John D. Teter Law Offices



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Recent Blog Posts

Understaffed IRS Poses Challenges Ahead of Tax Season

 Posted on March 05, 2015 in Taxation Law

Even as the year's annual tax season gets underway, staffing shortages at the Internal Revenue Service promise to make this year's season even more challenging than usual.

As the deadline for tax filing looms, taxpayers across the country are finding that their calls to the Internal Revenue Service offices are barely being answered. Just about 4 out of 10 calls are getting answered. At centers across the country, taxpayers are waiting for hours to get assistance from IRS officers.

The staffing shortages are linked to a reduction in the budget of the IRS. Congress has reduced the budget of the IRS by $1.2 billion since 2010 alone. That has led to significant staffing shortages at the Internal Revenue Service, as the agency has been forced to downsize as a result.

That has meant fewer staff members to man the telephone calls, and assist taxpayers. Agency employees are dealing with their own problems. The staffing shortages have meant that several clerical staff, including secretaries, have been given the ax. That means that regular employees are also being given clerical duties to perform, in addition to taxpayer assistance responsibilities. Motivations and morale levels are low at the agency.

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Caterpillar Faces Offshore Tax Scrutiny

 Posted on February 06, 2015 in Taxation Law

The Internal Revenue Service has proposed penalties and taxes worth more than $1 billion on Caterpillar. That announcement came after the Internal Revenue Service went through the company's returns from between 2007 and 2009.

The Internal Revenue Service is specifically looking at profits from a Caterpillar subsidiary in Switzerland. The subsidiary is also currently the subject of an investigation by the Securities and Exchange Commission.

In 1999, Caterpillar via a process of restructuring shifted most of its profits to this subsidiary, and gave it a license to distribute the company's replacement parts for its excavators, and other equipment outside of the United States. According to a Senate investigation, by doing so, Caterpillar managed to save as much as $2.4 billion in taxes between 2000 and 2013. The Senate investigation was specifically looking at how this is tax structure for the Swiss subsidiary helped the company to save as much as $300 million in taxes every year.

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Why it Makes Sense to File Taxes Early

 Posted on January 03, 2015 in Taxation Law

Tax filing season is upon us, and some persons will be very sensible, and file their taxes earlier than the rest. There are definitely advantages to filing taxes before everyone else does.

When you file your taxes quickly, you will be first in line for your refund. Many people anticipate refunds, when tax season rolls around, and for these people, the quicker they file their taxes, the quicker they are eligible for a refund.

Filing your taxes early also reduces the risk that you will be victimized by identity theft. This is a very serious crime, and there are far too many cases involving taxpayers who had their identities stolen and suffered severe financial losses as a result. In fact, in 2014, the Internal Revenue Service actually included identity fraud or identity theft, as one of the many scams that taxpayers in the United States need to avoid. In many of the most popular schemes, fraudsters steal personal information, and file fake income tax returns.

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IRS Tax Filing Season to Begin As Scheduled

 Posted on December 02, 2014 in Taxation Law

This year's tax filing season will commence on January 20 as scheduled. The season will commence in spite of a last-minute law passed by Congress.

The Internal Revenue Service has announced that taxpayers can begin filing their tax returns for 2014 on January 20, 2015. There had been concerns that the filing season would have to be postponed this year, as lawmakers continued to delay a bill containing tax breaks. Earlier this month, lawmakers passed the bill, which extended dozens of tax breaks which had expired. The law now extends those tax breaks to the end of the year, which means taxpayers will now be able to claim those breaks when they file their tax returns for 2014.

In previous years, last-minute wrangling by lawmakers had delayed the start of the tax filing season. However, that will not happen this year. The agency has assured taxpayers that the agency has reviewed all the tax law changes the government made recently, and had come to the conclusion that there is nothing to prevent taxpayers from filing their returns, because the systems will be updated on time.

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IRS Warns of Refund Delays Next Year Due to Resources Crunch

 Posted on November 05, 2014 in Taxation Law

The Internal Revenue Service warns that persons who are expecting tax refunds next year are likely to face delays receiving their checks in the mail. That's because the federal agency is battling a severe resources crunch and budget shortfalls.

According to the Internal Revenue Service Commissioner, the agency is being forced to cut costs in a number of ways, and he expects that a number of services including taxpayer services as well as tax enforcement efforts, could be adversely affected by the shortfall. Of most importance to taxpayers is the fact that their refunds could probably be delayed. There could be fewer staff members for the processing of refunds and you could receive the checks much later than expected.

In recent years, the agency has been able to process tax refunds within a timeframe of three weeks in the case of electronically filed returns. However, that timeframe will probably not apply this year because of the funding crunches. The IRS's troubles stems from budgeting cuts for the budget year ending in 2015. Lawmakers cut the budget by as much as $346 million.

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California Has One of the Worst Tax Climates in the Country

 Posted on October 02, 2014 in Taxation Law

A new study ranks California at close to the bottom of the heap for its tax laws. According to the poll by the State Business Tax Climate Index from the Tax Foundation, California has the 48th best tax climate out of the 50 states.

The State Business Tax Climate Index for 2015 measures the structure of the tax code of each state, taking into account a number of variables. Those variables include sales tax, property tax, income tax and employment insurance. States that had overly complicated, complex, and convoluted tax codes were ranked low on the list. States that had neutral and transparent tax codes fared much better on the list.

It should be no surprise to any California tax lawyer that the state is ranked at the bottom of the heap. The state ranked very poorly in a number of variables. It was ranked 48th for its overall business tax climate, and 34th for its corporate tax structure. It was ranked right at the bottom at number 50 for individual income tax structure, and at number 40 for sales tax structure. It fared slightly better when it came to property tax structure and unemployment insurance tax structure, gaining a position of number 14 for each of these variables.

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Lawmakers Move to Halt Inversions

 Posted on September 05, 2014 in Taxation Law

Inversion, or the process by which a corporation moves its base to a foreign country to avoid corporate taxes in the United States, has been a favored tool to avoid taxes for years now. However, in the future, new rules could possibly slow down the rate of inversions.

Lawmakers have proposed new rules that they believe will make it less attractive for companies to move their bases overseas, to avoid taxes. The rules have been specially designed to discourage inversions, and prevent the large volumes of lost tax revenues as a result of these moves by corporations.

The new rules are meant to suffocate corporate inversions, and discourage such moves in the future. The policies are aimed at making it harder for companies to move their bases overseas, and to make it less profitable for them to do so. Typically, during an inversion, an American company will move its tax base to a country outside the United States, where the taxes are much lower. American companies usually prefer countries like the United Kingdom or Ireland. In such cases, it is only the tax base that is moved overseas, and the administrative headquarters of the company continue to remain in the United States.

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Burger King Move to Canada Draws Criticism

 Posted on August 03, 2014 in Taxation Law

Burger King recently announced that it will soon acquire Tim Horton's Inc. of Canada, and will move its base to Canada as a result. The deal is backed by billionaire Warren Buffett, who is already under criticism because the move amounts to inversion.

Recently, Burger King announced that it had signed an $11 billion agreement to buy Tim Horton's, which is the one of the largest coffee- and- doughnut chains in Canada. This falls under the "inversion" category, and Burger King's headquarters will now move from Miami to Canada. It helps that Canada has a much lower tax structure compared to the United States. Burger King shareholders as a result of the move, will also be protected from capital-gains taxes.

Inversions, or corporate moves overseas like these, are mainly meant to save corporate taxes, and such inversions have been criticized roundly by lawmakers. The White House recently pitched in, saying that such companies that want to move outside the United States and move their bases to foreign lands simply to avoid taxes are being unpatriotic. Burger King denies that minimizing taxes is behind its deal. It says that the deal is aimed at capturing new growth opportunities.

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Companies Face Flak Over Tax Inversions

 Posted on July 06, 2014 in Taxation Law

Companies that choose to leave the United States in order to take advantage of the more lenient tax laws overseas are facing flak. A new fledgling movement against such practices involves a threat that investors will sell off shares of companies engaging in such tactics.

Tax inversions or the strategy in which companies leave this country for overseas tax havens that are much more lenient, have been used as a money-saving tactic by companies to avoid taxes for several years. Recently, billionaire investor Mark Cuban made it clear that he, for one, was very unhappy with such practices. He tweeted that when companies engaged in such practices, it increased tax shortfall, and that the rest of the country was then required to make up for the tax shortfall, causing the government to increase taxes. He threatened that he would sell off shares in companies that choose to leave the United States for tax havens overseas. He clearly and emphatically recommended that shareholders hold companies accountable, by selling off shares in those companies that choose to move overseas.

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IRS Launches Voluntary Tax Preparer Program

 Posted on June 02, 2014 in Taxation Law

The Internal Revenue Service recently announced that it will launch a new quality certification program for tax preparers.

The agency recently released new procedures that clearly describe details about the new education program. The Annual Filing Season Program, as it is called, is already a controversial one. The launch of the program came soon after the agency lost several court decisions, over its authority to impose mandated tax preparation programs.

For instance, the American Institute of CPAs has been in the forefront of criticizing the federal agency's plans for launching a tax preparer certification. The American Institute of CPAs says that such a program could even be unlawful. Several other groups have also raised their own objections to the program.

As part of the plan, while there will be no such formal certification exam like the one that exists for the now-invalidated Registered Tax Return Preparer or RTRP program, preparers would be required to take an annual refresher course. The program would be administered by a continuing education provider approved by the Internal Revenue Service. The refresher course would be designed according to the guidelines provided by the IRS, and would have to last for six hours. The program would also include a test of the course material. This would involve include a minimum of 100 questions, and applicants who complete the refresher course successfully would be required to provide right answers to at least 70% of the questions. Those who complete all formalities would receive a Record of Completion by the Federal Agency.

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