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Summing It Up

Keeping you ahead of the curve with timely news & updates.


OVDP's and IRS Data Mining

By: Howard Epstein, CPA, Director, International Tax

Opening a new front in the U.S. crackdown on offshore tax evasion, federal investigators have won court approval for a summons on a Caribbean bank, to turn over account data for wealthy American clients. This is just the latest of several overseas banks served with similar demands from the IRS, in an effort to identify federal tax evaders who have assets and income hidden offshore. This comes in response to the IRS leniency program (or Voluntary Disclosure Program), in which Americans can disclose previously secret foreign accounts to the IRS to avoid tax liens and pay back taxes.

The fact that the IRS is using John Doe Summons and other data mining means to flesh out non filers of FBARs provides further proof that they are steadfast in their resolve to find people committing tax fraud. The unfortunate part is that honest people that simply don't know the law are being compromised at the same time. It is important that those innocent people come forward under the current programs available before the IRS taps them on the shoulder and such relief is not available. 

FBAR Filing Assistance

At Freed Maxick, we are poised to assist you in assessing your FBAR filing requirements, integrate the necessary information, and prepare your current and past due FBARs. We also have considerable experience helping taxpayers that have not been historically compliant navigate the IRS guidelines, minimizing any potential penalties through the various IRS Voluntary Disclosure Programs that are available.

For a confidential discussion of your FBAR situation, call us at 716.847.2651, or complete and submit this form for more information.

 

 

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Marketplace Fairness Act Report

Senate Approves Internet Sales Tax: Measure Headed to House

The U.S. Senate has overwhelmingly, and with strong bipartisan support, passed the Marketplace Fairness Act of 2013 (the Act) by a vote of 69-27. The bill would allow a state to require certain remote sellers to collect sales and use tax on sales made to customers in the state. States that are members of the Streamlined Sales and Use Tax Agreement (SST) would automatically be granted this authority. States that are not SST members would be required 
to implement simplification requirements. The bill provides an exception for businesses with annual remote sales of $1 million or less.

dollar_sign.jpgHighlights of the report available below include:

  • Authorization of Tax

  • Collection on Remote Sales

  • Small Seller Exception

  • Simplification Requirements

  • Relief from Liability

  • Sourcing Rules

  • Limitations

To check out a detailed summary on the Marketplace Fairness Act, click HERE for the full report.

When it comes to taxes, Freed Maxick CPAs is different than most accounting firms in Western New York. To us, tax time is all the time. We’re sticklers about deadlines and compliance, but our larger goal is tax management. So we keep a year-round eye on federal, state and local tax laws, including those pending. We alert you to any changes that may affect you and help you respond in a timely way. 

We have the experience and resources necessary to resolve all your tax issues no matter what the complexity, including:

ASC 740
Canadian Services
Capitalization vs. Repair 
Cost Segregation Services
Foreign Bank Account Report Compliance
IC-DISC
International Tax Services

New York (NY) State Excelsior Jobs Program
Personal Tax Services
Research & Development (R&D) Tax Credits
State and Local Tax Services
State Tax Analysis & Resolution
Tax Credits
Tax Planning and Consulting
Transfer Pricing Analysis – Study
Tax Planning and Consulting

We may be based in New York State, however Freed Maxick provides tax services to business all over the U.S., no matter your location: Alabama, AL; Alaska, AK; Arizona, AZ; Arkansas, AR; California, CA; Colorado, CO; Connecticut, CT; Delaware, DE; Florida, FL; Georgia, GA; Hawaii, HI; Idaho, ID; Illinois; IL; Indiana, IN; Iowa, IA; Kansas, KS; Kentucky, KY; Louisiana, LA; Maine, ME; Maryland, MD; Massachusetts, MA; Michigan, MI; Minnesota, MN; Mississippi, MS; Missouri, MO; Montana, MT; Nebraska, NE; Nevada, NV; New Hampshire, NH; New Jersey, NJ; New Mexico, NM; New York; NY, North Carolina, NC; North Dakota, ND; Ohio, OH; Oklahoma, OK; Oregon, OR; Pennsylvania, PA; Rhode Island, RI; South Carolina, SC; South Dakota, SD; Tennessee, TN; Texas, TX; Utah, UT; Vermont, VT; Virginia, VA; Washington, WA; West Virginia, WV; Wisconsin, WI; Wyoming, WY. We Serve all 50 States.

 

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JOBS Act Amended- Its Impact on Crowdfunding

By Joe Burwick, CPA

lightbulb.jpgCrowdfunding is not a new concept, as grassroots fundraising dates back to 1997. But with new platforms, like that of IndieGoGo and Kickstarter, crowdfunding has gained traction in raising revenues for donations, charities, and businesses.

What types are there?

Crowdfunding relies on the concept of asking large groups of organizations and individuals, to contribute to a project. There are three primary types of crowdfunding:

  • Donation or Reward. When people give money towards a project and receive a gift or promise of one of the finished products in return.

  • Debt. Receiving funding from people with the expectation they will be paid back with interest in the future.

  • Equity. This involves getting a large number of people to buy into an idea in return for equity in the project or business.

Implications

Depending on the structure of the transaction (Equity, Debt, or Donation/Reward) there are differing tax implications and reporting requirements.  For instance, donations/rewards where the investor receives something in return is a taxable event and must be included in gross receipts.  However, if deductible business expenses exceed your crowdfunding revenue and other operating revenue, then you won’t owe income tax (but may owe franchise or minimum taxes). 

Depending on how the payments are received, the crowdfunding recipient may get Form 1099-K.  If payments are made by credit card or if payment in settlement of third party network transactions (i.e. PayPal) where gross payments exceed $20,000 and there are more than 200 transactions, you may receive one of these forms.  The IRS will look to match (and analyze) the income on your return to Form 1099-K you receive.

Legal Implications

In response to the growing popularity of Crowdfunding, the JOBS act set the Crowdfunding exemption for equity interest offered to the public at a ceiling of $1,000,000 for the aggregate amount sold to all investors in a twelve month period.  Prior to this act you had to either register with the SEC or meet another exception before offering securities to the public. 

The act further limits the amount sold to any individual investor based upon their annual income or net worth as follows:

  • If annual income or net worth is less than $100,000; the aggregate amount sold to such investor cannot exceed $2,000 or 5 percent of net worth / annual income.

  • If annual income or net worth is greater than $100,000 the aggregate amount sold to such investor cannot exceed ten percent of the annual income or net worth of the investor (not to exceed a maximum aggregate amount of $100,000).

You should consult a tax advisor to determine if the amounts received can be excluded from income (i.e. under Internal Revenue Code Section 118 for a Corporation). 

What are the Financial Reporting Requirements?

Not only are there potential tax implications to these equity investments, but you must meet various financial reporting requirements as well.  Here is what you have to know to meet the financial condition requirements clause of the JOBS act:

Different offering amounts have different SEC financial reporting standards. Congress has set forth the standards as follows:

  • If the target offering is $100,000 or less, the most recently completed income tax return and financial statements certified by the principal executive officer of the issuer must be provided.

  • If the target offering is more than $100,000, but not more than $500,000, financial statements reviewed by a public accountant independent of the issuer must be provided.

  • If the target offering is $500,000 or more, audited financial statements reviewed by a public accountant independent of the issuer must be provided.

describe the imageAs new provisions of the JOBS Act are rolled out, it seems to have raised more questions than answers for entrepreneurs and online start ups. While the bill was designed to help companies tap investors for the early cash they need to get established and hire workers, easing federal requirements for completing private share offerings; a young company would then be bound by SEC rules protecting the rights of their new stockholders, as well as certain state laws.

Don’t expect state security regulators to ease up anytime soon. As crowdfunding gains traction (and the dollars associated with it grow), so too will the scrutinizing of start-ups that issue shares through crowdfunding. Due to the complexities of parts of the JOBS Act and SEC rules toward crowdfunding, entrepreneurs should talk to a tax consultant; to be aware of all the state and federal regulations and the impact it may have at tax time.

Freed Maxick CPAs

Freed Maxick tax auditors will keep you up to date on the most pressing tax issues. If you would like to know how crowdfunding may affect your business at tax time Contact us and connect with our experts.

 

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Proposed Federal Budget Extends Deductions for Energy Efficient Commercial Buildings

Over the past year, commercial and industrial buildings used approximately 50% of the energy in the U.S. economy. Building on the American Recovery and Reinvestment Act, operations can be made more efficient using cost effective efficiency improvements. The “Better Buildings” initiative gives commercial and industrial builds a chance to increase efficiency 20% by 2020. These changes are built into the President’s 2014 Federal budget, which includes a proposed tax change to modify and permanently extend the 179D Energy Efficient Commercial Building Deduction. There are various strategies to the initiative.

Streamlining Green Energy Incentives for Commercial Buildings

In order to encourage businesses to go green, a number of financial measures are being explored. Progress has been made by proposing updates to the rules for the 179D tax deduction. The Federal Government is looking to redesign the current deduction to be more generous which will encourage building owners and real estate investment trusts (REITs) to retrofit their properties.

The proposal would raise the current maximum deduction for energy efficient commercial building property to $3.00 per square foot. The maximum partial deduction allowed with respect to each separate building system would be increased to $1.00 per square foot. For taxpayers that simultaneously satisfy the energy savings targets for both building envelope, HVAC, and lighting systems, the proposal would increase the maximum partial deduction to $2.20 per square foot.

The proposal also provides a new deduction based on energy savings realized from retrofitting an existing building. The deduction would be capped at 50 percent of the total cost of implementing the plan. The deduction would be allowed on a sliding scale ranging from $1.00 per square foot of retrofit floor area, for energy savings of at least 20 percent, up to $4.00 per square foot of retrofit floor area, for energy savings of 50 percent or more. Sixty percent of the deduction would be available when the property is placed in service and would be based on the projected energy savings performance of the commercial building retrofit plan. The remaining 40 percent of the allowable deduction would be available at a later point and would be based on actual energy savings performance of the retrofit plan.

Do you know what deductions are available for your business?

CSP360 is one of the nation’s leading providers of cost segregation and consulting services to real estate owners. Our philosophy is to offer clients an experienced team of professionals who take a 360° view of a taxpayer’s assets. This helps our team identify credits and incentives that the taxpayer may benefit from. Contact usto learn more!

 

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President Obama's Fiscal Year 2014 Federal Budget Proposal

describe the imageFrom the Thompson Reuters report," On April 10, President Obama released his Fiscal Year 2014 federal budget proposal, which included $1.8 trillion of additional deficit reduction over 10 years. It contains many of the provisions proposed in his 2013 budget, along with several new ones, such as the use of a chained consumer price index (CPI), a $3 million limit on tax-preferred retirement accounts, and an increase in the excise tax on tobacco.

Employing a “balanced approach,” the budget proposal seeks to tame the deficit while making businesses more competitive, providing middle-class tax relief, and reforming the tax Code. There are provisions that many will wholeheartedly support, and others that many will find unacceptable. Businesses will undoubtedly applaud the new stability in a permanent research credit and expensing deduction. Higher earners with incomes over $1 million will not be happy with paying at least 30% of their income in taxes under the so-called “Buffett Rule.” The elderly on a fixed budget may see the use of chained CPI as a politically safe way to cut Social Security. Some will view as overdue reforms to prevent companies from shifting profits overseas to avoid U.S. taxes and to encourage “insourcing” and job creation in
the U.S.

It is of course unlikely that many of these provisions will make their way into legislation, but some very well may. Whether regarded as a vision of the President’s agenda or a road map to coming changes, the budget proposal can’t be ignored." 

 To learn more and gain access to the full report, click HERE.

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Bitcoin | The New Cyber Currency?


Ever hear the saying “there’s an app for that”; well now there’s a currency for online users-Bitcoin. With no actual existence in the physical world, Bitcoin has been breaking barriers for online and consumer bartering.

How does it work?

By visiting an online exchange site, you can simply exchange traditional curriences (dollars, pounds, etc) for the virtual currency. Trading started at $7.00 in 2010, in exchange for one Bitcoin. What separates the Bitcoins from other tradable scripts (i.e. the Disney dollar), is that the coins trade on a floating exchange rather than having a fixed exchange rate set to a national currency. Prices have fluctuated wildly over the last couple of years, and with no government oversight or regulation, there is also no way to protect the online exchange. This led to a brief shutdown after Bitcoin sites were hacked. It is back in circulation, but finding places that will take the coin is difficult. There are some restaurants, book stores and online retailers that will take the coin as currency. It requires logging into your IPhone and sending the coins to the retailer you are dealing with, virtually. Once the exchange is complete, you have your merchandise.  According to Bitcoin Magazine, the currency has gained over 1 million users.

It can’t be that easy?

It’s not! When Bitcoin first started trading in 2009 it sold for less than a dollar. The virtual currency started garnering more attention when, in the start of January of this year, it rose from $10.00 to roughly $260.00 by April 10th. But that bubble burst when it fell to $77.00; since then it is slowly rising again. Not only is the currency volatile, but investors have had to deal with highly unstable trading platforms- the unfortunate symptom of decentralized currency. Currently there are 11 million Bitcoins in circulation, but this new way of bartering is unpredictable. Traditional currencies are safely held in a range of investment funds and banks. While both have their security problems, only one is considered “hard currency”.

Are there tax implications?

Due to widespread curiosity and the growing interest in Bitcoins, the Treasury Department issued a series of guidelines for Bitcoin brokers. The guidelines serve more as a direction against money laundering than tax implications. The IRS hasn’t specified yet whether Bitcoins should be considered an in-kind payment, bartering system, or foreign currency payment. Trying to decipher between these distinctions is no easy task, as each has its own implications under the U.S. tax code.  As the continued education is necessary, to be aware of future tax issues that may arise from internet currencies; as the IRS and government entities move toward concrete answers to questions surrounding the treatment of digital currencies.

High Tech WhitepaperFreed Maxick tax auditors stay current and update with currency guidelines, to help keep you aware of issues or implications that could affect your taxes. If you would like to learn more Contact us to connect with our experts.

We have also worked with hundreds of high tech companies and startups. Please call us to talk with one of our CPAs or business advisors about getting your high tech company to growth mode.  Call us at 716.847.2651, or contact us here.

 

 

 

 

 

 

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Amendments to New York’s Royalty Expense Add Back Statute

NY Royalty ExpenseAs the first legislative quarter for 2013 comes to an end and the second quarter begins, elected officials across the country are considering a large number of state income and franchise tax law changes. Some proposals have been audacious, recommending significant tax reform (e.g., eliminating the corporate and individual income taxes), while others stay true to the current tax policies and play around the edges (e.g., eliminating tax breaks).

One of the amendments to the current tax policies in New York State applies to corporate franchise tax, bank franchise tax, tax on unrelated business income, personal income, and insurance tax. Royalty income (sometimes called running royalties) are usage-based payments made by one party (the "licensee") to another (the "licensor") for the right to ongoing use of an asset, sometimes an intellectual property. Royalties are typically agreed upon as a percentage of gross or net revenues derived from the use of an asset or a fixed price per unit sold of an item of such, but there are also other modes and metrics of compensation. A royalty interest is the right to collect a stream of future royalty payments. 

Changes to New York’s royalty income add-back and exclusion provisions, which apply to taxable years beginning on or after January 1st 2013, eliminate the exclusion of royalty income received, if the related member that made the royalty payment was required to add back the payment to its income. Further, the bill creates new exceptions:

  • The royalty payment was paid, accrued or incurred by a taxpayer that is organized under the laws of a foreign country that has a tax treaty with the US. The taxpayer was subject to tax in the foreign country on a tax base that included the royalty payment paid, accrued or incurred by the taxpayer; the effective tax rate equals that imposed by New York; and the royalty payment was paid, accrued or incurred pursuant to a transaction that was undertaken for a valid business purpose and using terms that reflect an arm’s length relationship.

  • If the taxpayer was subject to tax on or measured by its net income in New York or another state; the tax base for the tax included the royalty payment paid, accrued or incurred by the taxpayer; and the aggregate effective tax rate (a nominal rate multiplied by the recipients apportionment percentage) applied to the related member in those jurisdictions is not less than 80% of the applicable New York statutory rate.

  • If the taxpayer was subject to tax in New York, another state or foreign nation on a tax base that included the royalty payment paid, accrued or incurred by the taxpayer; the related member during that same taxable year directly or indirectly paid, accrued or incurred such portion to an unrelated third party; and the transaction giving rise to the royalty payment between the taxpayer and related member was undertaken for a valid business purpose.

The new legislation is forth coming, applying to tax years beginning January 1st, 2013 and all applicable taxes related to this, filed thereafter.

Contact Us

When it comes to taxes, Freed Maxick CPAs is different than most accounting firms in Western New York. What matters to you, matters to us; giving you the most up to date alerts to any changes that may affect you and help you respond in a timely way. We serve all 50 states. Contact us to today.

 

 

 

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Fiscal Year Budget Proposals Report 2014

describe the imagePresident Obama released a $3.77 billion fiscal year (FY) 2014 federal budget on April 10, 2013, with a mix of individual and business tax proposals intended to raise revenue, reduce spending and encourage negotiations between the White House and the GOP on comprehensive tax reform.

President Obama called for a 28 percent cap on itemized deductions, a $3 million limit on tax-preferred retirement savings, a permanent research tax credit, a permanent American Opportunity Tax Credit (AOTC), a change in the taxation of carried interest, and more. President Obama also provided for the first time specifics on the so-called Buffet Rule. Following release of the President's FY 2014 budget recommendations, the Treasury Department issued its customary “Green Book,” describing the proposals.

Check out the latest CCH report featuring insight on tax reform and deficit reduction.



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New York State Solar Power on The Rise!


By: Jeffery T. Zawada, CPA

A few years ago, talk of harnessing energy for commercial or residential sustainability didn’t seem practical. With no replicable models for doing community based energy projects or investments, local development didn’t seem thinkable. But with recent opportunities in community solar, crowdfunding and R&D, there has been a surge in commercial and residential development and investment.

What are other States Doing?

In 2012, California-based company, Solar Mosaic, launched their first community solar investment project, allowing 51 California investors to earn 6.38% returns for investing in a 47 kilowatt solar array on the roof of the Youth Partnership in Oakland. Their subsequent 235 KW project ups the ante; opening up to regular folks in California and New York (and accredited investors in all 50 states). 

The Mosaic model turns community solar into a simple investment, letting prospective investors select a particular Mosaic project to invest in, with significantly higher returns than parking money in a U.S. Treasury or savings account.  For now, it’s limited to broad participation in just two states, New York and California. This is just one example of how solar companies are expanding the reach of solar energy output.

What is New York Doing?
Governor Cuomo, in his 2013 State of the State Address, announced the Charge New York Program; making NYS part of a clean tech economy. Due to the large amount of money NY is investing in panel installations for home and business; various companies in New York offer incentives and tax credits for both residential and commercial businesses looking to recoup some of the costs.

Companies like New York State Energy Research and Development Authority (NYSERDA) offer many state incentives and credits for commercial and residential builds.

  • NYSERDA Solar PV Program Incentives- Saves 40-70% off the purchase cost and install on a solar electric system by combining this program with other New York Energy SMART programs;

  • The NYSERDA Solar Thermal Program Incentive offers both residential and commercial 15-20% off the installed cost of an ST system.

On the state and federal level, NY offers tax credits and exemptions for various solar installations. Some of these include:

  • The NYS Solar Credit:  Is a 25% credit of the total installation cost. You have to file tax form IT-255 to receive the credit. Be mindful; there’s a cap of $5,000 on this. If you are installing a 5kw system, you’ll be due back $5,000 from the state.

  • The federal solar tax credit: Allows for a 30% solar installation tax credit. This credit differs slightly from NY state credits. You need to calculate your expenses after rebates. For example- on a hypothetical 5kw system priced at $25,000, you can expect back $4,875 (this is by taking the $25,000, subtracting the state solar power rebate of $8,750 to arrive at $16,250. Then take your 30% and you’ll get $4,875).

  • The NYS solar tax exemption: for the addition of solar panels to your home; giving an exemption from property tax increases, even though you’ll be adding roughly 20 times your annual electricity bill savings to your property value.

Still unsure what renewable energy credits or incentives you qualify for? Freed Maxick can help you figure it out. Contact us to connect with our experts, or call us at 716-847-2651.

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Taxpayer Roadblocks- the IRS and the FBAR

By: Howard B. Epstein, CPA

In April of 2010, the Department of the Treasury and the IRS asked for public comment regarding guidance projects and issues concerning interpretation and implementation of the new Foreign Account Tax Compliance Act (FATCA) provisions that stemmed from the HIRE Act of 2010. Unlike its FBAR compliance efforts that rely on delegated authority from the FinCEN and that are restricted due to concerns in the use of tax return or tax return information under Internal Revenue Code ( I.R.C.) 6103, the new provision eliminates these concerns and allows the IRS to use its own tax administration authority.

While there are benefits to the IRS using its own tax administrative authority, there are still some issues. Many of the issues encountered with the FBAR will continue to plague the new provision as well. For example:

  • The IRS will face the same problem with the new FATCA provisions as it does with the FBAR provisions, as there is no easy method to determine what constitutes the potential population filing base.

  • The new provision will be self-reported, similar to the FBAR.

Other roadblocks include the burden of what taxpayers will face, and increases filing requirements that have become considerably more complicated as a result of the addition of the FATCA filing. For example:

  • In addition to the required FBAR filing, taxpayers are now required to file the new FATCA information.

  • Taxpayers may also find that certain terms are defined differently in the BSA regulations and the Internal Revenue Code. For example, the term United States is defined in the BSA regulations as …the States of the United States, the District of Columbia, the Indian lands, and the Territories and Insular Possessions of the United States.20 While in the I.R.C. it is defined as “United States” when used in a geographical sense includes only the States and the District of Columbia

    (Source from IRS.gov/pub/IRS-wd I.R.C 7701(a)(9) (2010).

Are you hitting roadblocks in filing your FBAR and FATCA? Do you have questions on how to navigate the complex IRS tax rules? If so, we can help. Freed Maxick is committed to helping you! Contact us today to get started.

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