctly, the Tax Cuts and Jobs Act (TCJA), which was passed last year, made sizable changes to taxation rules, such as the addition of regulations mandating that global intangible low-taxed income produced by controlled foreign corporations be included in a taxpayer’s taxable income.

What Is a Controlled Foreign Corporation?

A controlled foreign corporation (CFC) is an American corporation that operates in another country with U.S. shareholders who hold 50% or more of the control of that corporation. American shareholders, directors, or officers of one of these businesses must report their income from the foreign corporation and pay taxes on that income. 

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 Posted on January 15, 2019 in Taxation Law

One change ushered in by the Tax Cuts and Jobs Act of 2017 permits eligible employees of privately held corporations to postpone paying income tax on the value of qualified stock options and restricted stock units (RSUs) granted to them by their employers. Under the law, one can postpone payment of this tax for up to 5 years.

This law is meant to encourage employee stock ownership in startup or early-stage businesses. It applies to stock options that are exercised and RSUs that are settled as of or after December 31, 2017. 

The IRS has announced and clarified many requirements that affect whether a person may be eligible for tax deferral. For example, in order for a company to be eligible, at least 80% of its domestic employees must have received stock options during a single calendar year. 

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 Posted on January 03, 2019 in Taxation Law

If it has come to your attention that your tax filings may not be in compliance with U.S. tax laws and regulations, and you may be concerned you could face criminal liability, the IRS Offshore Voluntary Disclosure Program (OVDP) may provide a means to rectify your noncompliance status. 

About the Offshore Voluntary Disclosure Program

The OVDP applies to tax issues related to unreported offshore income or assets. The OVDP was created for taxpayers who are concerned the IRS will view their conduct as willful or fraudulent. Under the law, a taxpayer’s failure to report offshore financial assets and fully pay the taxes due related to such assets may lead to criminal charges. Allowing for voluntary disclosure once tax returns have been filed is a way a taxpayer may be able to avoid criminal prosecution.

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 Posted on December 31, 2018 in Small Business Taxes

An IRS deadline for business owners is fast approaching. January 31, 2019 is the date by which employers and businesses must submit wage statement forms and independent contractor forms. 

These requirements were outlined in the Protecting Americans from Tax Hikes (PATH) Act of 2015, which made it compulsory for businesses to submit duplicates of Form W-2 (Wage and Tax Statement) and Form W-3 (Transmittal of Wage and Tax Statements) to the Social Security Administration by the end of January of each year. In addition, certain Forms 1099-MISC (Miscellaneous Income) must be filed by this date with the IRS to report payments made to independent contractors. 

There are penalties for businesses that do not comply with this deadline. 

Purpose of This Filing

By requiring employers to file wage statements and independent contractor forms by January 31, 2019, the IRS states that it can verify income reported by individuals in a faster and more accurate manner. This timeline also helps the IRS detect information that has been misreported. Thus, this requirement can assist in the prevention of tax fraud.

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 Posted on December 19, 2018 in Small Business Taxes

California employers are responsible for withholding payroll taxes, filing returns, and paying state and federal payroll taxes. The laws governing payroll taxes are complex, and as your small business grows, the onerousness of compliance with these tax rules will intensify.

What Are Payroll Taxes?

California has four state payroll taxes. Two are paid by the employer: Unemployment Insurance (UI) and Employment Training Tax (ETT). Two are withheld from workers’ wages: State Disability Insurance (SDI) and Personal Income Tax (PIT). Payroll taxes are administered by the Employment Development Department (EDD).

In addition, employers must handle federal payroll taxes. A small business will be required to pay federal taxes for Medicare, Social Security, and unemployment (FUTA). Also, an employer withholds federal personal income taxes, Medicare, and Social Security from workers’ wages.

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 Posted on December 10, 2018 in Taxation Law

The Internal Revenue Service (IRS) has no plans to create a voluntary disclosure program for virtual currency similar to what has previously been offered for undisclosed foreign assets, an agency official recently said in a speech at a tax symposium.

In 2014, the IRS stated that cryptocurrencies such as Bitcoin that could be converted to traditional currencies are considered property for the purposes of taxation. Thus, a person may experience a gain or a loss when selling or exchanging cryptocurrency based on the value of the cryptocurrency at the time of the exchange. 

Because cryptocurrencies are classified as property, general taxation rules of property will apply. The sale of cryptocurrencies, the use of them to purchase goods or services, or retaining the cryptocurrencies for investment purposes generally have tax consequences, which may mean taxes will be owed.

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 Posted on December 05, 2018 in Property Taxes

In the face of receiving dramatic annual increases in property tax bills, in 1978, California voters passed Proposition 13, which has limited the rate of property tax increases for the past 40 years, so long as certain criteria are met. 

About Prop. 13

Prop. 13 limits property tax increases to 1 percent of the property’s assessed value. Assessed value cannot be increased more than 2 percent per year. Prop. 13 also provides that property taxes may include any bond payments or special assessments as approved by voters. All special assessments must receive a two-thirds vote. Importantly, a key provision of Prop. 13 for tax planning purposes is that properties will only be reassessed after an ownership transfer or if substantial improvements have been made to the property.

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 Posted on November 15, 2018 in Taxation Law

If you are one of the millions of Americans who is saving for retirement, the IRS recently announced some good news for you. Starting in 2019, you can contribute more money to certain retirement accounts, including IRAs, 401(k)s, 403(b)s, most 457 plans, and the Thrift Savings Plan for federal workers. These changes will allow many people to save more money for retirement, and more tax deductions will be available.

Changes to Contribution Limits and Deductions

With this change, the IRS has increased the annual IRA contribution limit for the first time since 2013. The IRS also announced rules that make it easier to qualify for a Roth IRA as well as to deduct contributions to a traditional IRA. The changes include:

• With respect to the contribution limits to IRAs and Roth IRAs, the limit in 2019 is $6,000. That is a $500 increase from years prior.

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 Posted on October 23, 2018 in Taxation Law

Even though Tax Day for most people is in April, it is important to think about your taxes throughout the year. Reviewing tax information such as your withholding amounts and making sure you are keeping appropriate records as the year progresses are prudent measures that can save you money and trouble once Tax Day arrives.

If this is something that you have not thought a lot about, or if you discover an issue with your taxes, you should contact a tax attorney as soon as possible. It may still be early enough to correct course and resolve the issue before the end of the year.

Is it Time to Check Your Paycheck Withholdings?

With the recent revisions to the tax code made by the Tax Cuts and Jobs Act of 2017, the IRS encourages taxpayers to conduct a “paycheck check up” to review how much taxes are being withheld from your paycheck. The IRS provides a withholdings calculator to help you determine what the proper amount should be. If you need to adjust your withholdings, you can fill out a new W-4 form.

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