The Tax Exchange - April 2016
It is not uncommon for employers to experience issues in remitting amounts due for payroll taxes. Often, these issues go unnoticed by the employer and the IRS for long periods of time. As a result, corrective actions may occur well after payroll tax returns are due or filed and may result in additional tax and penalties.
The Treasury and IRS recently issued final regulations that will affect the reporting requirements of many domestic entities with specified foreign assets. With the issuance of these regulations, specified domestic entities must start filing Form 8938, Statement of Specified Foreign Financial Assets, with their annual tax return.
On March 9, 2016, the Texas Court of Appeals for the Third District issued a decision affirming the trial court’s decision that a business that acquires and processes seismic data for use by the oil and gas industry in developing wells was entitled to claim the costs of goods sold (COGS) deduction in calculating its franchise tax because the data provided was integral to the construction and improvement of its customers’ wells.
The U.S. Tax Court has restated the ground rules for what is required to use a family limited partnership to transfer wealth from an estate. The case is a reminder that intrafamily transfers need to be founded upon sound business reasons and respected accordingly.
There is an abundance of information documenting the benefits a company receives from having engaged employees. These benefits may include lower turnover cost, higher employee productivity, and fewer employee sick days.
States have historically challenged the state income tax benefits generated by intercompany transactions using a variety of approaches, including the application of intercompany addback rules and forced combination. Recently, states have been stepping up the use of these tools to combat what they perceive as tax-motivated base shifting and have been working to add a new set of more sophisticated tools to the toolbox.
The IRS recently concluded that a taxpayer could defer for up to two years the recognition of certain advance payment income received from the sale of unredeemed gift cards for goods or services. While this conclusion hinged on the facts and circumstances related to the specific taxpayer, it serves as a timely reminder of the tax treatment of advance payments received by companies.