Skip to main content Skip to search
468 N Camden Dr, Beverly Hills, CA 90210 | 2901 West Coast Hwy, Suite 200, Newport Beach, CA 92663

Request a free Consultation

Archives for Tax

Understanding the Implications of the Excise Tax on Corporate Stock Repurchase – IRS New Regulations for Tax Season 2024

In Tax Season 2024, the Treasury Department, and the Internal Revenue Service (IRS) have introduced new regulations regarding the corporate stock repurchase excise tax. The stock repurchase excise tax applies to repurchases after Dec. 31, 2022. This move comes amidst increasing scrutiny of stock buybacks and their impact on corporate behavior and economic inequality. Understanding these regulations is essential for both corporations and investors alike, as they could have significant implications for corporate finance strategies and shareholder value.

 

Negative Impact of Stock Buybacks

Stock buybacks, or share repurchases, occur when a company purchases its outstanding shares from the market, effectively reducing the number of shares available to the public. This practice has become increasingly common in recent years, with corporations often using excess cash or borrowing funds to repurchase shares. Proponents argue that buybacks can signal confidence in a company’s prospects and enhance shareholder value by boosting earnings per share (EPS) and stock prices.

 

However, critics contend that stock buybacks primarily benefit executives and large shareholders while potentially short-changing investment in research and development, employee compensation, and long-term growth initiatives. Additionally, concerns have been raised about the market manipulation potential of buybacks, as companies may repurchase shares to artificially inflate stock prices.

 

New Regulations from Tax Season 2024

The new regulations announced by the Treasury and IRS in Tax Season 2024 aim to address some of these concerns by imposing an excise tax on certain corporate stock repurchases. Under these regulations, corporations engaging in substantial stock buybacks could face additional tax liabilities, particularly if the repurchases are deemed excessive or disproportionate relative to other corporate expenditures.

  1. Excise Tax Rate

The Inflation Reduction Act has introduced a new excise tax on corporate stock repurchases, set at a rate of 1%. This tax applies to stock repurchases exceeding certain thresholds and is calculated based on the aggregate fair market value (FMV) of repurchased stock relative to the aggregate FMV of stock issued by the corporation during the tax year. While the excise tax rate remains fixed at 1%, it may vary depending on factors such as the size of the repurchase and the company’s financial performance. This measure aims to address concerns surrounding excessive stock buybacks by imposing a tax that corresponds to the extent of repurchase activities, promoting responsible corporate behavior and shareholder value.

 

  1. Exemptions and Thresholds

Certain exemptions and thresholds may apply to smaller stock repurchases or those undertaken for specific purposes, such as employee stock ownership plans (ESOPs) or capital restructuring initiatives. These exemptions aim to avoid penalizing companies for legitimate use of buybacks.

 

  1. Reporting and Compliance Requirements

Corporations will be required to accurately report their stock repurchase activities to the IRS and comply with any additional disclosure requirements. This transparency is crucial for ensuring the effectiveness and integrity of the regulations.

 

Implications for Corporations

The new regulations are likely to prompt corporations to reassess their stock buyback strategies and capital allocation decisions. Companies will need to weigh the potential tax implications of repurchasing shares against other uses of capital, such as investments in innovation, expansion, or dividends. Additionally, corporate boards and executives may face increased scrutiny from shareholders and regulators regarding the rationale behind stock buybacks and their alignment with long-term value creation. Transparent communication and accountability will be essential in navigating these expectations.

 

Implications for Investors

For investors, particularly institutional and activist shareholders, the new regulations offer greater transparency and oversight of corporate stock repurchase activities. Investors can use this information to evaluate management’s capital allocation decisions and assess the potential impact on shareholder value. Moreover, the excise tax on stock repurchases could influence investors’ perceptions of companies’ financial health and stewardship. Companies with excessive buyback activity may be viewed less favorably compared to those prioritizing investments in growth opportunities and sustainable value creation.

 

Compliance and Reporting

Corporations will be required to report their stock repurchase activities accurately to the IRS and comply with additional disclosure requirements. The stock repurchase excise tax must be reported on Form 720, Quarterly Federal Excise Tax Return, with Form 7208 attached. The final version of Form 7208 will be released before the first due date for reporting and payment of the tax.

 

The due date for Form 720, Quarterly Federal Excise Tax Return, depends on the specific quarter being reported. Generally, Form 720 is due by the last day of the month following the end of the calendar quarter. Here are the due dates for Tax Season 2024.

 

First Quarter (January – March): The due date is April 30th.

Second Quarter (April – June): The due date is July 31st.

Third Quarter (July – September): The due date is October 31st.

Fourth Quarter (October – December): The due date is January 31st of the following year.

 

The Treasury and IRS’s new regulations on corporate stock repurchase excise tax represent a significant development in the ongoing debate surrounding stock buybacks and their implications for corporate governance and shareholder value. To file proper excise tax and avoid IRS audits, it is recommended to engage any certified tax professionals that experience in tax implications.

 

IRS AUDIT GROUP

IRS Audit Group consists of tax professionals, CPAs, enrolled agents, and tax attorneys.  We are located in Los Angeles; California and our primary area of expertise is IRS Tax Audit Representation.  However, our certified professionals cooperate and work with all IRS offices across the country.  Please contact us for more information.  https://irsauditgroup.com/contact/

Toll Free: (888) 300-6670

Emergency Number: (310) 498-7508

[email protected]

Read more
Guide for IRS Tax Audits process

Navigating IRS Tax Audits: Overview of IRS Audit Process and Tips on Navigating through IRS Audit

Facing an IRS tax audit can be daunting for any business owner. However, understanding the process and being prepared can alleviate much of the stress. In this guide, we’ll delve into the intricacies of IRS tax audits for businesses, including what triggers them, the procedures involved, and potential outcomes.

 

What Prompts IRS Audits for Businesses?

There are several reasons why IRS audits are initiated for businesses, which can range from random selection to specific indicators that draw the attention of IRS agents. These triggers are commonly observed.

  • Red Flags: The IRS uses computer algorithms to flag returns that deviate from statistical norms, such as unusually high deductions or inconsistencies in reported income.
  • Random Selection: Some tax audits are random, chosen by computer selection to ensure compliance across a broad spectrum of taxpayers.
  • Industry Standards: Certain industries may face higher scrutiny due to historically higher rates of non-compliance or specific tax issues prevalent in those sectors.
  • Large Variances: Significant changes in income or deductions compared to previous years may raise red flags.
  • Information Matching: Discrepancies between a business report and what third parties (like clients or financial institutions) report can trigger an audit.

 

Understanding the Audit Process

The IRS audit process can be complex and intimidating, but understanding the steps involved can help alleviate some of the stress. A simplified overview of the audit process includes the following.

  • Notification: The IRS will notify the business either by mail or in person of the audit, specifying the tax year(s) under examination and the documents required.
  • Preparation: Gathering relevant financial records, receipts, invoices, and other documentation is crucial. It’s advisable to seek tax professionals’ help from a tax audit representation firm experienced in handling IRS audits.
  • Examination: The audit may be conducted via mail correspondence, at the IRS office, or even at the business premises. The IRS examiner will review the records and may request additional documentation or explanations.
  • Resolution: After the examination, the IRS will propose adjustments if necessary. The business can agree to the changes, request an appeal, or challenge the findings in tax court.

 

Potential Outcomes of an IRS Tax Audit

  • No Change: In some cases, the IRS may conclude that the business’s return is accurate, resulting in no changes or adjustments.
  • Additional Taxes Owed: If discrepancies are found, the IRS may assess additional taxes, penalties, and interest. IRS provided alternatives for taxpayers through its Payment Plans. In case of financial burden, those taxpayers unable to immediately pay their tax debt in full can adopt such IRS Payment Plans.
  • Refund: Occasionally, an audit may result in the discovery of overpaid taxes, leading to a refund for the business.
  • Settlement: In some instances, the business and the IRS may negotiate a settlement to resolve the audit findings.
  • Criminal Investigation: In cases of suspected tax evasion or fraud, an audit may escalate into a criminal investigation, potentially leading to severe penalties or even imprisonment.

 

Tips for Businesses Facing an IRS Audit

  • Stay Organized: Maintain meticulous records of all financial transactions and keep them organized and easily accessible.
  • Seek Professional Guidance: Enlist the help of tax professionals who understand the complexities of IRS audits and can represent the business effectively.
  • Cooperate with the IRS: Be cooperative and responsive throughout the audit process, providing requested documentation promptly and accurately.
  • Know Your Rights: Familiarize yourself with your rights as a taxpayer, including the right to representation and appeal.
  • Learn from the Experience: Use the audit as an opportunity to review and improve your business’s tax compliance processes to avoid future issues.

 

IRS AUDIT GROUP

IRS Audit Group consists of tax professionals, CPAs, enrolled agents, and tax attorneys.  We are located in Los Angeles; California and our primary area of expertise is IRS Tax Audit Representation.  However, our certified professionals cooperate and work with all IRS offices across the country.  Please contact us for more information.  https://irsauditgroup.com/contact/

Toll Free: (888) 300-6670

Emergency Number: (310) 498-7508

[email protected]

Read more
Blog on IRS Dirty Dozen Scam Alerts

Navigating Tax Season 2024 Safely: 12 Important Scam Alerts by IRS

As the Tax Season 2024 is here, so are potential scams and fraudulent activities, prompting the IRS to issue warnings about common schemes. Here’s a compilation of important facts about various scams and advice by the IRS for Tax Season 2024.

 

False Fuel Tax Credit Claims

Taxpayers should be highly cautious of false Fuel Tax Credit claims, as warned by the IRS in its Dirty Dozen list for Tax Season 2024. Scammers often target individuals with promises of significant refunds through illegitimate claims for this credit, exploiting unawareness of its eligibility criteria. Vigilance, verification of information, and reliance on official IRS resources are crucial to avoid falling prey to these scams, emphasizing the importance of a thorough review process to ensure accurate and lawful tax filings.

 

Untrustworthy Tax Preparers (Ghost Preparers)

Taxpayers must remain vigilant against untrustworthy tax preparers, a prominent warning from the IRS’s Dirty Dozen list for Tax Season 2024. The term “ghost preparers” refers to individuals who may not sign tax returns they prepare, leaving taxpayers vulnerable to potential fraud and identity theft. These preparers often promise inflated refunds or charge exorbitant fees, exploiting unsuspecting individuals. Taxpayers must verify the credentials of their tax preparers, ensuring they are qualified, registered, and reputable. Relying on certified tax professionals and maintaining awareness of red flags can help protect against financial losses and legal complications during tax filing.

 

Fake Charities Exploiting Taxpayer Generosity

The IRS’s inclusion of fake charities in its “Dirty Dozen” list underscores the risks taxpayers face during tax season. These scams prey on people’s goodwill, using deceptive tactics to extract money without benefiting genuine charitable causes. IRS advises to beware of scammers who might use email communications or manipulate caller IDs to deceive people into donating funds to charities. These fraudsters often target groups such as seniors and those with limited English proficiency. Taxpayers must remain vigilant, verifying the legitimacy of charities before donating.

 

Offer in Compromise Mills

Another scam for Tax Season 2024 is pricey offer-in-compromise (OIC) “mills” that falsely claim their services are necessary to resolve IRS debt. The OIC program offered by the IRS is a beneficial avenue for taxpayers struggling to settle their federal tax debts, and reputable companies are providing legitimate assistance. However, the IRS advises individuals to invest a few moments in reviewing the resources provided on IRS.gov to ascertain if they qualify for the OIC program. This step helps individuals avoid costly promoters and ensures they understand the eligibility criteria thoroughly before seeking assistance.

 

Helpful Scammers Offering to Set Up Online Accounts

The IRS warns against scammers offering to set up online accounts. The IRS Online Account serves as a convenient tool for individuals to access their tax information. However, it has also become a target for identity thieves who exploit it to file fraudulent tax returns and claim hefty refunds in the victim’s name. Taxpayers should avoid sharing sensitive personal data over the phone, email, or social media to protect themselves and avoid getting caught up in these scams.

 

Aggressive Promoters Making Questionable ERC Claims

The IRS’s “Dirty Dozen” for tax season 2024 list includes a warning about aggressive promoters who entice taxpayers into making questionable claims for the Employee Retention Credit (ERC). This scam targets small businesses, urging them to engage in activities that could lead to tax non-compliance and penalties. Taxpayers are advised to exercise caution and seek reliable tax professionals’ advice to avoid falling victim to these deceptive practices. As the IRS is continuing tax audits and investigations for false claims of ERC, it emphasizes the availability of a special withdrawal program for businesses to rectify erroneous claims and ensure compliance with tax regulations.

 

Phishing And Smishing Scams

The IRS has launched its annual “Dirty Dozen” campaign with a strong warning about phishing and smishing scams. These deceptive tactics involve fraudulent emails (phishing) and text messages (smishing) that appear to be from legitimate sources, such as the IRS or financial institutions, but are designed to steal sensitive information like Social Security numbers or financial details. The IRS doesn’t initiate contact with taxpayers by email, text messages, or social media channels to request personal or financial information.

 

High-Income Filers: Targeted by Illegal Tax Schemes

The improper art donation deductions, charitable remainder annuity trusts (CRATs), and monetized installment sales are all illegal tax schemes targeting high-income filers. These schemes exploit loopholes or misinterpretations of tax laws, posing significant risks of tax evasion and penalties for those involved.

 

Beware of Spear phishing and “New Client” Scams

In the ongoing spear phishing attacks targeting tax professionals and businesses, these attacks typically involve fraudulent emails or messages designed to deceive recipients into disclosing confidential information, such as login credentials or financial data, under the guise of legitimate communication. Moreover, the surge in “new client” scams adds another layer of vulnerability, as fraudsters exploit the trust between tax professionals and their clients to gain access to sensitive information or perpetrate financial fraud. Tax professionals and businesses must exercise caution, implement robust cybersecurity measures, and educate employees about the signs of phishing attempts to mitigate the risk of falling victim to these malicious schemes.

 

Social Media Tax Advice: Risks and Pitfalls for Taxpayers

Taxpayers should be wary of relying on social media platforms like TikTok for tax advice, as these channels can be rife with inaccurate or misleading information. Scammers frequently exploit these platforms to propagate fraudulent schemes, encompassing both common tax documents like Form W-2 and more obscure ones like Form 8944. One prevalent scam circulating on social media advises individuals to manipulate income details on Form W-2 and file electronically, falsely promising substantial refunds. Similarly, misinformation surrounding Form 8944 misleads taxpayers into believing they can use it to secure refunds from the IRS, irrespective of their actual tax liabilities. However, Form 8944 is exclusively designated for tax professionals seeking waivers to file paper returns and is inapplicable to individual taxpayers. Falling prey to such scams can lead to severe penalties and legal consequences for filing fraudulent tax returns. Therefore, taxpayers must exercise vigilance, seek guidance from reputable sources, and avoid succumbing to scams on social media platforms to safeguard their financial interests.

 

Bogus Tax Avoidance Strategies and International Schemes

As the annual taxpayer awareness campaign ends, it’s crucial to highlight the threat posed by bogus tax avoidance strategies and schemes with international elements. These schemes often promise unrealistic or exaggerated tax savings through intricate structures or offshore accounts, luring taxpayers into non-compliance with tax laws and risking severe penalties or legal consequences. With globalization and advancements in technology, scammers exploit cross-border transactions and offshore entities to conceal income, evade taxes, and exploit loopholes in tax regulations. Taxpayers must remain vigilant, seek advice from tax professionals, and ensure compliance with tax laws to avoid falling victim to these deceptive schemes and safeguard their financial well-being.

 

IRS is highlighting various scams through its “Dirty Dozen” campaign for Tax Season 2024. This list will be updated to include all dozen scams as and when the IRS publishes about these scams. By remaining vigilant, reporting suspicious activities, and engaging certified tax professionals, taxpayers can protect themselves from financial losses, identity theft, and legal complications during tax filing season.

 

IRS AUDIT GROUP

IRS Audit Group consists of tax professionals, CPAs, enrolled agents, and tax attorneys.  We are located in Los Angeles; California and our primary area of expertise is IRS Tax Audit Representation.  However, our certified professionals cooperate and work with all IRS offices across the country.  Please contact us for more information.  https://irsauditgroup.com/contact/

Toll Free: (888) 300-6670

Emergency Number: (310) 498-7508

[email protected]

Read more
First Quarter Estimated Tax Payment

IRS Reminder for Tax Season 2024: First Quarter Estimated Tax Payment Deadline for Estimated Tax – April 15, 2024

In this tax season 2024, the IRS sets deadlines for taxpayers to pay their taxes, including estimated tax payments not subject to withholding. The first quarter estimated tax payment deadline for 2024 is April 15. This blog delves into the details of this deadline, its significance, who it affects, why it exists, penalties for non-compliance, exemptions, tools for estimation, required forms, and IRS support.

 

When is the Deadline?

April 15 is the deadline for tax season 2024 to submit first quarter estimated tax payments to the IRS. This deadline is crucial for individuals and businesses with income sources that do not have taxes withheld, such as self-employment income, interest, dividends, and rental income.

 

Who Needs to File?

This deadline primarily affects self-employed individuals, freelancers, independent contractors, sole proprietors, partners in partnerships, and shareholders in S corporations. It also includes individuals who receive income from sources where taxes are not automatically withheld.

 

Reason for Quarterly Payments

Taxpayers are required to make estimated tax payments quarterly because of the pay-as-you-go system in the U.S. tax system. This system ensures that taxes on income earned during the year are paid throughout the year, rather than waiting until the following year. This helps in avoiding large tax bills at the end of the year and ensures a steady flow of revenue for the government.

 

Types of Income

When estimating quarterly tax payments, taxpayers need to ensure they include all forms of earned income, encompassing regular employment income, part-time work or side jobs, earnings from selling goods or services (typically reported on Form 1099-K), and various other sources like interest, dividends, capital gains, alimony, and rental income. It’s crucial to incorporate all income, including those not subject to withholding, to accurately calculate and fulfill tax obligations, thereby avoiding penalties or underpayment issues.

 

Penalties for Late Filing

Failure to file estimated tax payments by April 15 can result in penalties. The penalty amount varies depending on factors like the amount of tax owed and the duration of the delay. Taxpayers can use IRS penalty calculators or consult IRS publications to understand the potential penalties they might face.

 

Estimation and Required Documentation

To report and pay estimated taxes, individuals and businesses to file Form 1040-ES. This form includes worksheets for calculating the estimated tax amount and payment vouchers for submitting payments to the IRS. Additionally, there are online calculators and tax preparation software that can assist in accurately estimating tax liabilities based on income and deductions. It is also advisable to engage certified tax professionals to avoid any tax disputes, penalties, or IRS audits in the future.

 

Exemptions and Due Date Extensions

Certain groups of taxpayers, including farmers and fishers, recent retirees, individuals with disabilities, those receiving irregular income and victims of disasters are eligible for exceptions to penalties and special regulations.

Following recent disasters, eligible taxpayers in TennesseeConnecticutWest VirginiaMichiganCalifornia, and Washington have an extended deadline for tax season 2024 for estimated tax payments until June 17, 2024. Similarly, eligible taxpayers in AlaskaMaine and Rhode Island have until July 15, 2024, and eligible taxpayers in Hawaii have until Aug. 7, 2024. For more information, visit Tax Relief in disaster situations.

In addition, taxpayers who live or have a business in Israel, Gaza, or the West Bank, and certain other taxpayers affected by the terrorist attacks in the State of Israel, have until Oct. 7, 2024, to make estimated tax payments.

 

IRS Support and Assistance

The IRS provides various resources and support for taxpayers regarding estimated tax payments. This includes to include the Interactive Tax Assistanttax topics and frequently asked questions, and assistance through phone or in-person support at IRS offices or tax assistance centers.

 

IRS AUDIT GROUP

IRS Audit Group consists of tax professionals, CPAs, enrolled agents, and tax attorneys.  We are located in Los Angeles; California and our primary area of expertise is IRS Tax Audit Representation.  However, our certified professionals cooperate and work with all IRS offices across the country.  Please contact us for more information.  https://irsauditgroup.com/contact/

Toll Free: (888) 300-6670

Emergency Number: (310) 498-7508

[email protected]

Read more
Failing-IRS-Audit blog

Consequences of Failing an IRS Audit – Why It Is Crucial to Hire a Tax Professional for IRS Audit Representation

A solid grasp of tax laws and regulations is essential for businesses to effectively handle their financial matters. Nevertheless, even with meticulous attention, errors can occur, which may result in complications when it comes to complying with tax laws and regulations.  In a few circumstances, these errors might prompt a tax audit by the Internal Revenue Service (IRS). Failing an IRS audit can result in severe outcomes, such as monetary fines and harm to the organization’s image.  In this article, we’ll explore what could happen if a business fails an IRS audit, highlighting the importance of taking proactive steps to comply with tax rules and seeking help from knowledgeable tax professionals to protect businesses from these challenges.

 

Financial Consequences

  1. Penalties and Fines: Failing an IRS audit can result in hefty penalties and fines. These penalties can be imposed for underreporting income, overstating deductions, or other inaccuracies in tax filings. The financial impact of these penalties can be substantial and may strain the resources of the business.
  2. Additional Taxes: Besides penalties, businesses need to pay additional taxes if an audit reveals unreported income or disallowed deductions. These additional tax liabilities and accrued interest can further exacerbate the financial burden on the business.
  3. Legal Costs: In cases of serious non-compliance or suspected tax evasion, businesses incur legal costs defending themselves against IRS scrutiny. Legal representation can be expensive, adding to the overall financial strain caused by the audit process.

 

Reputational Consequences

  1. Loss of Trust: Failing an IRS audit can damage a business’s reputation and erode trust among stakeholders, including customers, suppliers, and investors. Public knowledge of non-compliance issues can tarnish the business’s image and undermine its credibility in the marketplace.
  2. Negative Publicity: News of an IRS audit or allegations of tax evasion can attract negative publicity, further harming the business’s reputation. Negative media coverage can have lasting effects on consumer perception and may drive away customers and business partners.
  3. Regulatory Scrutiny: Failing an IRS audit triggers increased scrutiny from other regulatory bodies, including state tax authorities and industry regulators. This additional scrutiny can disrupt business operations and add further strain to the business’s reputation and resources.

 

Importance of Proactive Compliance Measures and Professional Representation

  1. Maintaining Accurate Records: Businesses need to maintain accurate financial records and documentation to support their tax filings. Proactive record-keeping can help businesses identify and address potential compliance issues before they escalate into audit triggers.
  2. Seeking Professional Guidance: Engaging qualified tax professionals from a reputed tax audit representation firm can provide businesses with expert guidance on navigating complex tax laws and regulations. Professional representation during an IRS audit can help businesses present their case effectively and minimize the risk of adverse outcomes.
  3. Co-operating with Authorities: Businesses should cooperate fully with IRS auditors and provide requested information promptly. Transparency and cooperation demonstrate a commitment to compliance and may help mitigate penalties and fines.

 

If you have received notification from the IRS which is usually via. mail for IRS Audit, don’t panic but don’t delay. It is important to read the mail completely and understand the reason stated for the audit, the next step to be taken, or the documents requested by the IRS. To navigate these challenges, it is recommended to engage a tax audit representation firm like the IRS Audit Group.

 

IRS AUDIT GROUP

IRS Audit Group consists of tax professionals, CPAs, enrolled agents, and tax attorneys.  We are located in Los Angeles; California and our primary area of expertise is IRS Tax Audit Representation.  However, our certified professionals cooperate and work with all IRS offices across the country.  Please contact us for more information.  https://irsauditgroup.com/contact/

Toll Free: (888) 300-6670

Emergency Number: (310) 498-7508

[email protected]

Read more
IRS Blog_14_Common Tax Filing Mistakes to Avoid for Tax Season 2024

Avoid Common Tax Filing Mistakes for Tax Season 2024 – IRS Guidance to Speed Up the Refund Process

The Internal Revenue Service (IRS) has instructed taxpayers to avoid errors on their federal tax returns and expedite their refunds for the Tax Season. These guidelines aim to assist in submitting returns that are thorough, precise, and free of mistakes.  To help you navigate through Tax Season 2024 smoothly, here are some tips to avoid tax return mistakes and optimize your refund.

 

GATHER ALL TAX DOCUMENTS

Start gathering all necessary documents well before the 2024 tax filing deadline. This includes W-2 forms, 1099s, receipts for deductions, investment statements, and any other relevant financial documents. Having everything organized will make the tax preparation process much smoother and reduce the chances of overlooking important information.

 

USE ELECTRONIC FILING

The IRS recommends that taxpayers and their tax professionals leverage electronic filing channels, including IRS Free File or other certified e-file service providers. Furthermore, certain taxpayers in 12 States have the option to participate in the Direct File pilot program. Electronic filing offers the advantage of reducing mathematical inaccuracies and pinpointing potential tax credits or deductions for which the taxpayer may be eligible. It is imperative for taxpayers to conduct a thorough review of their tax returns to guarantee precision and compliance. Electing electronic filing and opting for direct deposit represent the most expeditious and secure methods to receive refunds.

 

USE THE CORRECT FILING STATUS

Tax software platforms are designed to mitigate errors by guiding users through the selection process of their tax return filing status. For this tax season 2024, individuals who are uncertain about their appropriate filing status can utilize the Interactive Tax Assistant available on IRS.gov. This tool aids individuals in determining the correct filing status, especially in situations where multiple statuses may be applicable.

 

DOUBLE-CHECK PERSONAL DETAILS

Taxpayers are required to provide precise information including the name, date of birth, and Social Security number (SSN) for each dependent listed on their individual income tax return. It is imperative that the SSN and individual’s name are entered accurately, reflecting the information as it appears on the Social Security card. In instances where a dependent or spouse does not possess an SSN and is ineligible to acquire one, an assigned Individual Taxpayer Identification Number (ITIN) should be furnished in place of the SSN.

 

FILE YOUR DIGITAL ASSETS TRANSACTIONS

All filers of Forms 1040, 1040-SR, 1040-NR, 1041, 1065, 1120, and 1120S must indicate their response to the digital asset question by selecting “Yes” or “No”. This question must be addressed by all taxpayers, irrespective of whether they participated in digital asset transactions during the tax year 2023. Furthermore, taxpayers are obligated to report all income derived from digital asset transactions.

For comprehensive guidelines regarding when to affirm “yes” and instructions on reporting digital asset-related income, individuals are advised to refer to the IRS.gov Digital Assets section.

 

REPORT ALL TAXABLE INCOME

Failure to report income may result in penalties and interest. Income tax information can help prevent errors that slow down the process and help find missed deductions or credits. Taxpayers should have all their income information ready before they begin filing their taxes. IRS can even conduct tax audits on such filings and may ask for further documents or even visit the premises for field audits.

 

DOUBLE CHECK ROUTING AND ACCOUNT NUMBERS

Taxpayers have the flexibility to choose to have their federal income taxes deposited into one, two, or three accounts of their choice. Bank documentation containing correct numbers and account numbers is important, especially when a refund is required, to reduce the risk of delays or the refund being sent to an undesirable location. Taxpayers also have the opportunity to use their refunds to purchase US Savings Bonds, thus making the most of their tax refunds.

 

SIGN AND DATE THE TAX FILINGS

If filing a joint tax return, both spouses must sign and date the document. For those independently preparing and electronically submitting their taxes, authentication involves entering the adjusted gross income (AGI) from the previous year. Taxpayers seeking guidance can consult resources like “Validating Your Electronically Filed Tax Return” for assistance with any questions they may have.

 

ACCURATE MAILING ADDRESS

Taxpayers and tax professionals are urged to opt for electronic filing whenever possible. However, if a paper tax return must be submitted, it’s vital to confirm the accurate mailing address. This verification can be carried out on the official IRS website, IRS.gov, or by referring to the instructions provided with Form 1040. This precautionary step is essential for minimizing processing delays caused by incorrect mailing addresses.

 

KEEP A COPY

After completing their tax filing, individuals should proactively produce duplicates of their signed returns and any accompanying schedules for their records. Maintaining these copies simplifies future tax preparations and assists in revising calculations, especially when filing amended returns. Moreover, it is recommended that taxpayers hold onto records supporting their reported income, deductions, or credits until the statutory period for that specific tax return expires. This proactive approach ensures adherence to regulatory standards and streamlines potential inquiries or audits by tax authorities.

 

IRS AUDIT GROUP

IRS Audit Group consists of tax professionals, CPAs, enrolled agents, and tax attorneys.  We are located in Los Angeles; California and our primary area of expertise is IRS Tax Audit Representation.  However, our certified professionals cooperate and work with all IRS offices across the country.  Please contact us for more information.  https://irsauditgroup.com/contact/

Toll Free: (888) 300-6670

Emergency Number: (310) 498-7508

[email protected]

Read more
Understanding AMIC Tax Season 2024 blog

Understanding the Advanced Manufacturing Investment Credit for Tax Season 2024 – Special Rules for Partnerships and S Corporations

The Internal Revenue Service (IRS) administers the Advanced Manufacturing Investment Credit (AMIC) in Tax Season 2024.  The objective is to motivate businesses to upgrade their manufacturing processes, and thereby boost competitiveness and stimulate economic growth.   In the fast-paced industrial environment, staying ahead often necessitates significant investments in advanced manufacturing technologies.

 

What is Advanced Manufacturing Investment Credit?

The AMIC (section 48D) is a targeted initiative under the Inflation Reduction Act (IRA) to boost the manufacturing sector, particularly in critical areas such as semiconductors and renewable energy. Offering a direct dollar-for-dollar tax reduction, it provides a significant financial incentive over deductions, spurring investments in advanced manufacturing technologies. This credit underlines the government’s focus on domestic manufacturing resurgence and supply chain security, with unique provisions for credit sale or transfer, enhancing its appeal and offering businesses strategic flexibility for growth and innovation in vital industries.

 

How much is the Credit for Tax Season 2024?

Eligible businesses may claim a tax credit equal to 25% of the qualified investment costs incurred for the purchase of advanced manufacturing equipment and related expenses. Qualified investments include expenditures on tangible property used in domestic manufacturing processes, such as machinery, equipment, and software specifically designed for advanced manufacturing activities.

 

Eligible Businesses for Tax Season 2024

To be eligible for the AMIC, a business must be engaged in manufacturing activities within the United States and must invest in qualified advanced manufacturing technology. Additionally, eligible taxpayers must obtain certification from the Department of Energy (DOE) or the National Institute of Standards and Technology (NIST) confirming that the equipment or process meets the criteria for advanced manufacturing.

 

For this overview, an advanced manufacturing facility is defined under proposed regulation section 1.48D-3(f) as a site primarily engaged in producing semiconductors or semiconductor manufacturing equipment. The facility’s assets must be central to semiconductor production or the creation of equipment to manufacture semiconductors.

 

Special Rules for Partnerships and S Corporations

Partnerships and S corporations may allocate the AMIC to their partners or shareholders according to their ownership interests in the business entity. This allows for greater flexibility in distributing tax benefits among multiple stakeholders and can enhance the attractiveness of the credit for businesses structured as pass-through entities.

 

How to Claim and What’s the Deadline?

To claim the AMIC, eligible businesses must file Form 8942, “Application for Certification of Qualified Investments Eligible for Credits and Grants Under the Qualifying Advanced Energy Project Credit,” with the IRS. Additionally, they must adhere to specific deadlines outlined by the IRS to ensure timely processing of their applications and claims.

 

The deadline for claiming the AMIC filing for tax year 2023 corresponds to the due date of Tax Season 2024 which is April 15, 2024. Taxpayers can include AMIC for the automatic extension that is due date on Oct. 15, 2024. It’s essential for businesses to adhere to filing deadlines to maximize their tax benefits and avoid potential penalties or interest charges.

 

In conclusion, the Advanced Manufacturing Investment Credit represents a valuable opportunity for businesses to invest in advanced manufacturing technologies while reducing their tax liabilities. By leveraging this incentive, companies can accelerate their growth, drive innovation, and strengthen their competitive position in the global marketplace. However, it’s crucial for businesses to carefully assess their eligibility, comply with applicable rules and deadlines, and seek guidance from tax professionals or the IRS when necessary.

 

IRS Audit Group

IRS Audit Group consists of tax professionals, CPAs, enrolled agents, and tax attorneys.  We are located in Los Angeles; California and our primary area of expertise is IRS Tax Audit Representation.  However, our certified professionals cooperate and work with all IRS offices across the country.  Please get in touch with us for more information.  https://irsauditgroup.com/contact/

Toll Free: (888) 300-6670

Emergency Number: (310) 498-7508

[email protected]

Read more
Recovery Rebate Credit 2024 Tax Season Deadline

Claim Your Recovery Rebate Credit for 2020 before the Deadline of Tax Season 2024

As the tax season 2024 approaches, the Internal Revenue Service (IRS) is actively reminding taxpayers across the country about the valuable opportunity to claim the COVID-era Recovery Rebate Credit for the tax years 2020 and 2021. This specific credit is designed as a refundable credit, targeting individuals who did not receive one or more of the Economic Impact Payments (EIPs) that were distributed in 2020 and 2021 as part of the government’s COVID-19 relief. For those who qualify and have not yet filed a tax return for those years, it’s important to act swiftly, as time is running out to claim the money that is rightfully yours.

 

When is the Deadline?

The Deadline for the 2020 Recovery Rebate Credit is Tax Season 2024. To claim the 2020 Recovery Rebate Credit, file a tax return by May 17, 2024. For the 2021 Recovery Rebate Credit, file a tax return by April 15, 2025. Filing by these deadlines is essential, as it ensures that you receive the financial assistance you qualify for, helping to alleviate any financial burdens you may be facing.

 

How Much Taxpayer Can Claim?

The credit’s amount varies based on individual circumstances but could reach up to $1,200 for the first EIP and up to $1,400 for the third EIP, with additional amounts available for qualifying dependents. This credit aims to provide much-needed financial assistance to those who missed out on the direct payments distributed in 2020 and 2021. It serves as a crucial resource for individuals and families facing financial hardships, offering relief during these challenging times.

 

Top of Form

Who is Eligible?

To qualify for the Recovery Rebate Credit, certain criteria need to be met. You must be either a U.S. citizen or a resident alien, and you cannot be claimed as a dependent by another taxpayer. Additionally, you must have a Social Security number issued before the due date of the tax return. It’s important to note that the 2020 Recovery Rebate Credit can also be claimed for someone who passed away in 2020 or later. These eligibility requirements ensure that the credit is provided to those who truly need it, offering financial support to individuals and families facing economic challenges due to the pandemic.

 

How to Claim?

To claim the Recovery Rebate Credit, it is necessary to file a tax return for the respective year, regardless of whether your income was minimal or non-existent. This filing requirement ensures that you can receive the credit you are entitled to, even if you did not receive any income during the year. For the 2020 tax year, the deadline to file your tax return and claim the credit is May 17, 2024. Similarly, for the 2021 tax year, the deadline is April 15, 2025. It is important to meet these deadlines to ensure that you receive any refund owed to you through the Recovery Rebate Credit.

 

What Assistance Does the IRS Provide?

The IRS provides valuable assistance to taxpayers through the Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs, offering free tax preparation services. These programs are specifically designed to aid eligible taxpayers in filing their tax returns accurately and claiming any credits or refunds they may be entitled to receive. The VITA Locator Tool and the hotline at 800-906-9887 can be utilized to easily locate the nearest VITA site, ensuring that individuals have access to the assistance they need. This support is invaluable, especially for those with limited income or resources, helping them navigate the tax filing process effectively.

 

IRS Audit Group

IRS Audit Group consists of tax professionals, CPAs, enrolled agents, and tax attorneys.  We are located in Los Angeles; California and our primary area of expertise is IRS Tax Audit Representation.  However, our certified professionals cooperate and work with all IRS offices across the country.  Please contact us for more information.  https://irsauditgroup.com/contact/

Toll Free: (888) 300-6670

Emergency Number: (310) 498-7508

[email protected]

Read more
Blog_Employee Retention Credit Claims for Tax Season 2024

Employee Retention Credit Claims for Tax Season 2024 – Find Seven IRS Warnings on Incorrect ERTC Claims

The Employee Retention Credit (ERC), or the Employee Retention Tax Credit (ERTC), is a tax credit scheme available to eligible businesses and tax-exempt organizations. Its purpose was to encourage businesses to retain their employees amidst the challenges posed by the COVID-19 pandemic.

 

Who is eligible?

Employers who qualify can access the credit if they have paid qualified wages to their employees between March 12, 2020, and January 1, 2022. The eligibility criteria and the amount of credit that can be claimed depend on the timing of the business impacts. It’s important to note that the Employee Retention Credit (ERC) is specifically designed for businesses and is not available to individuals.

 

How much is the credit?

The ERC for Tax Season 2024 is determined by taking a percentage of the qualified wages disbursed to employees. To calculate the credit, the maximum limit for qualified wages per employee is set at $10,000 for each calendar quarter. This means that any wages exceeding this amount will not be considered when determining the credit.

 

New Changes in ERC Claims for Tax Season 2024

  • Businesses that initially received Paycheck Protection Program (PPP) loans were not eligible for the Employee Retention Credit (ERC). However, new legislation now permits these businesses to retroactively claim the ERC for wages not covered by forgiven PPP loan funds.
  • Originally, the ERC was limited to businesses facing operational suspensions or revenue declines. Recent changes now allow businesses affected by COVID-19-related closures or reduced hours to qualify for the credit.
  • The credit limit for each employee has been raised to a higher amount.

 

IRS Issues 7 Warnings For Incorrect Claims

Despite its initial intent to offer essential economic support to employers facing financial challenges due to COVID-19, the IRS found itself overwhelmed with applications. A considerable number of these claims were either from ineligible applicants or sought an unreasonably high amount of Employee Retention Credit. The surge in misleading promotions by third-party entities further contributed to the erroneous claims. In response to this influx of questionable claims, the IRS is taking decisive action. This includes tax audits of ERC claims, imposing a temporary halt on the processing of new claims, and initiating criminal investigations into both promoters and businesses associated with improper claims.

 

To find whether the business is eligible or not, The IRS has an interactive ERC Eligibility Checklist that tax professionals and taxpayers can use to check potential eligibility for ERC.

If already claimed or applied, the IRS issues the below seven key warning signs that help businesses identify if their ERC claim may be ineligible.

  1. Too many quarters are being claimed.
  2. Government orders that don’t qualify.
  3. Too many employees and wrong calculations
  4. Business citing supply chain issues.
  5. Businesses claiming ERC for too much of a tax period.
  6. Businesses didn’t pay wages or didn’t exist during the eligibility period.
  7. The promoter says there’s nothing to lose.

 

Voluntary Disclosure Program in Tax Season 2024

To resolve and avoid penalty or interest, the IRS advises businesses to assess their eligibility for the ERC claim. Some businesses, unintentionally misled by promoters, may have filed incorrect claims for the ERC. To rectify this, businesses that received the credit but do not meet the ERC rules should consider participating in the ERC Voluntary Disclosure Program before the March 22 deadline in Tax season 2024. This program enables taxpayers to repay only 80% of the mistakenly received ERC, avoiding certain penalties and interest, while also providing protection against future tax audits of the relevant employment returns.

 

Additionally, for employers who haven’t yet received the ERC refund from the IRS but now believe they are ineligible (or partially ineligible), the ERC Withdrawal Program offers an avenue to avoid potential penalties and interest. However, this option is only available if the employer’s claim has not been selected for an IRS Audit. Importantly, the ERC withdrawal program remains effective even after March 22, 2024.

 

If an employer determines their claim was ineligible or partially ineligible, it is better to consult with a tax professional about taking advantage of the ERC Voluntary Disclosure Program or the ERC Withdrawal Program as soon as possible.

 

IRS Audit Group

IRS Audit Group consists of tax professionals, CPAs, enrolled agents, and tax attorneys.  We are located in Los Angeles; California and our primary area of expertise is IRS Tax Audit Representation.  However, our certified professionals cooperate and work with all IRS offices across the country.  Please contact us for more information.  https://irsauditgroup.com/contact/

Toll Free: (888) 300-6670

Emergency Number: (310) 498-7508

[email protected]

Read more
IRS blog_10 IRS Audits misuse of corporate resources

Corporate Executives and Tax Season 2024: What You Need to Know about IRS Audits on Corporate Resource Usage

In tax season 2024, the Internal Revenue Service (IRS) began to conduct thorough examinations on the utilization of corporate jets for personal reasons.  Chief Executive Officers (CEOs) and other top-level executives will fall under such IRS scrutiny.  This practice is a component of the IRS’s initiative to deter the misuse of corporate resources for individual benefits, as this could lead to inaccurate income reporting and tax fraud.

 

What is this Activity About?

IRS is actively targeting CEOs who utilize office jets for personal reasons as part of their ongoing endeavors to guarantee accurate reporting and taxation of all income, including additional benefits such as private jet usage. In instances where executives choose to employ corporate jets for personal travel, the value of this privilege is regarded as taxable income, ensuring fairness and compliance with tax regulations.

 

Who Should Be Aware of This?

It is crucial for CEOs, CFOs, and other high-ranking executives who possess the privilege of utilizing corporate jets to have a comprehensive understanding of the regulations and guidelines governing their usage. Equally important, accounting and tax professionals who bear the responsibility of documenting and reporting expenses associated with corporate jets should also possess a thorough knowledge of these rules. The rules and regulations pertaining to the utilization of corporate jets are of utmost importance for CEOs, CFOs, and other top executives who have the privilege of accessing these aircraft. It is imperative that they familiarize themselves with these guidelines to ensure compliance.

 

How to Keep Documentation on Private and Business Trips

It is crucial to have accurate documentation in order to differentiate between private and business trips. This involves keeping a comprehensive record of every flight, which should include the specific date, destination, purpose, and individuals who were on board. Furthermore, it is important to document and allocate any expenses associated with the flight, such as fuel, maintenance, and crew costs, in order to distinguish between business and personal use.

 

Is There a Penalty if the IRS Finds Misuse?

Should the IRS find that a CEO or any other executives have utilized a corporate jet for personal reasons inappropriately, there are potential penalties and tax implications that may follow. The executives would be required to include the value of the personal use of the jet as taxable income on their tax return. Failure to disclose this income could lead to penalties and interest accrual on the outstanding tax amount. In such cases, it is crucial for executives to accurately report any personal use of corporate assets, such as a jet, to avoid any legal repercussions.

 

The penalties and interest that may be imposed for failing to report personal use of a corporate jet can vary depending on the specific circumstances of the case. It is advisable for executives to seek tax professionals’ advice and guidance to ensure that they are fulfilling their tax obligations correctly and avoiding any potential legal issues. By being proactive and diligent in their tax reporting, executives can mitigate the risk of facing penalties and interest charges from the IRS.

Utilizing a private jet for personal use may result in notable tax consequences for chief executive officers and other top-level executives. Maintaining precise documentation and adhering to tax regulations are essential in order to steer clear of fines and investigations by the IRS. Consulting with a tax expert can provide valuable assistance in guaranteeing adherence to regulations and reducing the risk of tax obligations.

 

IRS Audit Group

IRS Audit Group consists of tax professionals, CPAs, enrolled agents, and tax attorneys.  We are located in Los Angeles; California and our primary area of expertise is IRS Tax Audit Representation.  However, our certified professionals cooperate and work with all IRS offices across the country.  Please contact us for more information.  https://irsauditgroup.com/contact/

Toll Free: (888) 300-6670

Emergency Number: (310) 498-7508

[email protected]

Read more

IRS Audit Group

Tax attorney in Beverly Hills, California

468 N Camden Dr #200,
Beverly Hills, CA 90210, USA

Call: +1 888-300-6670

Hours

Sunday8:00am-5:00pm Monday8:00am-10:00pm Tuesday8:00am-10:00pm Wednesday8:00am-10:00pm Thursday8:00am-10:00pm Friday8:00am-10:00pm Saturday8:00am-10:00pm