Florida Tax Attorney Blog

ANOTHER MAJOR PUBLIC ACCOUNTING FIRM EXTENDS TAX OFFSETS TO EMPLOYEES IN SAME-SEX RELATIONSHIPS

Tue, 14 Feb 2012 10:29:56 -0500

Yesterday, KPMG announced that it will offer tax offsets to its same-sex employees for the additional federal and state tax costs incurred when they pay for medical benefits for their same-sex domestic partners.

Here's how it works: Basically, KPMG employees who pay for medical and dental benefits for same-sex partners who do not qualify as a spouse or dependent under federal law will receive a credit at the end of the year funded by KPMG.

KPMG is the second major public accounting firm to implement this type of program (Ernst & Young was the first last month).

Back in October, I wrote an article entitled, Separate is Not Equal: Same-Sex Couples Should Be Entitled to Federal Tax Benefits. That article summarizes the disparate tax treatment afforded to same-sex couples and briefly explains why I believe this disparate treatment violates the First Amendment (among other provisions of the U.S. Constitution - e.g., Equal Protection Clause, Due Process Clause).

The recent initiatives by KPMG and Ernst & Young demonstrate that the accounting industry recognizes the injustice of subjecting same-sex couples to increased tax burdens on the basis of their sexual orientation. When will the government recognize this?

I've said it before, and I'll say it again, the opposition to same-sex marriage is a predominantly religious one. As such, it has no place in the law or politics. To the contrary, this type of religious entanglement is inconsistent with some of the core values upon which this Nation was founded (namely, anti-establishment of religion and free exercise of religion).

As a final note, it is interesting to note the similarities between today's ban on same-sex marriage and the historical ban on interracial marriages. Consider the landmark U.S. Supreme Court case of Loving v. Virginia as an example. That case involved the prosecution of a Virginia couple for violation of a Virginia statute which prohibited interracial marriages.

In support of their conviction, the Virginia judge wrote the following: "Almighty God created the races white, black, malay, and red, and he placed them on separate continents. . . . The fact that he separated the races shows that he did not intend for the races to mix."

Right about now, you're probably asking yourself how someone could be so ignorant. I don't understand either. Maybe we should ask the government. After all, current federal law bans same-sex marriage on the same caliber of logic.

BENEFITS RECEIVED IN CONNECTION WITH CHARITABLE GIFTS REDUCE VALUE OF GIFT FOR TAX PURPOSES

Fri, 10 Feb 2012 09:59:34 -0500

In Florida, it is not uncommon for purchasers of real estate to purchase old homes in "up and coming" areas for the underlying land. They purchase the property, knock down the existing home, and rebuild a new more modern home in its place. Some purchasers plan to live in the new home while others plan to flip it for a profit. Whatever the case, one thing is clear - it's expensive to demolish a home.

So why not make a charitable contribution of the home to the local fire department to be burned down in a firefighter training exercise?

That's exactly what Theodore Rolfs and his wife, Julia Gallagher did. See Rolfs v. Commissioner, No. 11-2078 (decided February 8, 2012).

Facts:

Theodore Rolfs and Julia Gallagher purchased a three-acre lakefront property in Chenequa, Wisconsin. Their plan was to demolish the existing home and build another in its place. Pursuant to this plan, they donated the existing home to the local fire department to be burned down in a firefighter training exercise. In connection with this donation, the couple claimed a $76,000 charitable deduction on their 1998 tax return for the value of the house. The IRS challenged the deduction.

Holding:
The couple took their case to the United States Tax Court which ruled in favor of the IRS. The taxpayers appealed the Tax Court decision to the U.S. Seventh Circuit Court of Appeals, which affirmed.

Takeaway:

When a gift is conditional, the conditions must be taken into account in determining fair market value of the donated property. In this case, the value of the benefit received (i.e. demolition) reduced the fair market value of the gift so substantially that no net value was available to support a charitable deduction. In this respect, the Court emphasized that the taxpayers failed to show that the value of their donation exceeded the substantial benefit they received in return.

So remember: if you receive a substantial benefit in connection with a charitable gift, you have the burden as the taxpayer to establish value of the gift in excess of the benefit received to support a charitable deduction.

STATES MAY BE DEPRIVING LEASING COMPANIES OF DUE PROCESS

Sun, 05 Feb 2012 16:48:07 -0500

It is well-established that the Due Process and Commerce Clauses of the U.S. Constitution impose limits on the taxing powers of the several States. E.g., Bellas Hess v. Illinois, 386 U.S. 753 (1967); Quill Corp. v. North Dakota, 504 U.S. 298 (1992). Under the Due Process Clause, there must be some minimum connection between a state and a corporation before such state may tax that corporation. E.g., Miller Bros. Co. v. Maryland, 347 U.S. 340, 344-45 (1954). Under the Commerce Clause, the corporation must have a "substantial nexus" with the taxing state. See Quill Corp. v. North Dakota, supra (citing Complete Auto v. Brady, 430 U.S. 274 (1977). In addition, the tax must be fairly apportioned, non-discriminatory, and fairly related to the services provided to the corporation by the taxing state. Id.

Of course, a corporation will typically know where its property and employees are located. Thus, to the extent a corporation has property or employees in a given state, it can be said to be on notice of its potential exposure to tax in that state, and the requirements of the Due Process Clause are, therefore, satisfied. In addition, the substantial nexus requirement of the Commerce Clause will likely be satisfied assuming that the tax is fairly apportioned, non-discriminatory, and fairly related to the state services provided to the corporation.

But what about corporations engaged in the leasing business (e.g., rental car businesses, equipment leasing businesses)? Can nexus be established with a state solely by virtue of a lessee's transportation of the leased property into that state?

The current trend suggests that the answer is yes.

AVOIDING THE DILUTIVE EFFECTS OF A TAX-FREE REORGANIZATION

Fri, 03 Feb 2012 18:06:17 -0500

The issuance of additional stock by an acquiring corporation is often (though not always) a necessary precondition to qualify a merger or acquisition transaction as a tax-free "reorganization" under Section 368 of the Internal Revenue Code. However, the issuance of additional shares could have a dilutive effect in the simple sense that more shares outstanding means lower earnings per share ("EPS"). For privately held companies, this potentially dilutive effect is not much of a concern. But for public companies, this is a big deal. Indeed, EPS is highly correlated with market rate, and the stock of many public companies trades on that basis.

One option is for the acquiring company to go out into the market and buy back the number of shares issued in connection with the reorganization. Keep in mind, however, that continuity of interest is generally a prerequisite to a valid tax-free reorganization. The tax-free treatment of the reorganization transactions described in Section 368 of the Internal Revenue Code are predicated on the theory that the investment in the target corporation has not changed but rather continues in a different form. Stated more simply, the shareholders of the target corporation have not cashed out their investments insofar as they continue to hold stock in the acquiring corporation. Consequently, there has been no realization event which would trigger tax.

Now, if the acquiring corporation goes out into the market where it repurchases the number of shares that it issued in the reorganization it is conceivable that it could acquire shares that were issued to target shareholders in the reorganization.

The question, therefore, becomes whether this destroys the requisite continuity of interest and, thereby, exposes the merger transaction to tax.

According to the IRS, a market repurchase of shares by an acquiring corporation following reorganization does not destroy continuity. To be sure, it is conceivable (and probably likely) that the acquiring corporation will repurchase shares issued to the target corporation shareholders in the reorganization. However, there is no privity between the buyer and seller in a market transaction. Consequently, a purchase of stock issued to a target shareholder in the reorganization would be purely coincidental.

Note, however, that the holding in Revenue Ruling 99-58 is subject to one mathematical caveat: the acquiring corporation cannot buy back more shares than were outstanding before the reorganization. If you think about it, this makes sense. If the acquiring corporation bought more shares than were outstanding before the reorganization, it would necessarily be purchasing shares issued to target shareholders in the reorganization. And that would destroy continuity.

Structuring a tax-free reorganization is difficult. If you need assistance in this area, please contact me.

IRS COLLECTION FINANCIAL STANDARDS NOW ACCOUNT FOR GEOGRAPHIC DISPARITIES IN COSTS OF LIVING

Wed, 01 Feb 2012 17:19:25 -0500

The IRS Collection Financial Standards are intended for use in calculating repayment of delinquent taxes. That is, they are used to evaluate a taxpayer's ability to pay delinquent taxes. In essence, the standards estimate a taxpayer's expenses to determine how much of their income is available to allocate towards taxes. In the past, the criteria used by the IRS to evaluate a taxpayer's ability to pay were based on national averages. But of course, costs of living vary from state to state, from county to county, and even from locality to locality. In this respect, the IRS has historically ignored known disparities in costs of living when evaluating ability to pay. For instance, a taxpayer living in New York City would be deemed to have the same living expenses as a taxpayer living in rural Wyoming. In essence, a taxpayer's expenses turned solely on family size with no other variables coming into play. This method for evaluating a taxpayer's ability to pay taxes has troubled me since my first day in the practice of tax law.

When I say that this has troubled me since my first day as a tax practitioner, I mean literally my very first day. The first tax matter that I handled was an innocent spouse petition. The case involved a woman whose former husband failed to report some serious income. Of course, as most married couples do, the couple filed joint tax returns during their marriage. Also, as is the case with many married couples, this woman signed a tax return prepared by her spouse without reviewing or understanding its contents. And no one can blame her for that. After all, marriage is a relationship of reciprocal trust. But as it turned out, her husband failed to adequately disclose income on the tax return. Sounds precisely like the type of situation for which the innocent spouse provisions are designed to provide relief ... unless you're the IRS.

Unfortunately, our innocent spouse petitions weren't well-received by the IRS. The IRS imputed knowledge of the unreported income to this woman by virtue of her signature on the couple's joint income tax return and was unwilling to deviate from this position notwithstanding the circumstances. That led to plan B: offer in compromise. Part of the offer in compromise process involves completing IRS Form 433-A. On this form, the taxpayer provides information regarding his or her income and expenses so that the IRS can evaluate the ability to pay tax. This is where the Collection Financial Standards come in.

Of course, one of the things South Florida is known for is a high cost of living. As a result of the IRS' national standards, however, the maximum expenses that the woman was allowed to report were substantially below her actual expenses. How is this an accurate reflection of a taxpayer's ability to pay delinquent taxes?

The good news is that the IRS recently issued new Collection Financial Standards. Significantly, these new standards take geographic disparities in costs of living into account, at least in part. For instance, under the new standards, the maximum allowable car or lease payment for a taxpayer living in Miami is $346. In this respect, Broward County (e.g., Fort Lauderdale) is included in the Miami region. The remaining counties in the state, however, fall into the broader "South Region" for which the maximum allowable car ownership expense is capped at $244. The propriety of drawing this $102 line at the Broward-Palm Beach County line is questionable, but the line has to be drawn somewhere, and any type of line-drawing will necessarily be arbitrary to some degree. Still, the perceived benefits of a bright-line standard like this typically outweigh any arbitrariness. In any event, these local standards are a significant improvement from the previous one-size fits all national standards. From this perspective, although the $244 maximum allowable car ownership expense for the South Region is $102 less than the $346 allowed for taxpayers in Broward and Miami-Dade Counties, it is, nevertheless, $52 more than that allowed for taxpayers in Seattle, $32 more than that allowed for taxpayers in the Midwest Region, and $28 more than that allowed for taxpayers in the Minneapolis-St. Paul area. Thus, while the new local standards may not be completely accurate in all circumstances, it does reflect disparities in costs of living.

In addition, the newly issued standards include comprehensive local standards for costs of housing and utilities. In this respect, the maximum allowable expense is computed on a county-by-county basis. The maximum allowable expense for housing and utilities for one person in Broward County is $1,719. The maximum allowed in Miami-Dade County is $1,676, and the maximum allowed in Palm Beach County is $1,710.

Note, however, that inaccurate national standards continue to govern the maximum allowable expenses for food, clothing, personal care products (e.g., cosmetics, toothpaste, etc.), and health insurance costs. In this respect, an individual is allowed a maximum of $300/month for food, $86/month for clothing, and $32/month for personal care products. To illustrate the inadequacy of these national standards, consider that a taxpayer living in Broward or Miami-Dade County is allowed to allocate more monthly income to a car lease payment than to food. But hey, no one has ever accused the IRS of being a picture of logic. To be sure, the new local standards represent with respect to transportation and housing expenses represent a significant improvement. But there's still a long way to go.

VALUATION OF STOCK ISSUED IN A REORGANIZATION

Mon, 30 Jan 2012 09:36:57 -0500

The Treasury Regulations tell us when to value stock issued in a reorganization for purposes of evaluating continuity. Curiously, however, these same regulations are silent as to how to value such stock.

With respect to the valuation date, stock will be valued at the agreement date if: (1) there is a binding merger agreement; and (2) the number of shares to be issued and the non-stock consideration are fixed. Otherwise, stock must be valued at the date on which the transaction closes. But once the valuation date is determined to be either the signing date or the closing date, how do you value the stock? On a typical trading day, a stock will trade within a range of prices, so which price is the relevant price for valuation purposes? The high? The low? The closing price? The weighted average? Curiously, the regulations provide not guidance on this subject.

The most conservative approach would be to use the lowest trading value for the relevant valuation date. So long as continuity requirements are satisfied based on the lowest trading value, you can rest assured that the requisite continuity of interest exists. However, the correct answer is probably less conservative. In the estate tax context, publicly traded securities are valued on the basis of the mean between the highest and lowest quoted selling prices on the valuation date. See Treas. Reg. § 20.2031-2(b). With that being said, there appears to be no reason in law or logic to believe that the same principles would not apply to stock valuation in the reorganization context.

If you need assistance in properly structuring a business reorganization under Section 368 of the Internal Revenue Code, please contact me.

NONTAXATION OF NONRESIDENTS WORKING ABOARD FOREIGN FLAGGED SHIPS

Wed, 25 Jan 2012 05:03:00 -0500

Pursuant to I.R.C. § 861(a)(3), "[c]ompensation for labor or services performed in the United States shall not be deemed to be income from sources within the United States if the labor or services are performed by a nonresident alien individual in connection with the individual's temporary presence in the United States as a regular member of the crew of a foreign vessel engaged in transportation between the United States and a foreign country or a possession of the United States."

Consequently, nonresident crew members working onboard a foreign flagged yacht may not be subject to the withholding requirements found in I.R.C. §§ 3402 or 1441, so long as that yacht is engaged in transportation between the U.S. and a foreign country or U.S. possession. In this regard, it should be noted that U.S. territories (e.g., Puerto Rico, U.S. Virgin Islands) and their territorial waters are not considered to be part of the U.S. for purposes of I.R.C. § 861.

TELECOMMUTING EMPLOYEES COULD SUBJECT CORPORATIONS TO MORE TAX

Sun, 22 Jan 2012 17:51:49 -0500

In Telebright Corp. v. Director, Division of Taxation, the New Jersey Division of Taxation effectively used a single employee's act of telecommuting as the jurisdictional hook to tax the income of a Delaware corporation. Significantly, the corporation maintained no offices in the State of New Jersey. Rather, the corporation's only contact with the State of New Jersey was in the form of an employee who telecommuted to work from her home in New Jersey.

This employee received her work assignments in New Jersey and completed such assignments from New Jersey using a company-provided laptop. Based on these indirect contacts through its employee, the corporation was held to be "doing business" in New Jersey. As a result, its income was subject to taxation in New Jersey under New Jersey law.

More significantly, the court held that such taxation was consistent with the Due Process and Commerce Clauses of the U.S. Constitution. First, the court held that the corporation's tax liability did not violate the Due Process Clause because the corporation had sufficient minimum contacts with New Jersey to justify taxation. In this respect, the court emphasized that the corporation had "fair warning" that its employment relationship with a New Jersey resident could subject it to New Jersey's jurisdiction. Second, the court held that the employee's presence in New Jersey in an employee capacity satisfied the substantial nexus requirement of the Commerce Clause because the corporation enjoyed the benefits of New Jersey's labor markets.

Key Takeaway: In this modern age of technology, corporations must be mindful of their telecommuting policies. Indeed, having a single employee telecommute from a state with otherwise insufficient minimum contacts to justify income taxation could subject that corporation to taxation in that state.

2012: THE YEAR OF THE SHORT SALE

Wed, 18 Jan 2012 13:48:41 -0500

If you're going to walk away from your upside down mortgage, do it in 2012.

Under current law, homeowners may engage in a short sale or foreclosure transaction without tax consequences so long as the lender officially releases the debt. This is the result of the Mortgage Debt Relief Act of 2007 which allows taxpayers to exclude income from the discharge of debt on their principal residence.

But be aware of a planned change in the law. Effective January 1, 2013, debt forgiven in connection with a short sale or foreclosure of a primary residence will be taxable for federal purposes. This is a big deal.

For example, this means that a short sale of a home for $25,000 less than the outstanding mortgage amount would subject the seller to taxes on $25,000 of income. Homeowners in the 35 percent tax bracket would owe $8,750; homeowners in the 33 percent tax bracket would owe $8,250; homeowners in the 25 percent tax bracket would owe Homeowners in the 28 percent tax bracket would owe $7,000; homeowners in the 25 percent tax bracket would owe $6,250; homeowners in the 15 percent tax bracket would owe $3,750; and homeowners in the 10 percent tax bracket would owe $2,500.

Short sales can take a long time, so homeowners who want to short sell their homes during 2012 before the law change takes effect would be well-advised to begin the process now.

COUPLE CONVICTED OF TAX EVASION AFTER RECEIVING BAD TAX ADVICE FROM DENTIST

Tue, 10 Jan 2012 18:11:51 -0500

This week, the First Circuit convicted a couple who received erroneous tax advice from a dentist of tax evasion. United States v. Allen, 1st Cir., No. 10-2160 (Jan. 6, 2012).

Facts:

The taxpayers in this case worked in the health and wellness industry. Specifically, they worked in the field of nutrition and vitamin supplement sales. On the advice of their dentist (which they claim to have confirmed through their own tax research), the taxpayers concluded that the Internal Revenue Code did not require them to pay taxes. They attached an explanation to this effect to their federal tax returns filed during the 1990s.

Beginning in 1998, the taxpayers claimed exemptions from withholding for federal income taxes. As a result, their employer discontinued withholding income taxes from their paychecks. Subsequently, the taxpayers classified themselves as independent contractors (as opposed to employees) such that their employer also discontinued withholding for FICA (i.e. Social Security and Medicare).

In 2000, the taxpayers stopped filing tax returns altogether. This is true notwithstanding their income of at least $100,000 during those years. Moreover, the taxpayers closed out all bank accounts, had their checks made payable either to cash or directly to creditors, and transferred the title to their home to a trust. From this point on, the taxpayers paid all expenses with cash or money orders.

In 2009, the taxpayers were charged with one count of conspiracy to defraud the United States, one count of attempted tax evasion, and four counts of willful failure to file income taxes (i.e. tax evasion). In April 2010, the taxpayers were tried in a joint trial in which they defended against the charges by asserting good faith reliance on their dentist's prior tax advice and good faith misinterpretation of the tax law. Not surprisingly, their argument was to no avail.

To be clear, the established law is that a taxpayer lacks the willfulness necessary for tax evasion if it is honestly believed, based on a misreading of the tax laws, that no taxes are owed. Cheek v. United States, 498 U.S. 192 (1991).

Holding:
Unfortunately for the Allens, however, the jury did not buy their argument. To the contrary, the jury convicted on all counts, and the Court sentenced each of them to three years in prison.

Bottom Line:
Ignorance or misinterpretation of the tax law is not a defense. Nor is reliance on tax advice received from a non-tax professional. So here's the bottom line: Don't give tax advice if you're not a tax professional, and don't rely on a tax position that sounds too good to be true (because it probably is).

MAKE SURE YOU CAN SUBSTANTIATE BUSINESS EXPENSE DEDUCTIONS

Mon, 09 Jan 2012 06:54:39 -0500

In a recent case, the United States Tax Court addressed an increasingly hot topic: the deductibility of business expenses. More specifically, the Tax Court addressed the substantiation requirement (i.e. the extent of support that a taxpayer must provide to support a business expense deduction).

Summary of Facts:

Taxpayer was employed as a mortgage banker by a company called Quick Loan Funding and Homefield Financial Inc. He was paid wages reported on Forms W-2, Wage and Tax Statement, of $ 127,319.47 and $ 79,052.24, respec-tively.

Taxpayer included three Schedules C with his individual tax return for three separate businesses in 2007. First, tax-payer reported gross receipts of $ 2,309 and claimed deductions for car and truck expenses of $ 10,242 in connection with his business as a mortgage banker. Respondent disallowed this expense. Second, taxpayer reported no gross re-ceipts or sales but claimed total expenses of $ 69,893 ($11,922 of which was for car and truck expenses) in connection with an advertising business. Respondent disallowed all of the ZE Advertising Co. claimed expenses. Finally, taxpayer reported gross receipts of $ 43,218, claimed costs of goods sold of $ 22,587, and claimed miscellaneous advertising expenses of $ 25,560 in connection with a search engine optimization business. The IRS disallowed all deductions.

Holding:

The Tax Court upheld the IRS' disallowance of taxpayer's claimed business expenses. Consequently, taxpayer was liable for taxes on the claimed deductions. Furthermore, taxpayer was liable for accuracy-related penalties for improperly claiming unsubstantiated business expense deductions.

Discussion:

Deductibility of Business Expenses

I.R.C. § 162(a) allows a deduction for "ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business." In this respect, a business expense is "ordinary" if it is normal, usual, or customary within the taxpayer's particular trade, business, or industry. Commissioner v. Heininger, 320 U.S. 467, 471 (1943); Deputy v. du Pont, 308 U.S. 488, 495 (1940). Similarly, a business expense is "necessary" if it is appropriate and helpful for the development of the business. Id.

When is an Expense a "Business Expense"?

In Commissioner v. Groetzinger, 480 U.S. 23, 35 (1987), the United States Supreme Court held that to be considered to be carrying on a trade or business within the meaning of section 162, "the taxpayer must be involved in the activity with continuity and regularity and . . . the taxpayer's primary purpose for engaging in the activity must be for income or profit." In determining whether a taxpayer's involvement with the alleged business was sufficiently continuous and regular, it is not controlling that the taxpayer intended to operate a business, because a business may not exist or yet have commenced without a single customer. There is no business in active operation where there are no customers and no evidence of any sales efforts that could lead to customers. Goodwin v. Commissioner, 75 T.C. 424, 433 (1980), affd. 691 F.2d 490 (3d Cir. 1982); Wolfgram v. Commissioner, T.C. Memo. 2010-69.

In Baacel Roumi v. Commissioner, the taxpayer failed to establish that his claimed advertising business was in fact an ongoing business for profit as required by Section 162(a). Taxpayer presented no evidence that the business was in operation in 2007. Indeed, taxpayer testified at trial that his advertising business was "in development" in 2007. Moreover, the advertising company's taxpayer identification number was not established until January 2008. Furthermore, taxpayer did not present evidence that the business had ever generated revenue or that he had claimed expense deductions relating to it in prior tax years. On this basis, the Tax Court held that the taxpayer failed to persuasively explain why an active business generated no gross receipts or sales yet managed to generate $ 69,893 in expenses.

CLIF NOTES: THE FLORIDA SMALL BUSINESS OWNER'S GUIDE TO TAXES

Mon, 02 Jan 2012 18:45:01 -0500

The new year is upon us, and so is tax season. And as tax season quickly approaches, it is important for Florida business owners to be aware of their tax obligations. Here's the 411 on when and how to file and pay:

FEDERAL:

Income Tax

Corporations

Due: March 15 if the corporation operates on a calendar year. Otherwise due on the 15th day of 3rd month following the end of tax year.

C-corporations - Form 1120

LLC Taxed as a Corporation - Form 1120

S-corporation - Form 1120S (Note: an S-corp itself is generally not liable for any tax

Partnerships

Due: April 15 if the partnership operates on a calendar year. Otherwise due on the 15th day of 4th month following the end of tax year.

Partnership - Form 1065

LLC Taxed as a Partnership - Form 1065

LLCs

Most LLCs with more than one member file a partnership return (Form 1065).

Due: April 15 if the LLC operates on a calendar year. Otherwise due on the 15th day of the 4th month following the end of the LLC's tax year.

To be taxed as a corporation, a Form 8832 must be filed. LLCs taxed as corporations file a corporate return (Form 1120).

Due:March 15 if the LLC operates on a calendar year. Otherwise due on the 15th day of the 3rd month following the end of the LLC's tax year..

Single-Member LLCs

Sole Member = Individual - Form 1040.

If you would prefer to have the LLC file as a corporation, you must file Form 8832. LLCs taxed as corporations file a corporate return (Form 1120).

Sole Member = Corporation - Form 1120 (for C-corps) or Form 1120S (for S-corps)

Employment Tax
Businesses with employees must withhold federal income, Medicare and Social Security taxes from wages. When and how these taxes are paid to the government depends on a business's aggregate annual employment tax liability.

Small Businesses With Annual Employment Tax Liability of Less Than $1,000: Payments may be made annually on January 31 by filing Form 944, Employer's Annual Federal Tax Return.

Businesses With Annual Employment Tax Liability in Excess of $1,000: Payments are generally made on a monthly or semi-weekly basis. For businesses with total annual deposits in excess of $200,000, the Electronic Federal Tax Payment System is required. Businesses with total annual deposits of less than $200,000 may use Form 8109-B to make these payments. The tax should be reported on Form 941, Employer's Quarterly Federal Tax Return

Unemployment Tax

Due: Jan. 31, April 30, July 31, Oct. 31

Must be paid for employees who were paid $1,500 in wages within a calendar quarter or who were employed for any portion of a day in 20 different weeks during the year.

Due at the end of the month that follows the last day of each quarter.

Electronic Payment or Form 8109-B.

Paid on a quarterly basis, but reported on an annual basis (Form 940).

FLORIDA:

Florida Corporate Income Tax

Due: April 1 if the corporation operates on a calendar year. Otherwise due on the 1st day of 4th month following the end of tax year.

Corporations that do business in Florida are subject to a 5.5% state corporate income tax.

C-corporations generally pay tax on Form F-1120. However corporations with a tax liability that is less than $2,500 may file a short form, F-1120A.

Estimated Tax Payments: Corporations that owe more than $2,500 in Florida corporate income tax for the year must make estimated tax payments on Form F-1120ES on or before the last day of the fourth, sixth and ninth months of the taxable year and on the last day of the tax year.

Limited Liability Companies:

LLCs which are classified as corporations for federal tax purposes are required to file a Florida corporate income tax return.

LLCs which are classified as partnerships for federal tax purposes are required to file a Florida Partnership Information Return (Form F-1065) if they are doing business in Florida and one or more of their owners are corporations.

A corporate owner of an LLC that is classified as a partnership for Florida and federal income tax purposes must file a Florida corporate income tax return.

S-Corporations: An S-corporation is not required to file a Florida corporate income tax return (except in cases where the S-corp has federal taxable income).Florida Unemployment Tax

Due:Jan. 31, April 30, July 31, Oct. 31:

A Florida business is required to report wages and pay taxes to the Unemployment Compensation program if:

It paid $1,500 in wages within a calendar quarter;

Employed one person for any portion of a day in 20 different weeks during the calendar year; or

is liable for federal unemployment tax.

Generally paid on a quarterly basis by submitting Form UCT-6 to the Florida Department of Revenue.

Florida Sales and Use Tax

Due: First day of the month

Businesses with taxable transactions must register with the Florida Department of Revenue by filing Form DR-1 or e-filing via the Florida Department of Revenue's website.

Businesses that collect more than $20,000 annually in sales and use tax must pay through electronically.

Businesses that collect less than $20,000 annually may use Form DR-15.

Returns and payments are generally due on the first day of the month following the month in which the tax was collected. However, businesses that do not collect substantial amounts of sales and use taxes may file and pay on a less frequent basis. Specifically, businesses that collect less than $1,000 per year may file on a quarterly basis; businesses that collect $500 or less per year may file on a semiannual basis; and businesses that collect $100 or less per year may file on an annual basis.

Florida Discretionary Surtax

Due: First day of the month

Some counties impose an additional surtax on transactions that are subject to the state sales and use tax.

In such counties, this surtax is reported on Form DR-15 with sales and use tax.

Use Tax on Out-of-State Purchases

Due:First day of the month following the quarter in which purchase was made

When out-of-state sellers fail to collect Florida sales tax, buyers must make the payment on their own.

Applies to merchandise purchased from the Internet, shopping networks, mail order catalogs, etc.

Applies to merchandise purchased while traveling out of state and shipped to Florida.

Paid on Form DR-15MO

Florida Tangible Personal Property Tax

Due: April 1

Florida businesses that own tangible personal property (e.g., computers, furniture, equipment) must this tax annually.

Inventory is not subject to tax.

Paid to county property appraiser on Form DR-405.

LICENSED FLORIDA ATTORNEY WILL WORK FOR FOOD

Fri, 30 Dec 2011 05:03:00 -0500

People are going hungry every day, right here, in one of the wealthiest countries in the world. The reasons are many: job loss; pay cuts; escalating costs of living. DeSellier Law, LLC seeks to help by offering basic legal services at a fee of 10 food items per hour as opposed to the typical attorney fee of a couple hundred dollars per hour. All food is donated directly to South Florida food banks in need. So, if you or someone you know is in need of a basic legal service but cannot afford it, please visit www.law4food.org and contact me.

SMALL BUSINESSES SHOULD TAKE ADVANTAGE OF DEPRECIATION INCENTIVES

Thu, 29 Dec 2011 08:29:54 -0500

If you have been considering purchasing new computers, equipment, vehicles, or other assets for your business, it might be a good idea to make the purchase before ringing in the new year. This is because the Internal Revenue Code currently contains two provisions which allow immediate write-offs for certain qualified purchases (as opposed to gradual cost recovery over time in the form of depreciation deductions).

Section 179 Deduction. The maximum deduction allowed has been increased to $500,000 (instead of reverting to $25,000 as scheduled), and the maximum purchase price has been increased to $2 million. This includes new and used capital equipment. In addition, it includes software.

However, in order to qualify for the Section 179 deduction, the property must be acquired for use in your trade or business. For mixed use property (i.e. property used for both business and non-business purposes), the Section 179 deduction is still available if the property is used more than 50% of the time for business. In that case, the cost of the property should be multiplied by the percentage of business use, and the resultant business cost will be the basis for your Section 179 deduction. For the types of property that qualify for the Section 179 deduction, see the IRS website.

Section 168(k) Bonus Depreciation. Under Section168(k), a taxpayer is permitted to write off the entire purchase price immediately (as opposed to gradually recovering the cost through depreciation deductions over time). This is a big deal because the costs of these types of capital investments are typically recovered over a 7- to 15-year period. In some cases, the recovery period may even be 20 years. Significantly, Section 168(k) applies after the application of Section 179. This means that in cases where Section 179 does not allow immediate expensing of the full cost, the entire cost may, nevertheless, be deductible after application of Section 168(k). Note, however, that unlike Section 179, Section 168(k) only applies to new property. For more information regarding the types of property that qualify for the Section 168(k) deduction, see the IRS website.

Option to Opt Out of Bonus Depreciation. The IRS recently ruled that taxpayers may forego bonus depreciation at their option. It may seem illogical to forgo this kind of tax benefit. However, such abstinence is worth considering in cases where a business has expiring net operating losses or capital loss carryovers. In those cases, the loss carryovers should be used currently, and cost recovery deductions should be saved for later.

5 YEAR-END TAX TIPS FOR INDIVIDUALS

Wed, 28 Dec 2011 06:07:54 -0500

401(k). As a general rule, a taxpayer can contribute up to $16,500 tax-free to a 401(k) plan. In addition, taxpayers who are older than 50 years old may contribute an additional $5,500 for a maximum tax-free contribution of $22,000. Significantly, the amount contributed lowers taxable income.

IRA. Taxpayers who do not have a 401(k) may make a deductible contribution to a traditional IRA. However, the contribution limits are lower. For taxpayers 50 years or younger, the contribution limit for 2011 is $5,000. For taxpayers older than 50 years old, the contribution limit for 2011 is $6,000. out of your taxable income. Nonetheless, taxpayers are generally well-advised to contribute pre-tax income into a retirement account where it can grow tax-free rather than paying taxes on that money.

Gifts. The gift-tax exemption is currently at an all-time high of $5 million ($10 million for married taxpayers). Consequently, high-wealth individuals may be well-advised to consider making gifts this year before the gift-tax exemption reverts to $1 million after 2012.

Charitable Giving. Consider donating appreciated stock or other assets to charitable organizations that accept such donations. Such a donation will result in a charitable deduction equal to the fair market value of the donated asset. This means that taxpayers can deduct the full value of the donated property without incurring a tax liability on the appreciation.

Charitable Contributions Directly from IRA. This is the last year in which taxpayers aged 70½ and older will be permitted to make charitable contributions straight out of their IRAs. This method of charitable giving could be advantageous for taxpayers with IRAs that have appreciated substantially over time or for taxpayers who do not need the required minimum distributions for living expenses for three reasons. One: tax is avoided on appreciation. Two: the taxpayer is entitled to a charitable deduction. Three: the required minimum distribution is not included in the taxpayer's income for the year.