Posted on February 28, 2023 in Taxation Law

Taxpayers with foreign assets must take extra care when filing their annual tax returns and reporting information to the IRS through other means. By law, taxpayers with foreign accounts are required to report these assets and pay any applicable taxes. Failure to report accounts or other assets when required could result in tax penalties. By understanding the specific requirements that apply to them, taxpayers can avoid tax-related issues, and they can determine the steps to take to respond to any penalties that have been assessed.

The Basics of Foreign Account Reporting

When it comes to reporting foreign financial accounts, there are two main forms that taxpayers should be familiar with: the Report of Foreign Bank and Financial Accounts (FBAR) and Form 8938. The FBAR is used to report the value of a taxpayer’s foreign bank and financial accounts in total at the end of a tax year. A taxpayer will be required to file an FBAR if they have an interest in one or more bank accounts, brokerage accounts, mutual funds, or other financial accounts in countries other than the United States, as long as the aggregate value of all of these accounts exceeds $10,000 at any time during the calendar year. FBARs are filed electronically with the Financial Crimes Enforcement Network (FinCEN), and they are due on April 15.

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 Posted on February 21, 2023 in Property Taxes

California property taxes can be complex and challenging to understand. While the laws regarding property taxes apply statewide, the ways these issues are handled can differ from county to county. Understanding the specific requirements that apply to property owners can be difficult, and failure to follow the correct procedures could result in penalties. To address issues related to property tax assessments, payment of taxes that are due, and other related concerns, property owners will need to be aware of important dates and deadlines that apply throughout the year.

Dates Related to Property Taxes

• January 1: Lien Date - Anyone who owns taxable property on this date will be liable for the taxes that apply to that property. Property taxes are generally calculated as 1 percent of the assessed value of the property on the lien date.

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 Posted on February 16, 2023 in Property Taxes

In California, property taxes are a notoriously complex issue, and they may apply to both individual taxpayers and businesses. While property taxes will generally apply to real estate property owned by an individual, married couple, or business, they may also apply to other types of personal property. Specifically, assets that fall under the category of "business personal property" will need to be reported, and taxes may be applied to some of these assets. By understanding the requirements that apply to business personal property, owners of small businesses and other types of companies can make sure to avoid potential penalties.

What Is Business Personal Property?

Business personal property refers to the tangible assets owned by businesses and used to conduct their operations. This includes furniture, fixtures, equipment, and other miscellaneous items used by a business in its day-to-day operations. It also includes vehicles, aircraft, and boats, as well as supplies used by a business, such as office supplies, janitorial products, or fuel for vehicles. A business may also be required to pay taxes on personal property that has been leased and is used as part of its ongoing operations.

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 Posted on January 23, 2023 in Taxation Law

Many businesses rely on non-compete clauses in employment contracts, severance agreements, and other types of contracts. These clauses can help businesses protect their interests and prevent unfair competition by restricting former employees, independent contractors, or other types of workers from working for competitors or starting their own competing businesses. However, under the administration of President Joe Biden, the federal government is looking to take action to restrict the use of non-compete clauses or even prohibit them altogether.

Proposed FTC Rule Regarding Non-Compete Clauses

On January 5, 2023, the Federal Trade Commission (FTC) proposed a new rule that would affect the use of non-compete clauses in the United States. Under this rule, the use of non-compete clauses would be defined as an "unfair method of competition," and employers would be prohibited from using these clauses in employment contracts or similar agreements. In addition, the rule would require employers to rescind any existing non-compete clauses and notify employees or other workers of this rescission. This rule would supersede any state laws or regulations that specify when non-compete agreements can or cannot be used.

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 Posted on January 13, 2023 in Taxation Law

Since Proposition 64 legalized the personal use and cultivation of marijuana in California in 2016, many business owners have been able to take advantage of the legal cannabis market. However, there are a variety of laws and regulations that apply to these businesses, and it is important for business owners to keep abreast of changes to the laws that may affect them. One change that recently went into effect involves the cannabis excise tax. California cannabis businesses will need to make sure they are following the correct procedures to avoid potential tax penalties while addressing any other small business tax issues that they may encounter.

What Is the Cannabis Excise Tax?

Excise taxes are levied on specific products, services, or activities. There are multiple types of federal and state excise taxes that apply to products such as gasoline, cigarettes, or alcohol. The state of California levies a 15 percent excise tax on cannabis businesses and microbusinesses.

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 Posted on January 11, 2023 in Small Business Taxes

Small business owners need to address a variety of small business tax issues, and it is important to comply with all requirements put in place by the IRS and California's Employment Development Department (EDD). Worker misclassification is one issue that has received increasing scrutiny in recent years, and businesses that improperly classify workers as independent contractors instead of employees may face a variety of tax penalties. Recently, the IRS and the federal Department of Labor (DOL) announced that they will be working together to identify tax compliance issues related to worker misclassification This may result in tax audits and penalties for businesses that have failed to follow the proper procedures.

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 Posted on December 31, 2022 in Small Business Taxes

If you are a small business owner, you may be aware that there are multiple different types of taxes that you need to pay. Self-employment taxes are the combined Social Security and Medicare taxes that sole proprietors, independent contractors, and other types of business owners must pay. Understanding the self-employment taxes that may apply to you can help you make sure you stay compliant with the law and will not be required to pay penalties or fees. 

Understanding Self-Employment Tax

You will generally be required to pay the self-employment tax (also known as SE tax) if you have net earnings of at least $400 from self-employment in a tax year. The SE tax rate is currently 15.3 percent, which consists of 12.4 percent for Social Security taxes and 2.9 percent for Medicare taxes. In 2022, the Social Security portion of the self-employment tax will apply to the first $147,000 of your net earnings, including wages or tips. All combined earnings will be subject to the Medicare portion of the self-employment tax.

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 Posted on December 13, 2022 in Tax Audits

The Criminal Investigation (CI) division of the IRS regularly investigates taxpayers who are suspected of tax evasion, tax fraud, and other offenses. These investigations may be related to tax audits, or they may be performed independently. Those who are accused of committing tax-related offenses may not only face penalties for non-payment of taxes or failure to submit the proper information to the IRS, but they may also be subject to criminal prosecution. In recent years, offenses related to cryptocurrency have been a significant concern for the IRS. Agency officials have stated that hundreds of cases involving virtual currency and tax evasion or other offenses are likely to be prosecuted within the next year.

The IRS's Increased Focus on Cryptocurrency

As more and more people invest in cryptocurrency, use virtual currencies to make payments and purchases, and receive digital assets as income, the IRS has begun to scrutinize these transactions and enforce compliance with tax laws. It has also been able to prosecute some major cases involving tax fraud and other related offenses. In just one example, the founders of Bitqyck, a cryptocurrency investment company, were convicted of tax evasion after defrauding investors of around $24 million. The defendants in this case had failed to file corporate tax returns, and they had underreported their income to the IRS, resulting in tax losses of more than $1.6 million. In addition to being sentenced to prison, the defendants were required to pay a civil penalty of $8.3 million to the U.S. Securities and Exchange Commission.

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 Posted on November 30, 2022 in Taxation Law

Businesses that operate in the United States must meet a variety of legal requirements, including disclosing information to the government. In addition to submitting the proper information to the IRS when filing tax returns and other required forms, other types of disclosures need to be made to government agencies. This now includes reports required under the Corporate Transparency Act (CTA). This law was passed in 2019, and the final rule regarding reporting requirements was released in September 2022. Businesses will need to make sure to file the proper reports to avoid potential civil and criminal penalties.

What Is the Corporate Transparency Act?

Congress passed the CTA with the intent of preventing money laundering by people and organizations involved in drug trafficking, fraud, and other illegal activities. These activities often involve the creation of shell companies that conceal the identities of the owners and allow criminals to access and use assets in the United States. To combat these activities, the CTA requires companies to submit reports detailing their beneficial ownership information (BOI).

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 Posted on November 18, 2022 in Taxation Law

Taxpayers who own foreign assets, earn income in more than one country, or may otherwise be required to pay taxes in multiple countries may need to address a variety of tax-related issues to ensure that they are in compliance with all applicable requirements. This can be a significant concern during tax audits, and in some cases, information about a person's finances and tax obligations may be shared with other countries by the IRS. By understanding when this can occur and how the sharing of information may affect tax liabilities, taxpayers can make sure they take the correct steps to avoid penalties in the United States or other countries.

Court Ruling Highlights Tax Information Sharing Practices

A recent court case that took place in California demonstrates the issues that taxpayers may face regarding the sharing of information by the IRS. In the case of Zhang v. United States, the Canadian government requested tax information from the IRS related to a married couple. The taxpayers challenged this request, claiming that the Canadian government made the request in bad faith. However, the Ninth Circuit Court of Appeals ruled against the taxpayers and found that the IRS had acted in good faith to provide the requested documents based on the terms of a bilateral treaty between the United States and Canada.

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