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Archive for July, 2013

PostHeaderIcon Tax News – July 31, 2013

It’s the end of a month.  While I don’t know what August will hold in the store in the tax arena, here’s what happened on the last day of July.

Yesterday I talked about the president’s plan to overhaul corporate taxes in exchange for some more stimulus money.  If there was any question, it became official today when the republicans started blasting the plan.  Mitch McConnell even went as far as saying the proposal might kill tax reform.

Speaking of, it must be a slow news day because tax reform is finally “being noticed.”    Although it looks like that notice doesn’t extend to the Senators who were asked to pitch in their ideas because the ideas that have been thrown in the pile have ranged from vague to non-existent.

This article talks about a way to save some capital gains tax if you have a kid who’s going to school.  Rather than paying for their school, you gift them appreciated shares of stock which they then sell to pay for college.  They then get to use the college tax credit to offset any capital gains they might pay.

Here’s a cool article talking about the state tax implications on player’s who got traded around this year’s baseball trade deadline.  The big winners or losers either came from or went to a state with no income tax like Florida or Texas.


PostHeaderIcon Tax News – July 30, 2013

The big tax news yesterday was President Obama’s speech about corporate tax “reform” (are you sick of the word yet?).  His plan would drop the corporate tax rate from 35%  to 28% and it would create a special manufacturing company rate (it will be interesting to see how everyone tries to become a “manufacturer”) of 25%.  The flip side is, the president wants more stimulus money for construction jobs.  The big piece of it would be a change in how overseas companies are taxed and it sounds like there would be some kind of depreciation change as well.  As usual, these speeches are light on details (it all sounds good) and it doesn’t sound like the other side of the aisle took it very well.

More on the tax reform front, it looks like talks may be coming to an end before they even begin and it all centers around Harry Reids comments about tax reform actually being a tax increase.  I figured this would be a nail in the coffin and with things not even really getting off the ground, you wonder how much time they’re going to waste on this.  Not that it’s a waste trying to come up with a way to reform taxes, but a waste because it’s such a fruitless effort with out current Congress.

Fox Business has a decent article on five tax mistakes that investors make.  There’s nothing earth shattering here but it’s a good list to go through as a reminder.  I didn’t really like the fifth suggestion about U.S. Treasuries but the one on harvesting losses was solid.

This is more accounting than tax, but this article talks about how some companies were able to “massage” their earnings when they changed their accounting year end.  There is a discussion near the end about accounting method changes and year end changes that’s worth reading.

PostHeaderIcon Tax News – July 29, 2013

No surprise here, but an attempt by our Senators to keep their discussions on tax reform secret for the next 50 years is facing some heat.  Thirty organizations have opined as to how they want to see whether to cut their senators off from the trough how they want more transparency.  Of course the fact that we even are talking about this goes a long way toward showing tax reform is going to be a tough sell.

I don’t know how having a city income tax can drive a city to bankruptcy, but it’s mentioned in this article at Kansas City Star.  And the reason non-residents are taxed at half the rate as residents seems like common sense to me.  If you’re in the city, you more directly benefit from the tax.

It’s getting more expensive to travel and it has a lot to do with municipalities trying to get what they can out of visitors while trying to keep their residents happy.  These include everything from hotel room taxes to car rental surcharges.  New York leads the way with these kind of taxes with $10.9 billion in tax revenue.

The US government is still trying to crack down on overseas tax avoidance and their latest sting is people trying to use Norway as their tax haven.  They’re asking for records from some of the big banks to see if they squeeze any revenue out of people trying to get out of paying their taxes by keeping their money overseas.

PostHeaderIcon Tax News – July 28, 2013

I missed the past couple of days so lets call this the weekend edition of Tax News.

Japan had planned on raising its countries’ sales tax in one of the biggest reforms to date but with the tax coming up soon, it looks like there’s some backtracking. Now it looks like it’s either going to be delayed or watered down.  While not relevant to what’s happening in the US, there have been some moves towards a national sales tax or a value added tax in the US so it’s interesting to see how other countries are handling, or in Japan’s case not handling, things with regard to their sales tax.

Obamacare strikes again when a new tax will begin this week.  It’s a $1 per employee excise tax on companies that employ Flexible Spending Accounts or Health Reimbursement Accounts.  Next year the tax goes up to $2 per employee and the money will go to fund the Patient-Centered Outcomes Research Institute.  It was created under Obamacare to study treatments and systems that work best at keeping people healthy.

CPAs have their own times and ways for keeping tabs on their clients.  If you don’t have someone helping, this article talks about some of the changes you might be facing with the year half way through.  The changes to the home office deduction are particularly interesting.

I’ve been saying this from day one but this Forbes article talks about why tax reform is impossible. In case you’re confused about how politics works, it comes down to money.

Finally, and also on tax reform, we have the blow back from Harry Reid’s comments about tax reform raising taxes.  It’s not going to fly in the house, which is another reason tax reform won’t even get off the ground.


PostHeaderIcon Tax News – July 25, 2013

Getting audited by the IRS is a major fear for a lot of people. In fact I’ve had clients intentionally pass on deductions just because they thought it was more likely to get them audited.  Most audits are performed by mail these days and if you get a notice, I recommend you respond as soon as you can and if you need help, just contact a professional.  In the meantime, has a nice piece with some pretty graphics on the statistics of IRS audits.

Everyone wants a break these days and FratPAC, the political action committee that represents fraternities and sororities, is looking to push through legislation that would allow frats and sororities to use charitable contributions to build chapter houses and they want to do it with no penalties that might come about from hazing activities.

One way for states to raise revenue is through amnesty programs. talks about a recent program being introduced in Louisiana that allows taxpayers who owe money to come clean and pay less in penalties.  While a lot of people get worried about the IRS, in my experience, it’s the states that come with the biggest issues.  The dollar amounts are usually smaller but I’ve found issues are more difficult to resolve.  Having something like this to allow people to get the monkey off their back is a good way to go about it.

New York is issuing tax refunds to same sex couples that file amended estate tax returns.  This is all coming about after last months Supreme Court ruling that struck down DOMA laws.  The court case, U.S. vs. Windsor, had a lot to do with taxes and New York is one of the states that’s following this federal decision.

There was a lot of tax reform stuff out there but probably the funniest is the fact that Senate Finance Committee discussions on tax reform will be sealed for more than 50 years.  You also have Harry Reid talking about how he thinks tax reform should be revenue positive and his number is just south of $1 trillion over 10 years. Of course this will be a non-starter in the House with the conservative leaning members not wanting to raise taxes.  Already we have lines being drawn in the sand that will ultimately prevent reform from happening.

PostHeaderIcon Tax News – July 24, 2013

There’s quite a bit of tax news on the internet today with the first story near and dear because I work with a lot of real estate investors.  A recent tax court case found in favor of the IRS in that a husband and wife who owned three rental properties weren’t considered real estate professionals because they lacked quality documentation to fulfill the time requirements.  For more information on qualifying as a real estate professional, I recommend you read the series I did on this subject last year.

The IRS continues in its crackdown of taxpayers trying to hide income overseas and their latest target is going after what’s been called “stateless income.”  In more plain English, this means companies use a complex legal structure so income falls through the cracks and avoids US taxes.  For now, it’s legal but with the IRS looking at this more closely, you could see the loophole close soon.

Computer maker Dell is looking to go private soon and as part of the buyout, they considered changing to a different tax jurisdiction to avoid US taxes.  Image appeared to be one of the reasons they didn’t pursue the strategy.

Do you know what Apple’s effective tax rate is?  It’s okay if you don’t because at this point in the year, it’s subject to interpretation.

Finally, a common strategy of high income taxpayers to get out of paying higher taxes is to try to shift some of their income to their kids.  While the kiddie tax can prevent this, you can still shift income to get out of some of the other phaseouts by not taking your kid as a dependent.  You don’t avoid the kiddie tax, but you may be able to push yourself into a situation to claim those credits with a phaseout or even the AMT.

PostHeaderIcon Tax News – July 23, 2013

One of my favorite sites,, has a great piece on tax and other issues surrounding the newer alternative currencies.  In her column, she talks about a new alternative currency that a non-profit in Philadelphia is trying to push called Equal Dollars.  The money is given out for volunteering and then can be used at local businesses.  Of course by receiving these “dollars,” you’re in effect receiving compensation that’s taxable.  The questions is, how does this local currency equate into it’s dollar equivalent so the IRS can take it’s share.

The G20 is on the prowl and the US multinational tax structure is in its sights.  A tax law that’s drawn ire from our president himself, (this is a very simple description) foreign companies that set up branches don’t have to pay taxes on their profits until the money is brought back home.  There was a reason for this policy at one point in time and it was to promote overseas investments.  This is a longer article and while it’s interesting from a political perspective, it’s not going to affect anyone unless they’re doing business on the ground in a foreign country.

It was a slow tax news day but it wouldn’t be complete without a story on tax reform. Senators Max Baucus and Orrin Hatch want their peers to give them ideas on tax reform and at least for now, there’s been some reluctance to do that because of all the lobbying interests involved.

PostHeaderIcon Tax News – July 22, 2013

This is going to be something new I’ll be doing on a mostly daily basis.  It’ll be a run down of the tax related news stories that I find and read through out the day.  As I get into this, you should also see my “links” list grow and while some of these stories will be posted individually on my Facebook page (most likely in the morning), you’ll find all of those and more in this daily update which should show up in the evening.  Anyway, on to my inaugural edition.

Right now, tax reform is in the spotlight and while I think it’s not going to happen anytime soon (we can’t Congress to agree on the small things much less something expansive as this), it’s in the news.

First off, we have a story at CNN Money talking about how “temporary” tax breaks that have at times lasted 30 years play havoc on budget estimates and downplay the true cost of these tax breaks.  The research and development credit and the renewable energy production tax credit are both examples of these temporary but permanent tax breaks.

Another CNN Money article talks about how companies have used advance pricing agreements to shave their taxes with regard to multinational   I remember when I was in school, transfer pricing was a big deal and a tool that the IRS could used to bring a hammer down on some of the bigger companies with overseas operations.  Transfer pricing is basically the prices you charge to your international subsidiaries or branches must be the same price as an arms length transaction.  To protect themselves, companies entered into advance pricing agreements to cover themselves in advance with the IRS with regard to transfer pricing issues.

On the tax reform front, we have an editorial at talking about how, for tax reform to work, we need to start completely over.  Again, this probably isn’t going to happen because it’ll be a lobbying feeding frenzy but it’s fun talking about.  And speaking of lobbyists, we have a WSJ piece on those big companies that have a vested interest in how tax reform will take shape.

Phil Mickelson recently won the British Open and with it, the state of California looks to cash in more than the pro golfer.  If you believe the math here, it looks like Phil is going to have to pay 61% of it which will be split between the federal government and the state of California.