Posted on July 07, 2015 in Taxation Law

The federal administration has been taking a number of initiatives in order to reduce the corporate practice of tax inversion. However, statistics indicate that these initiatives are not having the required effect.

Tax inversion refers to the practice of a company moving its legal base offshore while retaining most operations in the US. According to the Wall Street Journal, companies are continuing to move base to lower-tax destinations overseas, and are taking over US companies after doing so. They are taking advantage of lower tax rates in these tax havens. Typically, in these lower-tax havens like Ireland, corporate tax rates are in the mid-teens. That is in sharp contrast to the United States corporate tax rate, which hovers at 35%.

Not only are these companies saving on the taxes that they have to pay because they have now shifted legal base overseas, but they also enjoy profits from the mergers that they're able to bring about from their overseas bases. A number of companies have overseas bases that are used to save on taxes.

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 Posted on May 04, 2015 in Taxation Law

Gamblers have been eligible to pay taxes on their winnings for years, and must pay taxes on each dollar that they win on all kinds of gambling. That includes not just slot machines in casinos, but also winnings on sports bets.

At a slot machine, only winnings above $1200 must be reported to the IRS. However, the Internal Revenue Service has admitted that it is toying with the idea of lowering that limit to $600. Predictably, that has generated outrage in the gambling community. It's not just gamblers who are opposing those proposals. The casino industry is also opposing that lowered threshold for reporting earnings at slot machines.

According to the American Gaming Association, which is the main lobbying arm for the industry, implementing any such change would be very expensive for the industry. All slot machines at casinos would need to be updated to ensure that tax forms are submitted to gamblers as soon as they hit the taxable threshold. Besides, initial costs would also include labor costs. According to Caesars Entertainment, that additional labor could cost an additional $18 million per year.

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 Posted on April 15, 2015 in IRS Scams

According to a highly critical government report on the Internal Revenue Service recently, employees who were caught cheating on tax laws are very unlikely to be fired. That is in spite of the fact that a federal law expressly requires the head of the Internal Revenue Service to fire cheating employees. The report finds however, that the agency fired only approximately 39% employees who were found to violate tax laws.

The report couldn't come at a worse time for the Internal Revenue Service. The agency is already battling not just funding crunches, and staffing shortages, but also a number of questions about its operations. Public confidence in the agency is at an all-time low, and the agency's reputation is damaged.

The report says that the Internal Revenue Service looked away when many IRS employees violated tax laws willfully. The kind of cheating reported included missing tax deadlines, overstating expenses, and claiming tax credits for first-time homebuyers, even without buying a house. According to the report, over the past decade, the Internal Revenue Service has caught 1,580 of its employees in violation of tax laws. However, in 61% of the cases, the employee was simply given access to counseling sessions, or was reprimanded for the offense. In other cases, they were suspended. In the remaining cases, they were fired.

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 Posted on March 05, 2015 in Taxation Law

Even as the year's annual tax season gets underway, staffing shortages at the Internal Revenue Service promise to make this year's season even more challenging than usual.

As the deadline for tax filing looms, taxpayers across the country are finding that their calls to the Internal Revenue Service offices are barely being answered. Just about 4 out of 10 calls are getting answered. At centers across the country, taxpayers are waiting for hours to get assistance from IRS officers.

The staffing shortages are linked to a reduction in the budget of the IRS. Congress has reduced the budget of the IRS by $1.2 billion since 2010 alone. That has led to significant staffing shortages at the Internal Revenue Service, as the agency has been forced to downsize as a result.

That has meant fewer staff members to man the telephone calls, and assist taxpayers. Agency employees are dealing with their own problems. The staffing shortages have meant that several clerical staff, including secretaries, have been given the ax. That means that regular employees are also being given clerical duties to perform, in addition to taxpayer assistance responsibilities. Motivations and morale levels are low at the agency.

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 Posted on February 06, 2015 in Taxation Law

The Internal Revenue Service has proposed penalties and taxes worth more than $1 billion on Caterpillar. That announcement came after the Internal Revenue Service went through the company's returns from between 2007 and 2009.

The Internal Revenue Service is specifically looking at profits from a Caterpillar subsidiary in Switzerland. The subsidiary is also currently the subject of an investigation by the Securities and Exchange Commission.

In 1999, Caterpillar via a process of restructuring shifted most of its profits to this subsidiary, and gave it a license to distribute the company's replacement parts for its excavators, and other equipment outside of the United States. According to a Senate investigation, by doing so, Caterpillar managed to save as much as $2.4 billion in taxes between 2000 and 2013. The Senate investigation was specifically looking at how this is tax structure for the Swiss subsidiary helped the company to save as much as $300 million in taxes every year.

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 Posted on January 03, 2015 in Taxation Law

Tax filing season is upon us, and some persons will be very sensible, and file their taxes earlier than the rest. There are definitely advantages to filing taxes before everyone else does.

When you file your taxes quickly, you will be first in line for your refund. Many people anticipate refunds, when tax season rolls around, and for these people, the quicker they file their taxes, the quicker they are eligible for a refund.

Filing your taxes early also reduces the risk that you will be victimized by identity theft. This is a very serious crime, and there are far too many cases involving taxpayers who had their identities stolen and suffered severe financial losses as a result. In fact, in 2014, the Internal Revenue Service actually included identity fraud or identity theft, as one of the many scams that taxpayers in the United States need to avoid. In many of the most popular schemes, fraudsters steal personal information, and file fake income tax returns.

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 Posted on December 02, 2014 in Taxation Law

This year's tax filing season will commence on January 20 as scheduled. The season will commence in spite of a last-minute law passed by Congress.

The Internal Revenue Service has announced that taxpayers can begin filing their tax returns for 2014 on January 20, 2015. There had been concerns that the filing season would have to be postponed this year, as lawmakers continued to delay a bill containing tax breaks. Earlier this month, lawmakers passed the bill, which extended dozens of tax breaks which had expired. The law now extends those tax breaks to the end of the year, which means taxpayers will now be able to claim those breaks when they file their tax returns for 2014.

In previous years, last-minute wrangling by lawmakers had delayed the start of the tax filing season. However, that will not happen this year. The agency has assured taxpayers that the agency has reviewed all the tax law changes the government made recently, and had come to the conclusion that there is nothing to prevent taxpayers from filing their returns, because the systems will be updated on time.

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 Posted on November 05, 2014 in Taxation Law

The Internal Revenue Service warns that persons who are expecting tax refunds next year are likely to face delays receiving their checks in the mail. That's because the federal agency is battling a severe resources crunch and budget shortfalls.

According to the Internal Revenue Service Commissioner, the agency is being forced to cut costs in a number of ways, and he expects that a number of services including taxpayer services as well as tax enforcement efforts, could be adversely affected by the shortfall. Of most importance to taxpayers is the fact that their refunds could probably be delayed. There could be fewer staff members for the processing of refunds and you could receive the checks much later than expected.

In recent years, the agency has been able to process tax refunds within a timeframe of three weeks in the case of electronically filed returns. However, that timeframe will probably not apply this year because of the funding crunches. The IRS's troubles stems from budgeting cuts for the budget year ending in 2015. Lawmakers cut the budget by as much as $346 million.

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 Posted on October 02, 2014 in Taxation Law

A new study ranks California at close to the bottom of the heap for its tax laws. According to the poll by the State Business Tax Climate Index from the Tax Foundation, California has the 48th best tax climate out of the 50 states.

The State Business Tax Climate Index for 2015 measures the structure of the tax code of each state, taking into account a number of variables. Those variables include sales tax, property tax, income tax and employment insurance. States that had overly complicated, complex, and convoluted tax codes were ranked low on the list. States that had neutral and transparent tax codes fared much better on the list.

It should be no surprise to any California tax lawyer that the state is ranked at the bottom of the heap. The state ranked very poorly in a number of variables. It was ranked 48th for its overall business tax climate, and 34th for its corporate tax structure. It was ranked right at the bottom at number 50 for individual income tax structure, and at number 40 for sales tax structure. It fared slightly better when it came to property tax structure and unemployment insurance tax structure, gaining a position of number 14 for each of these variables.

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 Posted on September 05, 2014 in Taxation Law

Inversion, or the process by which a corporation moves its base to a foreign country to avoid corporate taxes in the United States, has been a favored tool to avoid taxes for years now. However, in the future, new rules could possibly slow down the rate of inversions.

Lawmakers have proposed new rules that they believe will make it less attractive for companies to move their bases overseas, to avoid taxes. The rules have been specially designed to discourage inversions, and prevent the large volumes of lost tax revenues as a result of these moves by corporations.

The new rules are meant to suffocate corporate inversions, and discourage such moves in the future. The policies are aimed at making it harder for companies to move their bases overseas, and to make it less profitable for them to do so. Typically, during an inversion, an American company will move its tax base to a country outside the United States, where the taxes are much lower. American companies usually prefer countries like the United Kingdom or Ireland. In such cases, it is only the tax base that is moved overseas, and the administrative headquarters of the company continue to remain in the United States.

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