Treasury and IRS recognize same-sex marriages

Treasury and IRS recognize same-sex marriages

• Washington, D.C. — The Treasury Department and the Internal Revenue Service have ruled that same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as married for federal tax purposes, regardless of whether the couple lives in a jurisdiction that recognizes same-sex marriage or a jurisdiction that does not recognize same-sex marriage. The ruling implements the federal tax aspects of the June 26, 2013 Supreme Court decision invalidating a key provision of the 1996 Defense of Marriage Act (DOMA). 

• Same-sex couples will be treated as married for all federal tax purposes, including income and gift and estate taxes. The ruling applies to all federal tax provisions where marriage is a factor, including filing status, claiming personal and dependency exemptions, taking the standard deduction, employee benefits, contributing to an IRA, and claiming the Earned Income Tax Credit or Child Tax Credit. Same-sex marriages legally entered into in one of the 50 states, the District of Columbia, a US territory, or a foreign country will be covered by the ruling. However, the ruling does not apply to registered domestic partnerships, civil unions, or similar formal relationships recognized under state law. 

• Married same-sex couples generally must file their 2013 federal income tax return using either the “married filing jointly” or “married filing separately” filing status. Individuals who were in same-sex marriages may, but are not required to, file original or amended returns choosing to be treated as married for federal tax purposes for one or more prior tax years still open under the statute of limitations. The statute of limitations for filing a tax refund claim is three years from the date the return was filed or two years from the date the tax was paid, whichever is later. Refund claims can still be filed for tax years 2010, 2011 and 2012. In addition, employees who purchased same-sex spouse health insurance coverage from their employers on an after-tax basis may treat the amounts paid for that coverage as pre-tax and excludable from income. 

Circular 230 Notice

CIRCULAR 230 NOTICE

• Circular 230 notice: To ensure compliance with requirements imposed by the IRS and other taxing authorities, we inform you that any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. 
• Plain English: Taxpayers are ultimately responsible for their financial decisions. Invalid tax shelters, tax scams or frivolous tax positions cannot be made valid by a “too-good-to-be-true” attorney opinion letter. Reliance on a “too-good-to-be-true” attorney tax opinion letter is not a valid defense to violations of US tax laws. 
• Please be assured that this notice does not reflect any decrease in the quality of services or the amount of thought we put into our correspondence with you. 
• Please note: Conversations between us are not covered by attorney-client privilege. Therefore, an expectation of confidentiality between me and the IRS cannot be expected, nor exist for that matter. Consequently, the IRS can compel me to reveal anything that you disclose to me.

Tax Dispute Forums

Tax Dispute Forums

When it comes to tax disputes, there are three different forums in which to bring a lawsuit, and sometimes the choice makes a difference in the result.  

• Virtually all taxpayers choose Tax Court because they need not pay the tax to have their day in court. But one problem with Tax Court is that all of the judges are former tax lawyers, and these judges often dismiss technical arguments offered by taxpayers who don’t want to pay the tax.
• In contrast, wealthy taxpayers often choose to pay the tax and then sue in Federal District Court for a refund. Why? They prefer, as a judge, a former federal prosecutor who is less likely to be deferential to the IRS. 
• The third option is taken by a small minority of taxpayers: paying the tax and suing for a refund in the Court of Federal Claims in Washington, DC.  That occurs when that unique court has favorable precedent that sets it apart from the other courts or, at least, lacks unfavorable precedent.

Reference:  Bruce Givner, Esq., is a tax lawyer with the Los Angeles law firm of Givner & Kaye, A Professional Corporation. He can be reached at Bruce@GivnerKaye.com.

20 tax tips for small businesses

20 tax tips for small businesses
The Internal Revenue Service sent letters to thousands of small-business owners recently, questioning whether they underpaid their taxes last year. 

Titled “Notification of Possible Income Under Reporting,” the letters were mailed to small employers this summer requesting that they review and confirm that they accurately reported their income on their 2012 tax returns.

In response to this action by the IRS, American University professors Donald Williamson and David Kautter have created a list of “Tax Best Practices for Small Businesses,” a checklist designed to help small business entrepreneurs stay up to date on all tax-related issues, and away from the scrutiny of 
the IRS. 

Here’s what Williamson & Kautter recommend small-business owners should do: 

1. Keep good records about who is an “employee” and who is an “independent contractor.” 
2. Keep track of places where you may have "nexus" (“physical presence”) (even unknowingly), to properly comply with state rules governing sales and income tax collection. 
3. Invest in a good software accounting system — to track your records and regularly provide updates to new IRS rules. 
4. Hire a tax accountant who has experience in your type of business, whether it’s a coffee shop or a construction business. 
5. Keep good records on how much was paid and the date placed in service, for any equipment, vehicles or other business assets. 
6. Avoid using funds from employee payroll tax withholding (or any taxes, for that matter) as a short-term loan to tide your business over during a shortfall in your cash flow. 
7. One of the biggest traps for small-business taxpayers is estimated taxes — pay quarterlies on time, calculate quarterlies correctly, and know the safe harbors that can protect you against underpayments.  Miscalculating any of these steps can be a major headache, so small-business owners should speak with someone, most likely a tax accountant or enrolled agent, who knows the rules cold. 
8. If you are the owner, and your spouse, child, mother-in-law, or other close relative works in your business, you should make sure your relative abides by the same employment rules as your unrelated employees. When someone pays you in cash, it doesn’t mean that payment is nontaxable.
9. Select a “tax year” for your business that reflects the natural ebb and flow of your business’ receipts and disbursements. This way, you won’t get caught in a cash crunch when tax time comes. 
10. You (or your accountant) should retain all relevant tax records for at least three years, and if your records relate to property and depreciation, you should keep the records until the property is disposed of, plus an additional three years. 
11. Keep detailed records on how you use your personal or business-owned vehicle for business versus personal purposes. 
12. Hire a reputable third-party administrator (such as Fidelity or Vanguard) to manage your 401(k) plan and other tax-favored employee benefits. 
13. Make sure you (and your tax accountant) are familiar with the tax rules, including the favorable tax credits and deductions that are unique to your business. 
14. If it becomes necessary for your small business to open a foreign bank account in order to pay vendors or others in a foreign country, make sure you (and your tax accountant) are vigilant in following the new rules on foreign bank accounts enacted in the Foreign Account Tax Compliance Act, or FATCA. (FBAR reporting)
15. If your hope is that your business will continue after you die, under the leadership of another family member or designated heir, you should take steps to protect the business against a forced sale in order to pay inheritance taxes. 
16. Don’t become foolishly emboldened into thinking the IRS will have to “prove” you have done something contrary to the tax law. The "burden of proof" is always on the taxpayer, not the IRS. 
17. Become familiar with the tax rules surrounding starting, running, selling and shutting down a business. Determine whether you should operate as a Partnership, Corporation, S-Corp, LLC, or Sole Proprietorship. Your tax accountant should be closely familiar with these rules. 
18. Have a one-on-one conversation with your accountant about the Affordable Care Act. 
19. If you can’t pay the taxes you owe the IRS, or other tax agency, you should contact your accountant right away. The situation won’t get any better by ignoring it.
20. When someone pays you in cash, it doesn’t mean that the payment is nontaxable. The IRS has state-of-the-art statistical technology and models based on spending habits and bank accounts to build a case against alleged tax scofflaws.

Courtesy:  accounting today | October 2013 accountingtoday.com

Donald Williamson & David Kautter

Government Shutdown Continues to Affect IRS Operations

Government Shutdown Continues to Affect IRS Operations
According to the IRS website, "all taxpayers should continue to meet their tax obligations." Regular filing deadlines will remain in effect during the shutdown. Individuals and businesses are encouraged to file electronically because those returns will be processed automatically. Paper returns will not be processed until full government operations resume but still must be postmarked by the deadline. On the other hand, tax refunds will not be issued until operations return to normal.

Live telephone customer service agents have been furloughed and the IRS's walk-in taxpayer assistance centers are closed. The Taxpayer Advocate Service is also closed. Tax audits are also not considered essential and are suspended until the shutdown comes to an end.

For more information on the government shutdown click The shutdown, the IRS and your taxes.

In preparation for a possible shutdown, the IRS on September 26 released a shutdown contingency plan that describes agency actions and activities for up to five business days during the shutdown. If the shutdown lasts longer than five business days, the deputy commissioner for operations support will reassess IRS activities and make any needed adjustments to personnel.

According to the IRS, no live telephone customer service assistance will be available; however, most automated toll-free telephone applications will remain operational. IRS walk-in Taxpayer Assistance Centers will be closed.

While federal government offices are closed, people with appointments related to examinations (audits), tax collection, and appeals or Taxpayer Advocate Service cases should assume their meetings are cancelled. IRS personnel will reschedule those meetings at a later date.

During the shutdown, automated IRS notices will continue to be mailed; however, the agency will not be working on any paper correspondence during this period.

How Does Federal Shutdown Affect Taxpayers?
The IRS provided the following basic steps that taxpayers should follow during the shutdown:

• Taxpayers should continue to file and pay taxes as normal. Individuals who requested an extension of time to file should file their returns by October 15, 2013.
• All other tax deadlines remain in effect, including those covering individuals, corporations, partnerships, and employers. The regular payroll tax deadlines also remain in effect.
• Taxpayers can file their tax returns electronically or on paper – although the processing of paper returns will be delayed until full government operations resume. Payments accompanying paper tax returns will still be accepted as the IRS receives them.
• Tax refunds will not be issued until normal government operations resume.
• Tax software companies, tax practitioners, and Free File will remain available to assist with taxes.

The IRS also provided a list of services that will be available, albeit limited, until the shutdown is over:

• For taxpayers seeking assistance, only the automated applications on the regular (800) 829-1040 telephone line will remain open.
• The IRS website will remain online, although some interactive features may not be available.
• IRS Free File partners as well as tax software companies will continue to accept and file tax returns.

The IRS said in a Web page about the shutdown that it is not sending out levies or liens, either those generated systemically or those manually generated by employees.

References:  

accountingWEB Jason Bramwell
accountingWEB Michael Cohn 
CNN Money

2014 Tax Tables

2014 Tax Tables