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Showing 16 posts from 2014.

Michigan Treasury Highlights Individual Income Tax Developments for 2014

The Michigan Department of Treasury has issued a release (available here (We have identified that the following link is no longer active, and it has been removed)) that highlights new developments affecting Michigan's individual income taxes for tax year 2014. The release notes the changes that Treasury has made to several forms, including Michigan Form MI-1040 and Schedule 1 (Additions and Subtractions). The release also notes that certain credit, deduction, and exemption amounts have been adjusted for inflation for tax year 2014. Finally, the release includes a number of reminders and announcements, including a reminder regarding the option to pay individual income taxes electronically. Please contact a member of Foster Swift's State and Local Tax (SALT) Practice Group if you have questions regarding Michigan taxes.

Categories: Income Tax, News & Events, Tax

501(c)(3) Organizations: What am I Required to Disclose When People Ask?

Tax-exempt organizations are exempt from many taxes, including federal income taxes.  However, in exchange for exemption from income tax for charitable activities and for receiving tax-deductible contributions, Congress requires 501(c)(3) organizations to disclose the following information to the public upon request: Read More ›

Categories: Income Tax, Tax, Tax-Exempt Organizations

Seventh Circuit Reverses District Court; Turns Away Constitutional Challenge to Minister's Housing Allowance

The principle that individuals have the right to worship as they see fit has been fundamental in the United States since the country's founding. However, while the government may be prohibited from establishing a religion or interfering with the free exercise thereof, that does not mean that government has no role in religion. Throughout history, organized religions have enjoyed special legal status, including in the Internal Revenue Code (the "Code").

The parsonage allowance, codified in Section 107 of the Code, has two parts.  Section 107(1) grants a tax exemption on the rental value of a home directly provided to a minister as part of his or her compensation. Section 107(2) excludes from gross income rental allowances paid to a minister as part of his or her compensation.

In November 2013, the U.S. District Court for the Western District of Wisconsin declared Section 107(2) of the Code unconstitutional because it violates the Establishment Clause of the First Amendment. The decision was appealed to the U.S. Court of Appeals for the Seventh Circuit.  Read More ›

Categories: Income Tax, News & Events, Tax

U.S. Tax Court: Value of Bank Reward Points is Taxable

U.S. Tax Court: Value of Bank Reward Points is TaxableWith 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

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

business fundsKickstarter 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

Simplify Tax-Exempt Applications with the 1023-EZThe 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