September 2013 Archives

California FTB Provides Non-California Businesses with Information on Income Apportioning

The complexity of California income tax laws for non-California businesses is not new. Whenever nonresident businesses have income sourced to California, California will assess income tax in many cases. Public Law (PL) 86-272 still exempts out-of-state businesses from California income tax if their California activities qualify. This generally means the business' only connection to California is that of soliciting orders for sales of tangible personal properties, in which the orders are sent outside of California for approval and filled from inventory maintained outside of California (and not shipped into California by the out-of-state business' own vehicles into California). Beginning with taxable years on or after January 1, 2013, all apportioning trades or businesses must assign sales of "other than tangible personal property" under the new market-based rules. Some industries will follow the special industry apportionment and allocation regulations.

California FTB Provides Non-California Businesses with Information on Income Apportioning

The complexity of California income tax laws for non-California businesses is not new. Whenever nonresident businesses have income sourced to California, California will assess income tax in many cases. Public Law (PL) 86-272 still exempts out-of-state businesses from California income tax if their California activities qualify. This generally means the business' only connection to California is that of soliciting orders for sales of tangible personal properties, in which the orders are sent outside of California for approval and filled from inventory maintained outside of California (and not shipped into California by the out-of-state business' own vehicles into California). Beginning with taxable years on or after January 1, 2013, all apportioning trades or businesses must assign sales of "other than tangible personal property" under the new market-based rules. Some industries will follow the special industry apportionment and allocation regulations.

IRS believes tax controversy is over

The IRS recently announced that it was granting tax-exempt status to True the Vote. The IRS and the Department of Justice may believe that this tax controversy may be over, but True the Vote says there are still questions that it needs answered. As many businesses in California who have had dealings with the IRS know, just because an announcement has been made doesn't mean that the paperwork has been completed.

Israeli Bank Account Owners Readmitted to OVDP

Although the IRS won't comment on the reason Bank Leumi customers were kicked out of the IRS' Offshore Voluntary Disclosure Program (OVDP) after not only being accepted into the program, but after some had already received a final clearance and paid the amounts due to the IRS, it is suspected that the IRS admitted the taxpayers into the program in error.  If a taxpayer is already under audit or investigation, he won't be admitted into OVDP.  Once admitted, a taxpayer can be removed if he does not cooperate with the government or makes false statements with regard to the disclosure.  Since some of these taxpayers were readmitted, it is likely they were originally admitted in error.  Regardless, the right result was reached with this reversal if the IRS wants taxpayers to continue to come forward and disclose offshore accounts. 

IRS Posts New Frequently Asked Questions on FATCA

The IRS has posted new information to its website, in the form of frequently asked questions (FAQs), relating to FATCA. One set of FAQs focuses on the registration system and can be located at this link. A second series of FAQs involves FACTA issues relating to qualified intermediaries, as well as addressing registration and IGAs. Those FAQs can be found here.

City of Los Angeles Offers Delinquent Businesses a Tax Amnesty

The City of Los Angeles announced a tax amenesty program for qualified taxpayers owing Business, Utility Users Taxes (Telephone, Electricity, Gas), Commercial Tenant's Occupancy, Transient Occupancy, and /or Parking Occupancy Taxes. The amnesty program is being administered by the City of Los Angeles Office of Finance from September 1, 2013 to December 2, 2013 and allows taxpayers to resolve outstanding balances without penalties.

Should the IRS get to decide what a celebrity is worth at death?

Many people in California have been following the court battles spawned by Michael Jackson's death. There could be yet another battle brewing for the late singer's family -- this one in the United States Tax Court. The IRS has made a seemingly arbitrary decision about how much Jackson's "image and likeness" is worth for tax purposes.

From Al Capone to Barry Bonds, the IRS has played a critical role initiating investigations that ultimately led to criminal prosecution.

Despite accusations that the notorious Capone was guilty of directing or committing many crimes through his organized syndication,  tax evasion was ultimately the offense the federal government pursued which resulted in Capone's sentence to federal prison in 1932.  Flash forward 80 years and we see a conviction against Barry Bonds for obstruction of justice, which originally began as an IRS investigation into a company that distributed steroids and other performance enhancing drugs to determine whether the distributor laundered the proceeds gained by selling those drugs.  On September 14, 2013, the United States Court of Appeals for the Ninth Circuit affirmed Bonds' conviction for obstruction of justice under the omnibus clause of 18 USC, Section 1503, the interpretations of which will apply to tax obstructions under 26 USC Section 7212(a).  Click here for United States v. Bonds, 2013 U.S. App. LEXIS 19007 (9th Cir. 2013) http://cdn.ca9.uscourts.gov/datastore/opinions/2013/09/13/11-10669.pdf.

Small Businesses Owe Big

Last December, the Second District Court of Appeal for California ruled in Cutler v. Franchise Tax Board that a California business incentive program violated the US Constitution's Commerce Clause. The program was enacted 20 years ago to allow investors selling stock in a qualified small business to be taxed at half of the state's capital gains rate or to roll the proceeds into a new qualified small business within 60 days of the sale. In order to qualify for the tax break, 80% of the business's payroll at the time the stock was purchased must have been within California and 80% of assets and payroll must have been within California during the taxpayer's holding period. This tax incentive was designed to encourage the establishment of small businesses in California. The Court found California's tax incentive unconstitutional saying it discriminated against out of state businesses.

California tax crimes: Family inherited tax evasion problems

When the founder of International Investment Advisors LLC passed away in 2001, he was worth approximately $24 million. What his family may not have realized at the time was that over half of that fortune was held in overseas bank accounts and taxes had not been paid on that money. Now, the son of the financier and three more of his family members were charged with tax crimes and conspiracy.

Mandatory Tip? New Tax Treatment

In 2012, the IRS issued Revenue Ruling 2012-18 directing that automatic gratuities-tips added by the restaurant to the bill of large parties-- be classified as service charges, which are treated as regular wages subject to payroll tax withholding, rather than tips to be reported by the employee. The IRS later delayed implementation of the rule until January 1, 2014 to allow restaurants time to implement strategies for complying with the new rule.

US Citizen Pleads Guilty to Tax Conspiracy

The Department of Justice and Internal Revenue Service-Criminal Investigation announce a guilty plea by Aaron Cohen of Encino, California. Mr. Cohen pleaded guilty in the U.S. District Court for the Central District of California to conspiracy to defraud the United States.

United States and Switzerland Issue Joint Statement Regarding Tax Evasion Investigations

The Department of Justice has announced a program encouraging Swiss banks to cooperate in ongoing U.S. investigations of the use of foreign bank accounts to commit tax evasion. The program is available only to banks not currently under criminal investigation by the Department of Justice for offshore activities. Participating Swiss banks will be required to do the following:

Ways to handle California tax debt

There are times when taxpayers are unable to meet their tax obligations to their home state. Just as the federal government has ways for individuals and businesses to deal with tax debt, states do as well. There are four main ways used by most states, including California, to handle back taxes.

Contact the Law Office of Williams & Associates

For more information about our tax law services, or to discuss your tax matter, call our Sacramento office at (916) 488-8501 or toll free at (800) 684-7147. You may also send us an inquiry via email.

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