Egoavil Klug Salas & Veloso PLLC

The income of a foreign corporation is not subject to federal corporate income tax unless the foreign corporation has income that is effectively connected with a U.S. trade or business (or permanent establishment as provided in an applicable tax treaty) or consists of certain types of U.S. source fixed or determinable annual or periodic income (“FDAP”). A foreign corporation’s income from operations outside the U.S. is not subject to U.S. corporate income tax unless special rules apply.

A U.S. shareholder of a controlled foreign corporation (“CFC”) may be subject to U.S. tax on their pro rata share of the CFC’s income, even if that income is not distributed to the shareholder. Subpart F income is typically passive income of the foreign corporation. U.S. shareholders of a CFC include their pro rata share of subpart F income as taxable income for the year earned, even if the income is not distributed to the U.S. shareholders. Most income that is not subpart F income of the CFC will be subject to the global intangible low-taxed income (“GILTI”) regime, where to the extent the CFC’s income exceeds 10 percent of its aggregate basis in its tangible assets, the U.S. shareholders must include the excess as income for the year. Individual U.S. shareholders are taxed at ordinary income tax rates up to 37 percent on inclusions in income under both the subpart F and GILTI regimes. To the extent the CFC’s income is neither Subpart F income nor GILTI income, the income will not be subject to U.S. tax until distributions are made to the U.S. shareholders.

Link to the article in the comments.

A charitable remainder unitrust (“CRUT”) is a common planning technique for the charitably inclined high net worth. The CRUT allows for the tax-free liquidation of a highly appreciated asset, the tax-free growth of the assets inside the CRUT, with the income building inside the CRUT being taxed to the extent of distributions to the lifetime beneficiary. As compared to immediate taxation on the gain on the sale of a highly appreciated asset with after-tax proceeds being subject to tax annually, the CRUT can allow for superior returns where the distributions to the lifetime beneficiaries will occur over a sufficient period of time even though the remainder is distributed to charity. This is the power of tax-free diversification paired with tax-free growth inside the CRUT.

Clowns of the CRUT: A Tale Where Professionalism and Competence Fail to the Detriment of the Beneficiaries (Part 1 of 2) A charitable remainder unitrust (“CRUT”) is a common planning technique for the charitably inclined high net worth. The CRUT allows for the tax-free liquidation of a highly appreciated asset, the tax-free growth of the assets inside the CRUT, with the income building inside the CRUT being taxed ...

Here's a friendly reminder from the IRS:
"Don’t fall for scammers playing cupid."

If you received payments of more than $600 during 2022 and on through some popular payment apps like Venmo, Zelle, Paypal, or any other similar organization, you may want to read this: https://klugcounsel.com/600-threshold-third-party-payment-platforms-delayed/

______________
Klug Counsel provides sophisticated tax planning and structuring for federal, state, and international taxation to corporations, partnerships, private equity funds, nonprofits, individuals, and family offices.

For questions and inquiries, please contact us at [email protected] or visit our website: www.klugcounsel.com.

We are excited to announce the addition of Steven Solway to the team!

Steven brings a global mobility practice to Klug Counsel providing corporate mobility and immigration services that are symbiotic with our international tax practice. Steven brings more than just another corporate immigration practice; his approach is to provide a concierge service tailored to the needs of each client. The approach is not just to find solutions in the U.S., but to provide global coordinated services meeting the needs of multinational companies with a global workforce. Steven is committed to diversity, kindness and being open-minded, including understanding and accepting that everyone is different and unique and respecting these differences.

Steven is entrepreneurial, and self-motivated with an emphasis on client service, managing client relationships, and client development.

📌 IRS Delays Implementation of $600 Threshold for Third-Party Payment platforms

📌 Why is this relevant to your filing obligations in the next tax season?

Under the American Rescue Plan, beginning January 1, 2023, Third-Party Payment platforms and similar entities were required to report to the IRS the aggregate amount of payments to users that exceed $600 in a calendar year through Form 1099-K, Merchant Card, and Third-Party Payments.

Read the full update prepared by Arturo Meza-Chávez here:

https://klugcounsel.com/600-threshold-third-party-payment-platforms-delayed/

______________

Klug Counsel provides sophisticated tax planning and structuring for federal, state, and international taxation to corporations, partnerships, private equity funds, nonprofits, individuals, and family offices.

For questions and inquiries, please contact us at [email protected] or visit our website: www.klugcounsel.com.

We are pleased to announce some notable developments at Klug Counsel PLLC. We are excited about new members and practice areas that have been added to the firm and the creation of a related entity that will allow us to better serve our clients with accounting and finance support in 2023.

To read the full update, please visit: https://klugcounsel.com/recap-updates-2022/

Wishing you the happiest holidays and a wonderful New Year in 2023!

- The team at Klug Counsel PLLC

ABLE Accounts - Tax Benefit for People with Disabilities

The Achieving a Better Life Experience (ABLE) Act of 2014 allows states to create tax-advantaged savings programs for eligible people with disabilities (designated beneficiaries). Funds from these 529A ABLE accounts can help designated beneficiaries pay for qualified disability expenses. Distributions are tax-free if used for qualified disability expenses.

The Tax Cuts and Jobs Act of 2017

→Increases the amount of contributions allowed to an ABLE account and adds special rules for the increased contribution limit.

→Allows an ABLE account’s designated beneficiary to claim the saver's credit for contributions to the account.

More information may be found here: https://www.irs.gov/government-entities/federal-state-local-governments/able-accounts-tax-benefit-for-people-with-disabilities

It's now easier to contact Basswood Counsel.

On August 16, 2022, President Biden signed the Inflation Reduction Act into law. As part of the significant changes made by this legislation, the IRS will receive a budget increase of nearly $80 billion over the next ten years to improve four areas: enforcement, operations support, business system modernization, and taxpayer services.

More about this here: https://klugcounsel.com/irs-80b-funding/

The IRS Independent Office of Appeals released its focus guide for fiscal year 2023. The focus guide outlines the taxpayer service initiatives you can expect over the coming year.

Source: https://www.irs.gov/newsroom/irs-independent-office-of-appeals-priorities-for-2023-focus-on-taxpayer-service

IRS Provides Tax Inflation Adjustments for Tax Year 2023

The Internal Revenue Service announced the tax year 2023 annual inflation adjustments for more than 60 tax provisions, including the tax rate schedules and other tax changes.

Source: https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2023

... The latest IRS and Census data show that taxes are one such factor, as people and businesses favor states with low and structurally sound tax systems, which can impact the state’s economic growth and governmental coffers.

Source: Tax Foundation Instagram https://www.instagram.com/p/CjoI01KvKMK/

______________

Klug Counsel provides sophisticated tax planning and structuring for federal, state, and international taxation to corporations, partnerships, private equity funds, nonprofits, individuals, and family offices.

For questions and inquiries, please contact us at [email protected] or visit our website: www.klugcounsel.com.

... The 𝗹𝗼𝘄𝗲𝘀𝘁 median property tax payments in the country are in six counties or county equivalents with median property taxes of less than $200 a year:

• Northwest Arctic Borough and the Kusivlak Census Area (Alaska)
• Avoyelles, East Carroll, and Madison (Louisiana)
• Choctaw (Alabama)

The 𝗵𝗶𝗴𝗵𝗲𝘀𝘁 median property tax payments in the country are in eight counties that all have bills exceeding $10,000:

• Bergen, Essex, and Union (New Jersey)
• Nassau, New York, Rockland, and Westchester (New York)
• Falls Church (Virginia)

All but Falls Church are near New York City, as is the next highest, Passaic County, New Jersey ($9,999).

Source: Tax Foundation Instagram https://www.instagram.com/p/Cik-Ek0vHMF/

The IRS calls special attention to people hit by recent national disasters, including Hurricane Ian. Taxpayers with an IRS address of record in areas covered by Federal Emergency Management Agency disaster declarations in Missouri, Kentucky, the island of St. Croix in the U.S. Virgin Islands and members of the Tribal Nation of the Salt River Pima Maricopa Indian Community have until November 15, 2022, to file various individual and business tax returns. Taxpayers in Florida, Puerto Rico, North Carolina, South Carolina, parts of Alaska and Hinds County, Mississippi, have until February 15, 2023. This list continues to be updated regularly; potentially affected taxpayers by recent storms should visit the disaster relief page on IRS.gov for the latest information.

Source: https://www.irs.gov/newsroom/irs-dont-miss-this-important-oct-17-tax-extension-deadline

Internal Revenue Service | An official website of the United States government Pay your taxes. Get your refund status. Find IRS forms and answers to tax questions. We help you understand and meet your federal tax responsibilities.

The IRS reminds U.S. citizens, resident aliens and domestic legal entities that the extension deadline to file their annual Report of FBAR is October 15.

Filers who missed the April 15 annual due date earlier this year received an automatic extension until October 15, 2022, to file the FBAR. They did not need to request the extension.

Source: https://www.irs.gov/newsroom/irs-dont-miss-this-important-oct-17-tax-extension-deadline

Hurricane Ian victims throughout Florida now have until February 15, 2023, to file various federal individual and business tax returns and make tax payments, the Internal Revenue Service announced today.

The IRS is offering relief to any area designated by the Federal Emergency Management Agency (FEMA). This means that individuals and households that reside or have a business anywhere in the state of Florida qualify for tax relief. The current list of eligible localities is always available on the disaster relief page on IRS.gov.

The tax relief postpones various tax filing and payment deadlines that occurred starting on September 23, 2022. As a result, affected individuals and businesses will have until February 15, 2023, to file returns and pay any taxes that were originally due during this period.

This means individuals who had a valid extension to file their 2021 return due to run out on October 17, 2022, will now have until February 15, 2023, to file.
https://bit.ly/3fBp1SP

Key Findings

*Forty-four states levy a corporate income tax. Rates range from 2.5 percent in North Carolina to 11.5 percent in New Jersey.

*Six states—Alaska, Illinois, Iowa, Minnesota, New Jersey, and Pennsylvania—levy top marginal corporate income tax rates of 9 percent or higher.

*Eleven states—Arizona, Colorado, Indiana, Kentucky, Mississippi, Missouri, North Carolina, North Dakota, Oklahoma, South Carolina, and Utah—have top rates at or below 5 percent.

*Nevada, Ohio, Texas, and Washington impose gross receipts taxes instead of corporate income taxes. Gross receipts taxes are generally thought to be more economically harmful than corporate income taxes.

*South Dakota and Wyoming are the only states that levy neither a corporate income nor gross receipts tax.

From: https://taxfoundation.org/publications/state-corporate-income-tax-rates-and-brackets/

Differences Between the Inflation Reduction Act and Global Minimum Tax Rules

Source: https://taxfoundation.org/inflation-reduction-act-minimum-tax/

“Taxing Big Oil Profiteers Act” Risks Disincentivizing Production, Inventory

In response to high oil prices, Sen. Ron Wyden (D-OR) has proposed raising taxes on oil and gas companies in three ways. His “Taxing Big Oil Profiteers Act” would create an additional 21 percent tax on so-called excess profits earned over 10 percent of revenues of oil companies with annual revenues over $1 billion; levy a tax on stock buybacks; and remove last-in, first-out (LIFO) tax treatment of inventory accounting. These changes would risk making our economic situation worse, not better.

The underlying idea of the excess profits tax is that 10 percent returns roughly corresponds to a “normal” rate of return.

[from the Tax Foundation blog, the full article may be read here: https://taxfoundation.org/big-oil-gas-wyden-excess-profits-tax/]

“Taxing Big Oil Profiteers Act” Risks Disincentivizing Production, Inventory In response to high oil prices, Sen. Wyden has proposed raising taxes on oil and gas companies in three ways. His “Taxing Big Oil Profiteers Act” would create an additional 21 percent tax on so-called excess profits earned over 10 percent of revenues of oil companies with annual revenues over $1...

President Biden’s announcement of student loan debt forgiveness is already raising many questions. How much will it cost? Who will benefit the most? How will it contribute to inflation? Does the president even have the legal authority to implement this loan forgiveness?

Here’s one more question to add to the mix: will states consider student loan debt forgiveness a taxable event? In many states, the answer could be yes.

Read more about this here: https://taxfoundation.org/student-loan-debt-cancelation-tax-treatment/

List of States That Might Tax Student Loan Debt Cancellation Dwindles Will states consider student loan forgiveness a taxable event? In some states, the answer could be yes.

... the IRS issued Notice 2022-36, which provides penalty relief to most people and businesses who file certain 2019 or 2020 returns late. Nearly 1.6 million taxpayers will automatically receive more than $1.2 billion in refunds or credits. Many of these payments will be completed by the end of September.

Besides providing relief to both individuals and businesses impacted by the pandemic, this step is designed to allow the IRS to focus its resources on processing backlogged tax returns and taxpayer correspondence to help return to normal operations for the 2023 filing season...

More information may be found here:https://www.irs.gov/pub/irs-drop/n-22-36.pdf

-----------------------------------------------------------------------------------

Klug Counsel provides sophisticated tax planning and structuring for federal, state, and international taxation to corporations, partnerships, private equity funds, nonprofits, individuals, and family offices.

For questions and inquiries, please contact us at [email protected] or visit our website: www.klugcounsel.com.

↘️ FATCA Information for Individuals

More information may be found here: https://www.irs.gov/businesses/corporations/fatca-information-for-individuals

--------------------------------

Klug Counsel provides sophisticated tax planning and structuring for federal, state, and international taxation to corporations, partnerships, private equity funds, nonprofits, individuals, and family offices.

For questions and inquiries, please contact us at [email protected]

From the IRS:

Taxpayers who requested an extension to file their 2021 tax return don't have to wait until mid-October to file. If a taxpayer has all the necessary information to file an accurate return, they can file electronically at any time before the October deadline and avoid a last-minute rush to file.

Taxpayers who requested more time to file an accurate return have until October 17, 2022. Those who have what they need to file, however, should file as soon as possible to avoid delays in processing their return.

https://www.irs.gov/newsroom/whats-hot

------------
Klug Counsel provides sophisticated tax planning and structuring for federal, state, and international taxation to corporations, partnerships, private equity funds, nonprofits, individuals, and family offices.

Contact us at [email protected].