U.S. Tax Court: Value of Bank Reward Points is Taxable
With holiday travel season upon us, you may be thinking about redeeming some reward points you’ve earned from your bank for a free airline ticket. After a recent U.S. Tax Court ruling, the ticket may not be as free as you think.
In the case of Shankar v. Commissioner, IRS, the U.S. Tax Court sided with the IRS and held that the value of an airline ticket purchased with “Thank You” reward points is taxable as gross income.
Parimal Shankar received 50,000 “Thank You” points from Citibank in 2009. Citibank sent him and the IRS a Form 1009-MISC, which reported the ticket value of $668 as “other income.” Shankar did not report the income. The IRS sought payment of the tax and assessed a $563 deficiency. Shankar disputed the IRS’s position, filed a petition with the U.S. Tax Court, and the case went to trial. Read More ›
Categories: Income Tax, Tax
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Michigan Sales and Use Tax Audits
Every year, the Michigan Department of Treasury audits Michigan businesses for compliance with the Sales and Use tax laws. Oftentimes, those audits result in tax assessments that are disputed by the taxpayer. But, how does a taxpayer navigate the audit process and challenge a tax assessment? Read More ›
Categories: Sales Tax, Tax, Use Tax
Failure to Follow Michigan Tax Requirements Creates Personal Liability for Corporate Officers
A commonly-recognized feature of
many business entities is the "shield" that protects officers,
members, managers, and partners from personal liability for the business's
actions. However, that "shield" does not protect the officers of a
company from all liability. Importantly,
if a business fails to pay its taxes, then the key officers of the business can
be held personally liable for the unpaid taxes of the business. Read More ›
Categories: Compliance, Sales Tax, Tax
Kickstarter and Crowdfunding can provide much needed business funds – and a big tax bill
Kickstarter is a crowdfunding platform for creative projects. Project creators set a funding goal and deadline for their project, and if people like the project, they can pledge money to help make it happen. From movies to books, electronic gadgets to fashion, a wide range of projects raise funds (and in many cases don't raise funds) on Kickstarter. One guy even raised over $50,000 to make potato salad.
While Kickstarter has been a great fundraising platform for a wide range of people who may have had no alternative source of financing, an issue that many people overlook is the tax implications from a successful Kickstarter campaign. Read More ›
Categories: Crowdfunding, News & Events, Tax
Annual Federal Reporting and Filing Obligations of Tax Exempt Entities
Who Must File?
Virtually all tax exempt entities must file an annual return with the IRS. In fact, the presumption is that a tax exempt organization must file unless they fit into one of the IRS's limited exceptions. Several exemptions apply to certain religious organizations, political organizations, and others.
What Must be Filed?
There is no single form common to all tax exempt organizations, but all will file one of the "990-Series Return" forms, including Forms 990, 990-N, 990-EZ, or 990-PF. Supplemental information may be required through any one or more of Schedule A through R too. In general, tax exempt organizations incurring gross receipts less than $50,000 will file Form 990-N, also known as the "e-Postcard." Organizations that do not qualify to use Form 990-N, but who incur gross receipts less than $200,000 and have less than $500,000 in total assets may file either Form 990 or 990-EZ, while those with receipts or assets equal to or greater than the previously mentioned benchmarks must file Form 990. Finally, private foundations must file Form 990-PF regardless of financial status. Read More ›
Categories: Corporate Income Tax, Tax-Exempt Organizations
IRS Announces New 1023-EZ Form to Simplify Tax-Exempt Applications
The IRS recently announced a new and shorter 1023-EZ form to help small charities apply for 501(c)(3) tax-exempt status.
The new form is described by IRS Commissioner John Koskinen as a "common-sense approach that will reduce lengthy processing delays for small tax-exempt groups and ultimately larger organizations as well." The announcement comes at a time when the IRS is currently evaluating more than 60,000 applications for 501(c)(3) status, with many pending for at least nine months. Read More ›
Categories: Compliance, Tax-Exempt Organizations
IRS Auditing Deferred Compensation Plans for Section 409A Compliance
The Internal Revenue Service recently announced that it has begun a new audit initiative to test taxpayers’ compliance with Section 409A of the Internal
Revenue Code. Section 409A applies complex rules to “deferred compensation,” which generally includes compensation that is payable in a year after the year in which it is earned. This includes benefits provided under traditional
nonqualified deferred compensation plans, such as SERPS and phantom stock plans, as well as some bonus and severance benefits and benefits provided under
typical employment and consulting agreements. Read More ›
Categories: Compliance
If You’re Claiming a Charitable Deduction, Make Sure You Follow the Rules
Tax season is over for most individual taxpayers. But it is not too early to start planning your 2014 deductions.
One way to lower your tax liability is to deduct charitable contributions made during 2014. However, to defend your charitable deduction before the IRS, you must retain documentation that supports it. Read More ›
Categories: Tax
Your 501(c)(3) Status Has Been Revoked – What Now?
Many nonprofit corporations are exempt from federal income tax pursuant to Section 501(c)(3) of the Internal Revenue Code. Until relatively recently, many of those tax-exempt nonprofits were not required to file annual Form 990 series returns. That all changed with the Pension Protection Act of 2006. Now, all tax-exempt nonprofits are required to file an annual Form 990 series return. If a tax-exempt organization fails to do so for three consecutive years, then its federal income tax exemption is automatically revoked - - no questions asked.
How Do You Know If Your Tax-Exempt Organization Has Lost Its
501(c)(3) Status?
The IRS maintains a list of organizations that have had their 501(c)(3) status revoked. Read More ›
IRS: Bitcoins Are Property, Not Currency
In guidance issued on Tuesday, March 25, 2014, the IRS warned that virtual currencies, such as Bitcoin, are to be treated as property and not as currency for tax purposes.
"General tax principles that apply to property transactions apply to transactions using virtual currency," the IRS said in the guidance statement. Read More ›
Categories: News & Events, Tax
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