Ref: Corporate Transparency Act

THIS IS A NEW LEGAL REQUIREMENT EFFECTIVE 1/1/2024. [We bring it to your attention as a client service and strongly suggest you contact your business attorney or a paralegal reporting service].

Who is effected: Virtually ALL corporations, LLCs and partnerships.

When: Due date is Jan 1, 2025 for all entities in existence prior to 2024. New entities within 30 days of formation. Changes: Within 30 days of the change.

What: Information for all control employees of ALL entities includes full name, residential address, identification information (including a pdf of drivers license or passport).

How: You or your attorney will report through fincen.gov/boi

Example I: Small corp is owned by three shareholders A(50%), B(40%) and C(10%). Also John Smith is President, but not a shareholder. Information would be reported for all over 25% and John as an officer.

Example II: Small LLC is owned 50% each by partnership A and B. Both partnership A and B are owned 50% each by John, Susie, Sam and Christy. Since each of the individuals is the 25% beneficial owner of Small LLC, it will report all four. Also, both partnership A and B will report two partners each respectively.

Penalties: Are SEVERE: $500 per day and up to two years in prison.

AGAIN, THIS IS A LEGAL REQUIREMENT AND NOT PART OF YOUR INCOME TAX RETURN. AS WE ARE NOT A LAW FIRM, WE DON’T OFFER THIS REPORTING SERVICE. You can either report yourself or through your attorney / paralegal.

Ref: New phishing email making the rounds.

The IRS does not email taxpayers! There’s a new email making the rounds promising a missed refund if you reply. DON’T REPLY. It’s a phishing email designed to steel your identity.

You can report it to the government by emailing phishing@irs.gov.

See post dated 11/26/24 for current information

The EV credit (aka Clean Vehicle Credit) qualification has become hugely complex based on the vehicle’s components and assembly location. The US Department of Energy has supplied a link to input the VIN number and see if the vehicle qualifies for a credit:

https://afdc.energy.gov/laws/electric-vehicles-for-tax-credit

Final Assembly in North America: To be eligible for the Clean Vehicle Credit, a vehicle must have undergone final assembly in North America. In general, North America includes the United States and Puerto Rico, Canada, and Mexico for purposes of determining the location of final assembly.

The Dept of Energy’s website suggests that the manufacturer of the vehicle is the best source to check qualification of a vehicle prior to purchase. [Note that VIN must be supplied when filing a tax return claiming the credit such that the IRS can confirm qualification.

Ref: Franchise Tax Board release 2/24/23

Background: If your business received a Covid Employee Retention Credit from the IRS, you must amend the year to which the credit applies (e.g. 2021) reflecting receipt of the money.

CA approach: A few weeks ago, CA FTB announced that they were looking into whether the IRS ERC would result in tax on the CA state return… with an indication that they were leaning toward assessing tax on it.

New CA approach: Today the CA FTB reversed themselves and stated:

“Recently, the Franchise Tax Board provided a response to a question regarding the taxability of the refundable portion of the federal Employee Retention Credit (ERC). The previous response indicated that the portion of the refundable ERC that is refunded to the taxpayer would be income for California income tax purposes. However, upon further review of the applicable federal rules and guidance related to the ERC, the Franchise Board has modified its previous response. An employer receiving the ERC is not required to include the portion of the credit that reduces the employer’s applicable employment taxes, nor the refundable portion of the credit, in its gross income for California income tax purposes.”

Source: IR-2023-03: Jan 10, 2023 UPDATED 2/24/23: IR-2023-33

NEW DEADLINE FOR SOME = OCTOBER 16, 2023

Who: CA counties included in the FEMA storm victim declared disaster area. A partial list is Los Angeles, Orange, Riverside, Santa Barbara, San Diego and Ventura Counties. 31 counties qualify as of today and the full list can be found on https://www.irs.gov/newsroom/irs-announces-tax-relief-for-victims-of-severe-winter-storms-flooding-and-mudslides-in-california

What returns: Individuals due April 18, 2023 and businesses due March 15, 2023 or April 18, 2023.

Additional: Individuals have until October 16 to fund traditional and Roth IRAs.

How: IRS uses mailing addresses to determine eligibility and treatment is automatic.

Payments: Regularly due 3/15/23 or 4/18/23 are now due 10/16/2023.

Source: IR 2022-234; Released Dec 29, 2022

Effective 1/1/2023:

-Business use is 65.5 cents per mile

-Medical use is 22 cents per mile

-Charitable use is 14 cents per mile

Ref: IR-2022-226: December 23, 2022

One year delay for third party settlement organizations such as PayPal, Venmo, Cash App, etc to report payments on business transactions of $600 or more per year.

We’re back to the old rules: Form 1099-K will be issued for aggregate amount of $20,000 or more than 200 transactions.

TAKE AWAY: DON’T make personal transfers to/from a business PayPal, Venmo or similar third party settlement account.

Ref: American Rescue Plan

Under the American Rescue Plan, all payment facilitators such as Venmo, Paypal, Zelle, etc will have to send recipients a Form 1099-K if the total received in 2022 was $600 or more. The recipient will have to list that income on his/her tax return for 2022 and tell the IRS what the money was for?

Example: Joe Doe receives a Form 1099-K for $9,000 for 2022. His records show that $4,000 was for room rental in his home; $1,000 for sale of a bicycle (cost $2,500) and $4,000 inheritance.

Result:

1. Rent income: Will be shown (and taxed on Schedule E of his return)
2. Sale of bicycle: Will be shown on Schedule D and the $1,500 personal loss non-deductible
3. Inheritance: Will be shown as non-taxable income under “other income” on his return.

KEEP VERY GOOD RECORDS AND SUBMIT ALONG WITH THE FORM 1099-K.

Ref: CA Revenue & Taxation Code 18662

Application: All businesses in CA using nonresidents to provide SERVICES TO THE BUSINESS.

California has begun an aggressive campaign to catch businesses using nonresidents to provide services to CA businesses without collecting the 7% nonresident withholding on payments to the out-of-state service provider.

Example: You are Corporation ABC based in Los Angeles. You use a graphic designer in AZ. The invoice is $1,000. You remit $930 to the vendor and $70 to CA on their behalf. (You then send the $70 to the CA Franchise Tax Board and provide the vendor with a statement at year-end showing all nonresident withholding paid on their behalf).

Penalty: If you are found to be out-of-compliance with this law, you will owe the 7% that you should have withheld plus penalties.

If you think that you may be subject to this regulation, please call us immediately for further information.