Business Strategies

In the realm of tax research, the journey from traditional methods to the digital age has been transformative. The evolution of AI in this field marks a significant milestone, reshaping how tax professionals approach complex regulations and compliance. This journey began with simple tax software, gradually advancing to more sophisticated AI tools capable of analyzing large datasets and identifying patterns beyond human capability. Today, we stand at a pivotal moment where AI, particularly ChatGPT, is not just an aid but a game-changer in tax research. Enter "BEST WILD", a revolutionary technique designed specifically for this new era. By integrating the advanced capabilities of ChatGPT, "BEST WILD" offers a systematic approach that transcends traditional boundaries in tax law analysis. This method doesn’t just aid in navigating the complexities of tax regulations; it revolutionizes the process, making it more efficient, accurate, and insightful.

Various rulings and tax agency actions in 2023 were arguably “unusual” and “surprising.” Most of these items were not the key holding of court decisions or IRS news releases or guidance. They were more subtle or buried. This article uncovers a variety of these oddities and posits what we might learn from them.

The House recently approved new tax legislation, some of which applies retroactively to 2023. Reliable reports suggest that the Senate likely won't vote on their version of the bill until later this month or possibly in March due to a two-week recess starting on 02/12/2024 – if they even approve it at all. Should the legislation pass, that would mean that there has been only one filing season (2023) in the last five (2020-2024) where tax law changes and other issues have not affected the filing season. We know that these sorts of changes have huge implications for the timing of service you can offer your clients, as well as the price you may need to charge for your work.

Lane Grigsby is back in the “news” as one of the major backers and advisers of Louisiana Governor Jeff Landry, but that’s not what gets the chairman of Cajun Construction in Think Outside the Tax Box. For that, we have a recent decision in the United States Court of Appeals for the Fifth Circuit. Judge Patrick Higginbotham wrote the opinion, and it’s all about the research credit.

Wolfgang Frederick Kraske, representing himself in Tax Court, pulled off a rare feat. He managed to get two opinions for the price of one in a relatively low stakes case . My friend Lew Taishoff found the regular decision about the $4,574 Section 6662(a) accuracy related penalty to be of great interest . I think the more interesting story is in the memo opinion that covers the tax deficiency of $22,687 for the years 2011 and 2012. It is mostly about Section 183: Activities not engaged in for profit, commonly referred to as the hobby loss rule. Although in this case, the activity does not even seem to get up to the level of a hobby, much less a business conducted for profit. I didn’t dig any deeper into the case, so the story you are getting is what Judge John H. Gale concluded. Kraske might have had something to say if I had interviewed him.

When I started my business, referrals and testimonials were not on my mind. Like most entrepreneurs, my crucial motivator was to have freedom of time for my family, to expand my skill set, and to remove the cap on my earnings potential. When I got my first client as a side hustle, my referral source was a board member who knew my skills very well and recommended me to the non-profit he served as treasurer. In December 2018, a prospect asked me for referrals, and I had no idea what to say. There was only a little besides my resume and employer as a reference. Then I thought, hey, I have my non-profit client, and I asked my client whether they would speak with this prospect and answer any questions they had, and they agreed. That’s when I realized the power of referrals and testimonials.

Regulatory tsunamis come in batches. By now, for example, most of you have heard about the tax-reporting requirement slated to kick in next year, where the IRS would've learned about the income of individual taxpayers who made just $600 on the likes of eBay. That sounded like a looming nightmare -- until the IRS suddenly put it off a year two days before Thanksgiving. (Sometimes removing tax regulations without warning creates as much confusion as adding them.) Small businesses aren’t off the regulatory hook that easily for 2024. Come January 1, a new ownership-reporting requirement begins for millions of American companies. Now’s the time to prepare yourself and your company.

The S corporation is a powerful tool for small business owners to manage their business efficiently and reduce payroll taxes on owner’s profits. The primary benefit small business owners get, when organized as an S corporation, is the opportunity to avoid payroll taxes on distributions after paying reasonable compensation. A reasonable wage/salary is a must for shareholder-employee/s. However, the shareholder-employee soon discovers that the lower her wage is, the lower the payroll taxes. Why not pay no wage? Or only a token wage? Of course, the IRS knows those tricks and requires the company to pay “reasonable compensation” to shareholder-employees so they’ll submit proper payroll taxes. The IRS can adjust wages to reflect reasonable compensation. Family members of the shareholder must also receive reasonable compensation for services rendered. In this article we will begin by debunking urban legends surrounding S corporation reasonable compensation followed by calculating a reasonable compensation package before finishing with a strategy.