John D. Teter Law Offices

REQUEST A CONSULTATION TODAY

408-866-1810

1361 South Winchester Boulevard, Suite 113
San Jose, CA 95128
Recent blog posts

san jose tax lawyerDuring the business formation process, a business’s owner, partners, investors, or shareholders will need to determine how the business will be structured. The selection of a business entity may determine how a company will be organized and managed, and it will also affect the taxes that the business will need to pay. By understanding how taxes apply to different types of business structures, owners or partners can determine which type of business entity will provide them with the most benefits.

Taxation for Different Types of Business Entities

The structure of a business will determine whether income taxes will apply to the business itself or to its owners, partners, and shareholders. If a business is a pass-through entity, profits and losses will be passed through to those who have an ownership share in the business, and individual income taxes will apply to these amounts. 

Some commonly used business entities are taxed as follows:

...

San Jose IRA Tax LawyerThere are multiple different types of retirement accounts that a person may use to ensure that they will have the necessary financial resources later in life. These accounts can provide a number of tax benefits in addition to allowing money saved throughout a person’s career to grow significantly through well-managed investments. However, the treatment of these accounts by the IRS can sometimes become complicated, including in cases where a person dies either before or after they begin receiving distributions. Recently, the IRS issued a Proposed Rule that details the requirements that apply in these situations.

Changes to RMD Rules Under the SECURE Act

The Setting Every Community Up for Retirement Enhancement (SECURE) Act, which was implemented in December 2019, made a few updates to the rules related to required minimum distributions (RMDs) for certain types of retirement accounts, including 403(b) plans and individual retirement accounts (IRAs). One major change was an update to the required beginning date (RBD) at which a person must begin receiving distributions. For people born after July 1, 1949, the RBD has been increased from age 70 ½ to 72.

The SECURE Act also addressed situations where an account owner dies before they have received distributions of all funds in an account or plan. A person will typically name one or more beneficiaries who will receive any remaining funds, and the SECURE Act details when different types of beneficiaries will be required to take distributions from a decedent’s account.

...

San Jose Tax Reporting LawyerThe internet has allowed many people to pursue opportunities that had not previously been available, including when raising money for business purposes or to support charitable causes. “Crowdfunding” has become a popular way to raise funds, and multiple platforms are available for people and businesses that are looking to connect with individual people and receive donations or sell products or services. For example, Kickstarter is a platform that many people and businesses use to raise funds to publish books, record and release musical albums, create video games, or pursue other opportunities. Platforms such as GoFundMe have also helped people raise money for charitable purposes through donations, such as to pay for medical bills. As these platforms become more popular, these who receive money through these methods will need to understand their tax reporting requirements and the situations where they may need to pay income taxes on the money raised.

Form 1099-K and Crowdfunding

Crowdfunding websites or services are required to report distributions of money to recipients in certain cases. This is done by filing a form 1099-K with the IRS, and a copy of this form will also be provided to the person or organization that has received funds. For tax year 2021 or any previous years, the reporting threshold for Form 1099-K was only met if a person received a total at least $20,000 through donations or other transactions from at least 200 people. However for tax years beginning January 1, 2022 or later, this threshold has been lowered to $600. If a person receives at least this amount, regardless of the number of transactions or donations, a Form 1099-K will be required.

Form 1099-K may be filed by a crowdfunding website or by a payment processor that receives payments from contributors and distributes the amounts raised to a recipient. While this form will be required in cases where contributors receive goods or services in return for their payments, it may not need to be filed in other cases, such as when people make charitable donations to a crowdfunding campaign.

...

San Jose Tax Compliance LawyereIn recent years, virtual currencies have become a popular investment. Many people have been able to realize significant gains through buying, selling, and trading cryptocurrencies, and they have also used these currencies to complete multiple types of digital transactions. As the use of virtual currencies has continued to rise, the federal government has taken steps to ensure that assets and transactions are reported properly so that they can be taxed by the IRS. The way these currencies are treated may change in the future based on proposals from the administration of President Joe Biden.

Changes to Cryptocurrency Taxes Could Raise Billions in Tax Revenue

A budget proposal released by the Biden administration in March 2022 included several possible changes to how virtual currencies may be treated. These include:

  • Cryptocurrency taxes may shift to using mark-to-market rules. Currently, virtual currencies are treated as property, and capital gains taxes are applied when cryptocurrencies are sold or traded. Under a mark-to-market system, increases in value of cryptocurrencies would be treated as income, and in some cases, owners would be required to pay income taxes to the IRS. However, virtual currencies would not be considered to be securities or commodities, and mark-to-market rules would only apply for currencies classified in a new third category of assets. The Treasury Department will determine which types of currencies are included in this category depending on whether they are actively traded, whether they are regularly bought and sold using currency issued by the United States or other countries, and whether reliable price quotes are available.

    ...

san jose tax lawyerU.S. taxpayers who own assets in other countries must meet a number of requirements when filing tax returns with the IRS. Reporting of foreign assets can be complex, and in some cases, taxpayers may wish to avoid providing the IRS with more information than is necessary. Form 8938 (Statement of Specified Foreign Financial Assets) will provide information about multiple types of foreign accounts, and taxpayers may be required to submit this form along with their annual tax return. However, there are some exceptions to this requirement, and depending on the tax strategies a person uses and the extent of their assets, they may be able to avoid submitting Form 8938 in certain situations.

Exceptions to Form 8938 Requirements

Taxpayers who are considered “specified individuals” or “specified domestic entities” are required to submit Form 8938 if they own foreign assets with a value above a certain threshold. However, a person who is not required to file a tax return for a certain year will not need to submit Form 8938.

Specified individuals include U.S. citizens, people who are considered resident aliens, and nonresident aliens who choose to be treated as resident aliens so that they can file a joint tax return with their spouse. If a nonresident alien does not elect to be treated as a U.S. resident, they will not be required to file Form 8938. Specified domestic entities include closely held domestic corporations or partnerships that earn at least 50% of their gross income from passive income or hold at least 50% of their assets for the production of passive income. Entities that own foreign assets but do not use at least 50% of their assets for passive income will not be required to file Form 8938.

...
BBB ABA State bar of california SCCBA MH 2016
Back to Top