What’s the Connection? The Far-Reaching Implications of Tax Nexus by Robert L. Rojas and J. Michael Pusey Reprinted from Tax Notes State, April 15, 2024, p. 207 General Nexus at Its Root The term “nexus” basically deals with connections and when a taxpayer or the taxpayer’s entities have tax paying or reporting responsibilities. With the sales tax, the business is not the taxpayer but the collector and remitter of the tax. These nexus responsibilities usually focus on paying or collecting tax, but the concept can also address when reporting or filing is necessary. One dictionary source defines nexus as “a bond, link, or junction; a means of connection between things or parts; (also) the state of being connected or linked.”1 In our context, nexus is basically the point at which you (or yours) and taxes get connected. The term might be seen as the “tie that binds” the taxpayer to the tax collector. Arizona, for example, defines the term as “the connection required to … [Read more...] about Tax Nexus
Bob’s Blog
Buy-Sell Agreements – Your Business Will
What happens to a company when one owner becomes disabled? For example, a company may have a buy-sell agreement that covers the death of an owner, but fails to adequately address the cash flow implications of a lifetime event (divorce, disability, bankruptcy or retirement of a shareholder). Few owners (or their advisors) give much thought or analysis to the likelihood of a lifetime transfer. Instead they focus all of their attention on dealing with the least likely event—an owner’s death. Yet, in our experience, lifetime transfers occur much more frequently, and when they do can cause huge problems. Typically, owners create buy-sell agreements that may work well in the event of a shareholder’s death, but forget that the same provisions (such as a first right of refusal at a pre-determined price should one owner wish to transfer ownership to anyone) will govern in the case of a lifetime transfer. Because these agreements are designed for one event and used for another, the result … [Read more...] about Buy-Sell Agreements – Your Business Will
Incorporating Your Business – A Planning Opportunity and a Puzzle
Robert L. Rojas, CPA, M.S. – Taxation, CExP, Rojas & Associates, CPAsLos Angeles, Newport Beach, Sacramento, rojascpa.com J. Michael Pusey, CPA, National Tax Director Introduction This article is to help entrepreneurs, owners and their advisers understand the tax implications which follow the choice of setting up your business operations. We offer a detailed look at the C corporation. We cover ownership by the individual (the sole proprietorship), the S corporation, and the partnership. A C corporation is simply one which hasn’t elected S corporation status for a particular year. It is possible for a corporation to have a history that includes C corporation status for some periods and S corporation status for other periods. A single individual cannot be a partnership, although spouses can operate as a partnership. Thus it is possible for a single individual to operate a business as a C corporation or S corporation. The limited liability … [Read more...] about Incorporating Your Business – A Planning Opportunity and a Puzzle
The Basics of Family Limited Partnerships and Why they are Still Important
The Practical Perspective Family limited partnerships (FLPs) continue to be well established, flexible planning vehicles with tax, financial and administrative advantages. Family limited partnership (FLP) documents create restrictions that may have important tax and financial implications. For example, the documents may provide for centralized management of the assets through a more senior member of the family. Assets in the partnership may also be sheltered from creditor claims. Estate planning is not only focused on avoiding unnecessary transfer tax but making decisions about different needs within the family and management of different types of assets. Reduced valuations are often critically important in planning for larger estates – avoiding or minimizing estate or gift tax. These taxes are still an issue for many families. Family Limited Partnerships – The Basics The FLP is governed by the statutes of … [Read more...] about The Basics of Family Limited Partnerships and Why they are Still Important
Catastrophic Disasters –The CPA’s Expertise Can Help With Recovery And Planning
Introduction Our goal is to provide useful tax and financial information to those affected by major casualties and disasters, and their advisors. ((See generally these tax rules: Sections 139(c)’ and 165(c)’, 7508A. If you are a tax professional, see “Disaster Relief Resource Center for Tax Professionals,” https://www.irs.gov/tax-professionals/disaster-relief-resource-center-for-tax-professionals.)) We mention the effects of Hurricane Harvey in and around Houston beginning in August, 2017, and Hurricane Irma that hit Florida and its environs soon after, and then the terrible fires in Northern California in October. Catastrophic disasters have been ongoing. Harvey has been described as the worst flood disaster ever in the continental United States. Just in and around Houston, FEMA believes some 68,000 homes were flooded. ((“Spared from Harvey’s worst,” Ralph Vartabedian and Ben Welsh, Los Angeles Times, 11/19/17, p. A17.)) On the heels of Hurricane Harvey, there has been … [Read more...] about Catastrophic Disasters –The CPA’s Expertise Can Help With Recovery And Planning
The Private Foundation as a Charitable Lifestyle
You’re a busy business owner, investor or executive and would like your success to translate into significant charitable achievements. You would like your success to pour over and help others. You may be looking at retirement and considering a more hands-on approach to helping others, more of an active charitable lifestyle but perhaps not operating a charity. We trust this article will help you decide whether the private foundation is a vehicle suited to your philanthropic, business, tax and estate planning goals. We address the philanthropist, or potential philanthropist, but include their advisors. We will compare the private foundation with other approaches to charitable accomplishment. The rules are complex but a public charity generally receives at least one third of its support from the general public, whereas a private foundation’s support base is normally a limited number of donors. Its funding is usually provided by a donor or a family. ((Instructions to Form … [Read more...] about The Private Foundation as a Charitable Lifestyle
Tips on Registering your Charity
This article was first published in December 2016 on the Planned Giving Design Center website. Download the article Watching charities is a necessary government function because, while rare, there's an occasional bad charity, and any number of charities whose activities may deserve occasional scrutiny. The first step in this process is requiring the charities to register with the state's group that monitors charities. Regulatory Scrutiny Grows Our purpose is to put this topic in some general perspective, making every effort to be brief with a topic that is inherently complex. There are about forty jurisdictions that may require registration. We look generally at such questions as when registration is required and the costs. There is soon to be a centralized, electronic place where the charity can register once and this gets sent to myriad jurisdictions. The vehicle is to be launched in upcoming months with some thirteen initial governmental participants. See "Simpler … [Read more...] about Tips on Registering your Charity
How to Choose a 401(k) Plan Auditor
CFOs must be careful in making this choice, because there may be issues of penalties and personal legal liability. For startup companies or others that are putting a 401(k) plan in place, the details may seem endless. Generally, audits of such plans with 100 or more participants are required as part of the Form 5500 filing for employee benefit plans. For 2015, the instructions for the form ran 82 pages. By comparison, the instructions for Form 1120 for corporate tax returns were only 26 pages. The regulatory environment, which effectively encompasses the IRS, the Department of Labor, and possibly state regulators, is a unique world with a stream of new regulations that may seem endless as well. The DoL looks at fiduciary standards, reporting and disclosure requirements, and its own meticulous rules. The Internal Revenue Service and its specialists are looking at the plan’s qualified status and potential tax issues. The regulators look at not only what’s in the plan, but … [Read more...] about How to Choose a 401(k) Plan Auditor
Selling Your Dental Practice: Part I The Transition Period
By Bob Rojas, CPA Selling a dental practice requires negociation and agreement on many issues. This article will cover the transition period. This is the period between settlement and when the seller exitits the practice. One major variable is how long the seller would like to continue practicing, and when the seller would like to retire. There is an entire spectrum of possibilities to include retiring as soon as the practice is sold to working full time for a period and phasing out gradually. Keep in mind if the seller wants to keep practicing there needs to be enough patients to keep two doctors busy. Practices with two or more offices make scheduling easier two doctors easier. If the seller stays it is important to list hours, days, benefits and compensation in the agreement. Generally the seller is paid a percentage of collections as would an associate. If the seller stays a period shorter than six weeks, generally there is no compensation and it is just considered a … [Read more...] about Selling Your Dental Practice: Part I The Transition Period
Taxes and Marriage The Marriage Penalty Tax
Call me old fashioned, but I love being married. When I met my future wife, we fell in love and we were married. I had a Masters Degree in Tax and helped many clients minimize their taxes. I knew exactly what our marriage would cost me in income. We were married despite the Marriage Tax Penalty. We are still in love and I love being married. We continue to endure the Marriage Tax Penalty. Why does our Tax Code penalize married people? In 1990 55% of US households were married, in 2000 51% and in 2010 it is 49%. The marriage penalty came from the Tax Reform Act of 1969. At the time most families had one income earner and it was designed to help those families. It was even referred to as the marriage bonus tax as a single earner with a family paid less tax than an earner without a family. In 1960 72% of all people were married. Today most households have two income earners but only 52% of US people are married. This is why we use the phrase marriage penalty tax. … [Read more...] about Taxes and Marriage The Marriage Penalty Tax
