Posted on April 06,2023 in Taxation Law

U.S. taxpayers who own foreign assets and investments often face confusion about their requirements when filing taxes and reporting information to the IRS. In general, taxpayers must file a Foreign Bank and Financial Account Report (FBAR) on an annual basis, and they must include information about all accounts or other assets owned outside the United States. Failure to file FBARs can result in steep penalties. Until recently, there was some confusion about how penalties were applied in certain situations. However, a recent Supreme Court ruling has cleared up this issue and provided some understanding of the potential penalties in certain cases.

Bittner v. United States

In the case of Bittner v. United States, the defendant was charged with failing to report foreign accounts to the IRS between 2007 and 2011. The question was whether the penalties that would apply should be based on the number of reports that were not filed or the number of accounts that were not reported. A maximum $10,000 penalty may be applied for each violation, and initially, the IRS imposed a total penalty of $2.72 million based on the number of accounts that were not reported between 2007 and 2011. The defendant challenged this decision, and the fine was reduced to $50,000, or $10,000 for each year that he did not report his assets correctly. An appeals court reversed the ruling, and the defendant then appealed the case to the Supreme Court.

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 Posted on March 28,2023 in Taxation Law

The rise of virtual currencies such as Bitcoin and Ethereum has created a new world of digital assets, which have become increasingly popular with investors in recent years. But while there are numerous potential benefits of investing in cryptocurrency, the tax laws that apply to owning, selling, or trading these assets can sometimes be unclear for many. During the 2023 tax season, taxpayers may be wondering how their cryptocurrency or other digital asset investments will be addressed on their tax returns. Fortunately, the IRS has provided guidance on these issues, ensuring that crypto earnings can be reported correctly while maintaining compliance with IRS regulations.

Reporting Digital Assets on Tax Returns

For tax year 2021, a question was added to the 1040 tax return form asking taxpayers if they received, sold, or exchanged cryptocurrency during that year. This question has been included on tax returns for 2022 as well, although it has been updated to refer to "digital assets." According to the IRS, digital assets include cryptocurrencies and virtual currencies that can be converted to money or other assets, as well as "stablecoins," which are cryptocurrencies that have been tied to the value of other commodities or financial instruments in order to avoid fluctuations in value. Digital assets also include non-fungible tokens (NFTs).

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 Posted on March 20,2023 in Taxation Law

The Foreign Bank and Financial Account Report, which is usually referred to as the FBAR, is an important tax filing requirement for U.S. citizens and residents who have foreign financial accounts. If you fail to file an FBAR when required, this can result in hefty fines and penalties from the IRS. Missing the deadline can lead to serious consequences, and taxpayers will need to understand the available options in these situations.

Understanding FBAR Requirements

The FBAR filing requirement applies to taxpayers who have a financial interest in or signature authority over one or more accounts at a foreign financial institution outside the United States. If the aggregate value of all foreign accounts owned by a taxpayer exceeds $10,000 at any point during a tax year, an FBAR must be filed. Eligible taxpayers include individual U.S. citizens or residents of the United States, as well as LLCs, business partnerships, trusts, and estates. Foreign accounts that must be reported include bank accounts, retirement accounts, brokerage accounts, as well as accounts for trading in precious metals or gems and other types of foreign financial assets.

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 Posted on March 06,2023 in Taxation Law

 Retirement accounts such as 401Ks and IRAs are a great way to save for the future and help protect your financial security. When you contribute money to these accounts, it grows over time, and in most cases, you will not have to pay taxes until you withdraw the funds. This can provide tremendous benefits, such as tax-free compounding of your investments and significant savings when you retire. However, there may be times when you may need to access money in retirement accounts early due to unforeseen circumstances or emergencies. Early withdrawals can result in significant penalties, and taxes will typically apply. Fortunately, with the recent passage of the SECURE 2.0 Act, some exceptions have been made that allow individuals to make withdrawals from their retirement accounts without incurring excise taxes or penalties in certain circumstances.

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 Posted on February 28,2023 in Taxation Law

Taxpayers with foreign assets must take extra care when filing their annual tax returns and reporting information to the IRS through other means. By law, taxpayers with foreign accounts are required to report these assets and pay any applicable taxes. Failure to report accounts or other assets when required could result in tax penalties. By understanding the specific requirements that apply to them, taxpayers can avoid tax-related issues, and they can determine the steps to take to respond to any penalties that have been assessed.

The Basics of Foreign Account Reporting

When it comes to reporting foreign financial accounts, there are two main forms that taxpayers should be familiar with: the Report of Foreign Bank and Financial Accounts (FBAR) and Form 8938. The FBAR is used to report the value of a taxpayer’s foreign bank and financial accounts in total at the end of a tax year. A taxpayer will be required to file an FBAR if they have an interest in one or more bank accounts, brokerage accounts, mutual funds, or other financial accounts in countries other than the United States, as long as the aggregate value of all of these accounts exceeds $10,000 at any time during the calendar year. FBARs are filed electronically with the Financial Crimes Enforcement Network (FinCEN), and they are due on April 15.

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 Posted on February 21,2023 in Property Taxes

California property taxes can be complex and challenging to understand. While the laws regarding property taxes apply statewide, the ways these issues are handled can differ from county to county. Understanding the specific requirements that apply to property owners can be difficult, and failure to follow the correct procedures could result in penalties. To address issues related to property tax assessments, payment of taxes that are due, and other related concerns, property owners will need to be aware of important dates and deadlines that apply throughout the year.

Dates Related to Property Taxes

• January 1: Lien Date - Anyone who owns taxable property on this date will be liable for the taxes that apply to that property. Property taxes are generally calculated as 1 percent of the assessed value of the property on the lien date.

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 Posted on February 16,2023 in Property Taxes

In California, property taxes are a notoriously complex issue, and they may apply to both individual taxpayers and businesses. While property taxes will generally apply to real estate property owned by an individual, married couple, or business, they may also apply to other types of personal property. Specifically, assets that fall under the category of "business personal property" will need to be reported, and taxes may be applied to some of these assets. By understanding the requirements that apply to business personal property, owners of small businesses and other types of companies can make sure to avoid potential penalties.

What Is Business Personal Property?

Business personal property refers to the tangible assets owned by businesses and used to conduct their operations. This includes furniture, fixtures, equipment, and other miscellaneous items used by a business in its day-to-day operations. It also includes vehicles, aircraft, and boats, as well as supplies used by a business, such as office supplies, janitorial products, or fuel for vehicles. A business may also be required to pay taxes on personal property that has been leased and is used as part of its ongoing operations.

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 Posted on January 23,2023 in Taxation Law

Many businesses rely on non-compete clauses in employment contracts, severance agreements, and other types of contracts. These clauses can help businesses protect their interests and prevent unfair competition by restricting former employees, independent contractors, or other types of workers from working for competitors or starting their own competing businesses. However, under the administration of President Joe Biden, the federal government is looking to take action to restrict the use of non-compete clauses or even prohibit them altogether.

Proposed FTC Rule Regarding Non-Compete Clauses

On January 5, 2023, the Federal Trade Commission (FTC) proposed a new rule that would affect the use of non-compete clauses in the United States. Under this rule, the use of non-compete clauses would be defined as an "unfair method of competition," and employers would be prohibited from using these clauses in employment contracts or similar agreements. In addition, the rule would require employers to rescind any existing non-compete clauses and notify employees or other workers of this rescission. This rule would supersede any state laws or regulations that specify when non-compete agreements can or cannot be used.

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 Posted on January 13,2023 in Taxation Law

Since Proposition 64 legalized the personal use and cultivation of marijuana in California in 2016, many business owners have been able to take advantage of the legal cannabis market. However, there are a variety of laws and regulations that apply to these businesses, and it is important for business owners to keep abreast of changes to the laws that may affect them. One change that recently went into effect involves the cannabis excise tax. California cannabis businesses will need to make sure they are following the correct procedures to avoid potential tax penalties while addressing any other small business tax issues that they may encounter.

What Is the Cannabis Excise Tax?

Excise taxes are levied on specific products, services, or activities. There are multiple types of federal and state excise taxes that apply to products such as gasoline, cigarettes, or alcohol. The state of California levies a 15 percent excise tax on cannabis businesses and microbusinesses.

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 Posted on January 11,2023 in Small Business Taxes

Small business owners need to address a variety of small business tax issues, and it is important to comply with all requirements put in place by the IRS and California's Employment Development Department (EDD). Worker misclassification is one issue that has received increasing scrutiny in recent years, and businesses that improperly classify workers as independent contractors instead of employees may face a variety of tax penalties. Recently, the IRS and the federal Department of Labor (DOL) announced that they will be working together to identify tax compliance issues related to worker misclassification This may result in tax audits and penalties for businesses that have failed to follow the proper procedures.

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