Guest Article

Companies that specialize in the Credit for Increasing Research Activities (also known as the R&D tax credit) sell hard to our clients. During tax season they are online looking for businesses who may qualify for this credit—especially startups. They cast an extremely wide net that has the potential for a lot of bycatch. While it’s true that the R&D credit is often overlooked by small businesses and their return preparers, it’s not as easy to qualify for the credit as some of these companies want small business owners to believe. Savvy tax professionals can help to ensure that their qualifying business clients receive the benefit of this credit while avoiding situations that would make them ineligible for it.

It seems like the left and the right have entered into a competition as to which side can make the silliest tax observation. The New York Times came out strong for the left as its team of reporters was handed fragments of Trump’s 1995 tax filings. They proceeded to “explain” flow-through entities and net operating losses, fairly mundane tax concepts, as if they were tools of Satan. It did not take long for the right to strike back at least as imprudently.

It’s not often that we get to wave a magic wand and turn a taxable transaction into a non-taxable transaction, but partnership taxation offers us this opportunity. Partnership taxation is extraordinarily flexible and combines tax-favored aspects of both corporate entity taxation and individual taxation. Proper planning and use of this flexibility can actually turn a contribution in return for a partnership interest from a recognition event that results in taxable income to you to a non-recognition event that merely adds to your basis in the partnership. The difference between contributing services versus property for a partnership interest is huge. Contribute services, and you have taxable compensation. Contribute property, and you have a non-recognition event. Determining whether your contribution is classifiable as property rather than services saves a ton in tax. Keep reading to learn how.

At least once a week in the cryptocurrency community, there is a new post or article encouraging crypto investors to relocate to Puerto Rico to avoid tax. Relocating to the Caribbean is certainly an attractive proposition, but is it too good to be true? In the words of every good tax professional everywhere, “It depends.” Becoming a resident of Puerto Rico does have some potential tax benefits that come with it, but it is no slam dunk decision. Let’s take a trip together to the Island of Enchantment, grab a cocktail on the beach, and lower our tax bill!

I’m no fan of needlessly complicating people’s tax situations, and I often remind readers to consider administrative overhead and compliance costs in addition to tax savings when evaluating tax strategies. The following strategies work best for high-net-worth taxpayers and medium to large “small businesses.” I’m not talking about people who think they are high-net-worth, but if even after the estate tax exemption was doubled, you have to file an estate tax return (Form 706), this is you. If your individual or business net worth is in or is approaching the double-digit millions, this may not apply to you – yet. Keep reading anyway because it may be only a matter of time before you can use it or one of your “I wanna be a playa” clients comes to you asking about this strategy because they saw it on TikTok. Keep reading to learn more on how to save.

COVID-19 has affected every aspect of our lives, and tax filing status is no exception. Couples who have filed jointly for their entire marriage may find that for 2021 it is more beneficial to file separately. This is in large part thanks to the many stimulus bills the Congress passed in 2020 and 2021. The addition of Economic Impact Payments (EIP) and the associated Recovery Rebate Credits (RRC) have complicated what was once a simple tax calculation to now include these additional factors. In some scenarios, a couple would pay more tax filing separately than if they filed jointly, but because of pandemic-related credits, end up with more money in their pockets. Filing separately is not without its own potential headaches, though. Keep reading to find out when to switch your filing status.

The Employee Retention Credit (ERC) is a huge benefit for businesses, but it is often incredibly difficult to maximize fully. Practitioners must perform a complex interplay of wages between PPP, grants, or other wage credits. They must know the voluminous rules of the ERC program itself, the other programs that may enter into the equation, and the related portions of the Tax Code. With so much to consider, a particularly powerful tool can easily be missed: the ERC health expenses. Many are surprised when someone asks about health programs since they do not realize these benefits count as ERC qualified costs. Some ERC claims ignore health costs entirely or only capture the employee portions. Deductions for health costs are in the payroll data, but employer costs are typically not in pay records. By reviewing all the qualifying health expenses and available methods for allocating costs, you can really increase your ERC. Keep reading to learn more!

Many tax professionals cringe at the thought of a client coming to them with cryptocurrency transactions. However, a May 2021 NASDAQ survey shows that 17 percent of American adults own crypto, making it harder for tax pros to avoid. It may soon be inevitable that practitioners will need to process cryptocurrency transactions. IRS Circular 230 requires practitioners to “possess the necessary competence” and to “exercise due diligence” in the return they prepare. Failure to meet these provisions could result in the taxpayer unnecessarily overpaying tax. What exactly does that require? Read on to find out!