While much effort has been put forward by CPA Firms like Professional Tax Resolution to warn of the potential dangers of fraud regarding the IRS’s new use of private debt collection agencies, there has been little discussion of another provision introduced at the same time through the FAST Act. Much more out of the control of individual taxpayers, this provision sees the State Department teaming up with the IRS to revoke or suspend passports due to unpaid and unresolved taxes.

Earlier this year, the IRS provided insight into how the program will effect those with outstanding taxes. Section 32101 of the FAST Act allows the Secretary of Treasury to provide the Secretary of State with a list of “seriously delinquent taxpayers.” This list will acted upon with denial, revocation, or limitation of the passports of those listed. Those to be titled “seriously delinquent”will have had a Notice of Federal Tax Lien filed  (with appeal rights lapsed or exhausted) or a levy has been issued on an assessed liability of $50,000 or more.

If a taxpayer has been working to resolve past-due taxes, and has created an installment agreement or Offer in Compromise, has exercised Collection Due Process Rights, or has had collection stopped, he or she will not qualify for IRS certification. If you happen to find yourself on this list, you’ll be able to get yourself back off with any of the above options that we can discuss in greater details when you contact Professional Tax Resolution. The law allows for removal from such a list within 30 days of liability satisfaction or any of the above.

It’s still difficult to see how this type of a penalty will actually be put into effect for delinquent taxpayers. Just how seriously will the IRS take “serious” liabilities? Will they have the manpower with recent budget cuts to do the appropriate due diligence? How often is this list updated and compiled? HOW will the list be compiled? Can the IRS keep up? As we wait to see how the use of private debt collectors will shake out for the IRS, we wait also on the answers to these questions regarding delinquent tax penalties.

We’ll be keeping a close eye on the developments from Washington. In the meantime, if you have tax questions or a tax debt you are unable to pay, our experienced tax settlement professionals are happy to discuss your tax resolution options free of charge. For more information about our services, visit us today at www.professionaltaxresolution.com or call us at 877.889.6527. Our CPAs, Enrolled Agents and other skilled accountants have a thorough understanding of tax law together with the experience necessary to know which tax settlement option will be the best fit for your specific set of circumstances.

The President and his team recently released a one-page document proposing major changes and deep cuts to the individual tax system. Released near the 100-day mark of his administration, the plan includes changes in rhetoric that betray some of what we’ve heard for the past months and during the campaign.

Notably, the repeal of deductions of state and local taxes paid, could have a negative effect of high-tax states such as California, New York, and New Jersey. The standard deduction would only be applicable to charitable donations and mortgage payments. Tax rates have been proposed to drop to 35% from almost 40% in the top bracket, with lower brackets being set at 25% and 10%. Corporate taxes would be lowered to 15% from 35% with US companies owing little to nothing on foreign profits. The 15% extended to corporations will extend to business income reported by individuals.

The one-sheet proposal was lacking details and has raised questions from economists, pundits, and Americans.

• Can companies immediately write off capital expenses?
• What happens to personal exemptions?
• What’s the deal with the one-time tax rate on US companies’ non-domestic earning?
• What is done with child care credits?

Tax reform has continually been put on the backburner by Congress and the divisions in Washington don’t seem to be healing anytime soon. If Democrats band together under Senate Minority Leader Chuck Schumer’s belief that the plan overly benefits the country’s top earners to the detriment of the middle and lower classes, Republicans will need to pass the plan through Reconciliation, which requires the bill to not increase budget deficits beyond a ten-year period. And while Republicans largely praise the plan, economists have doubt that it will be able to keep ballooning deficits in check.

Representative Kevin Brady (R-Texas) believes, “It really makes clear the president’s commitment on tax reform and delivering it in a very bold way this year.” Though as chairman of the House Ways and Means Committee, he claims, “We’ve still got some work to do. There’s no question about it.”

With a recent, heavy focus on ACA repeal, we haven’t seen much new come from the President’s tax and finance teams on the details presented (or missing from) the proposal. Treasury Secretary Steven Mnuchin and Gary Cohn, economic advisor to Mr. Trump claimed those details are being negotiated with Congress.

“We have a unique opportunity to do something major here,” said Mr. Cohn. “It’s our intention to create a huge tax cut and equally as important, a huge simplification of the tax system in America.”

We’ll be keeping a close eye on the developments from Washington. In the meantime, if you have tax questions or a tax debt you are unable to pay, our experienced tax settlement professionals are happy to discuss your tax resolution options free of charge. For more information about our services, visit us today at www.professionaltaxresolution.com or call us at 877.889.6527. Our CPAs, Enrolled Agents and other skilled accountants have a thorough understanding of tax law together with the experience necessary to know which tax settlement option will be the best fit for your specific set of circumstances.

As companies grow and change over the course of their lifetime, certain structures that were set up at the beginning of the venture may grow obsolete and need to be changed. Legal forms of organization that were once appropriate and helpful to the business may come to work against it. There’s an importance in noting that in most cases where tax and business considerations allow, it is possible to convert a company’s organization to better suit current and emerging goals.
Can You Convert a California Corporation to Other Entity Forms?
Generally, domestic stock corporations can convert into other official California business entities. California limited liability company (LLC), limited partnership (LP) or general partnership (GP) can convert into a California or foreign other business entity. Provided that the laws of the foreign jurisdiction allow for it, a foreign corporation can convert to a California corporation. The exception is that a California corporation cannot convert to a foreign entity.
What Steps Are Required to Convert a C Corp to an S Corporation?
With the help of a professional or CPA, for federal tax purposes, the simple requirement to convert a C corporation to an S corporation is filing Form 2553 with the IRS. Requirements of filing of IRS Form 2553 include:
Form being signed by all the shareholders
The form must be submitted within two months and 15 days past the beginning of the tax year within which the S corporation election is being made.
Additonally, form 1120S should be filed for the tax year in which the S corporation election is made.

What Tax, Financial and Legal Considerations Are Associated with Conversion of a C Corp?
When changing California C Corporations to California S Corporations, the biggest alteration to understand is a tax election. All California corporations are formed as C corps. It is only after the filing of articles of incorporation, enactment of the bylaws, issuance of shares, and first shareholder meeting is conducted that a newly formed California C corp can elect to become an S corporation, filing IRS Form 2553. In the case an S election is not conducted and filed within 45 days of incorporating, the corporation will remain a C corporation until the form is filed. These seem to be the only filing needs with the California Secretary of State.

Additional considerations to discuss with your CPA when deciding to convert an S Corp include:
– Pass-through tax considerations – Converting a C Corp to an S Corp results in disparate tax handling as the business moves from an independent tax entity to a pass-through entity.
– Built-in gains (BIG) tax considerations — Within five (5) years of conversion the IRS imposes a 35% tax on the gains derived from asset sales of the C corporation and distributed by the S corporation. The BIG tax may apply if assets are not sold but are similar to receivable accounts accrued under C status and collected under S.
– Passive investment income taxes – A converted S corporation can be subject to taxes on passive investment income inherited from its existence as a C corporation (PFIC tax). If this income exceeds 25 percent of the S corporation’s gross income it will be subject to a special tax. If the PFIC tax applies three years in a row, the S conversion is terminated. (https://ctlsites.uga.edu/) Distributing passive income to S shareholders avoids PFIC taxes.
– FICA and Self-employment tax minimization considerations — S corporation shareholders can minimize both self-employment and FICA taxes by creating a reasonable between dividends and salary.

The above represents only some of the considerations that should be addressed prior to converting a C Corp in California. Speak to an experienced CPA prior to engaging in any actions regarding your business’s form of legalization.

Is it possible to cover the loss of income tax to governments local and federal and in between?

During 2016’s Presidential race, there was no discussion of automation. As opposed to globalization, which dominated large segments of the debates. The true driver of job loss between 2000 and 2010 was in fact the rise of the robot with greater than 80% of losses jobs attributed to it.

The questions include the determination of effective tax rates, the future of human capital, and the potentials of a Universal Basic Income proposed and championed by Elon Musk and other futurists. For all his “techno-optimism” Gates still believes that the tax will only slow the tide of machines taking over as a preferred source of labor.

In discussing the role of business versus government in determining the role and trajectory of automated labor, Gates believes the existence and potentially exponential growth of inequity requires governments to lead the charge and protect their constituents from losing to monetary capital.

“Gates said that a robot tax could finance jobs taking care of elderly people or working with kids in schools, for which needs are unmet and to which humans are particularly well suited.” The intimate role played by caregivers and teachers is not easily replicated by machines, although the emotional skills of artificial intelligence are growing just as rapidly as the logical reasoning and physical prowess of machines. How long will it be until even those jobs are taken by robots? With hit shows like WestWorld and Humans, the large-scale philosophy of integrating artificial intelligence into our lives has been invited into our lives, and we will have to answer to the growth sooner than most of us expect. The greater details are what we will continue to pursue.

In the meantime, while most of us still have our own tax obligations, if you have tax questions or a tax debt you are unable to pay, our experienced tax settlement professionals are happy to discuss your tax resolution options free of charge. For more information about our services, visit us today at www.professionaltaxresolution.com or call us at 877.889.6527. Our CPAs, Enrolled Agents and other skilled accountants have a thorough understanding of tax law together with the experience necessary to know which tax settlement option will be the best fit for your specific set of circumstances.