Apple is clearly aware of how to manipulate its federal tax burden in a way that the CEO has described as beneficial to its shareholders. For companies in Austin, it is important to also have a firm grasp on federal and state tax burdens so as to minimize how much they pay in taxes while remaining within the letter of the law. A tax attorney can provide an overview on how to best reduce a company's tax burden.
]]> The way in which Apple managed to avoid paying taxes on $30 billion of its global profits between 2009 to 2012 was by directing them through its Irish subsidiaries. This massive amount of profits, roughly one-third of its total profits, was not taxed at the U.S. corporate income tax rate of 35 percent, which some people believe creates a larger tax burden for everyone else in the U.S.While Apple is the current focus of tax avoidance, there are numerous companies and corporations in the United States that do similar things to reduce their tax burden. It was Apple, however, that has spurred some of the effort to close the loopholes that these corporations have found. It may be a while, however, before corporations will see an increase in their tax burden.
Source: The Washington Post, "Apple is shifting its tax burden," May 21, 2013
]]>There has been some concern, however, about the fact that the smaller companies who would suddenly face the new tax were never a part of the state's former lawsuit against big tobacco companies.
]]> While it is true that the bill only increases taxes on those tobacco companies that were not included in the state's 1998 settlement with the then-existing tobacco companies, this bill would reduce these new companies' share of the market and make them compete on the same level as the more-established companies.The tax would raise the cost of cigarettes by 55 cents per pack. It is unknown if the bill will ultimately pass the Senate or be approved by the governor. The tax would also lower the costs of chewing tobacco by 80 cents to $1.22. It is not entirely clear why the government would seek to raise one new tax and to take away or severely reduce another.
This story reminds us that taxes are always changing and that the state can make small, but significant changes to the tax scheme.
Source: KHOU, "Texas House bill cuts taxes on chewing tobacco, raises them on some cigarettes," May 8, 2013
]]>In a formal apology issued this month, the IRS admitted to inappropriately flagging some conservative political groups for additional review to see if they were violating their tax-exempt status. According to the release, the government agency violated multiple IRS policies in the process.
]]> The IRS admits to singling out many of the organizations because they used terms like "tea party" and "patriot" in their applications for tax-exempt status. In some cases, the IRS even asked for a list of donors, which Lois Lerner, head of the IRS division which oversees tax-exempt groups, explains was a violation of IRS policy. "I would like to apologize for that," she said in the press release.The IRS claims that the practice of flagging the accounts was initiated by low-level workers in their Ohio location, though they point out that they believe it was not motivated by political bias. But now that the IRS has admitted to flagging accounts in such a manner, could something like this be happening to everyday citizens as well? It's a disconcerting question no one seems to have an answer to at this time.
Source: ABC News, "IRS Apologizes for Targeting Conservative Groups," Stephen Ohlemacher, May 10, 2013
]]>The proposed legislation would reduce the tax on mixed beverages by one-half, only for those venues that regularly have live music. Specifically, the bill provides that the venue must have live music for a minimum of four nights per week, at least 45 weeks out of the year. The bill was proposed with the intention that the money saved from the reduced tax rate would then be passed along to musicians, allowing these businesses to schedule more live shows.
]]> According to the Texas Music Office, the bill would likely affect approximately 200 venues in Texas - around one-third of which are located in Austin. The tax cut would result in costs to cities and the state of around $60 to $80 million annually.Those who support the bill believe it would encourage businesses to continue and increase the number of live performances at their venues each year, as those in the business have stated it can be difficult to make a profit with such ventures.
There are those who do not favor the bill, of course. They argue that there is no safeguard in place to ensure the savings from the tax cuts are passed on to the musicians. They contend that these businesses could just as easily keep the money saved from the tax breaks for themselves.
Source: The New York Times, "Law Would Halve Mixed-Drink Tax at Music Clubs and Promote More Concerts," Maurice Chammah, May 2, 2013.
]]>With Governor Rick Perry's goal of cutting $1.8 billion in taxes, the legislature is discussing more tax cuts for businesses. A huge portion of that tax cut goal put forth in Perry's April 15 tax relief plan is targeted at dropping the franchise taxes by $1.6 billion.
]]> In an effort to meet that challenge, the Senate is considering a bill that would cut taxes by $1.3 billion. At this time, the Senate has already passed legislation that would issue refunds for people paying for electricity. The House is currently considering the bill.Another major bill that is supposedly "ready to pass" is a bill that would only require businesses making more than $1 million a year to pay the franchise tax. If this bill is passed, the government will collect approximately $200 million fewer in taxes over the next two years.
If it seems that Texas is constantly changing what is taxed, who is taxed and what exemptions are available, it may be important to consult a state tax attorney. An attorney can provide important advice on how best to comply with taxes while ensuring that you do not pay more than what is needed.
Source: Houston Business Journal, "Texas Senate offers new cuts to business taxes," James Jeffrey, May 1, 2013
]]>For the Texas state government, this could mean an added source of income from Internet purchases. As more and more people use the Internet to make purchases, there are fewer opportunities for the state to collect sales tax, and it also pits brick-and-mortar stores against Internet retailers. President Obama supports this bill, saying that it can provide much-needed income to local and state governments.
]]> The bill is also being presented as a way to equalize the competition between brick-and-mortar stores and Internet retailers. As the president and CEO of the National Retail Federation has pointed out, stores in Texas have many different ways to attract customers and compete with Internet retailers, but they have no choice but to collect sales tax. This bill would force Internet stores to collect the same taxes as everyone else.Regardless of whether you support the bill or not, the way in which federal and state laws affect taxes and tax collection can be quite confusing. And since taxes are not something to just guess on and hope they were done correctly, it is important that any questions are directed to an experienced tax attorney who can help to clarify any confusion.
Source: The Associated Press, "Tax-free Internet shopping jeopardized by bill," Stephen Ohlemacher, April 23, 2013
If you would like to know more about the way in which our law firm has helped individuals comply with Texas sales tax, please visit our website.
]]>The governor cited examples of other states that are actively working to improve their economies and Perry says that he wants to continue to make Texas a site of economic development. In support of that effort, the governor has proposed a $1 million deduction for businesses that make more than $20 million in revenue. This is just one part, however, of his overall plan.
]]> In addition, Perry proposed reducing the business franchise tax by 5 percent, lowering the tax rate for businesses that file online and to award businesses who move to Texas a one-time deduction for moving expenses. This proposal, however, would require legislative approval, so it is unknown if the state legislature would support such a business tax overhaul. Moreover, it is not clear how much tax revenue this would take away from the Texas state coffers.As tax laws change, it may be difficult to ensure that you are still in compliance. For businesses, taxes are even more complex and require someone knowledgeable with tax law to ensure that the business is paying just the right amount of taxes. By working with a tax attorney, a business can help protect itself from complicated tax law issues.
Source: Reuters, "Texas Governor Perry calls for tax cuts for business," Corrie MacLaggan, April 15, 2013
Please visit our state tax web page to find out more about the various state business taxes in Texas.
]]>And, with the confusing tax code that the United States government currently uses, it is no wonder that people have questions. President Obama has also just introduced some tax reforms that could make taxes even more confusing. Regardless of if an individual supports the president's proposal, a change to the tax system could make Tax Day that much more difficult next year.
]]> One of the proposals the president has put forth is to implement the "Buffett Rule." This rule would make anyone who earns more than $1 million in a year pay a minimum of 30 percent of his or her income in taxes. The rule was named after Warren Buffett, who first pioneered the idea. It is expected that the rule would raise approximately $53 billion in the next 10 years.Another of the changes could hit Texans quite close to home: The president has suggested eliminating many of the tax breaks that gas, oil and coal companies currently enjoy. If the tax breaks are eliminated, the government could potentially raise $44 billion in the next decade.
It remains to be seen whether these changes will be passed by Congress.
Source: The Associated Press, "Obama Proposes Additional 94-Cent Federal Tax Increase On Cigarettes," April 11, 2013
Discover more about the work we have done for Austin residents on federal tax issues by visiting our website.
]]>There is currently similar legislation in the House of Representatives, too.
]]> The Houston Chronicle points out that one of the many state tax breaks comes from the Greenbelt Act. This law allows that any land that is restricted to recreational, scenic or park use can be taxed at a much lower rate. Take, for example, a country club in Houston that is worth approximately $80 million dollars. If it was taxed at a normal rate, it would be paying a sizable sum of money to the Texas state coffers, but through the Greenbelt Act, it is only taxed as if it were worth a little more than $4 million. The country club's savings are nearly $2 million each year through this tax break.That is just one of many tax breaks within Texas. Whether these tax breaks are actually sunsetted or not, the Texas tax code is quite difficult to understand. Trying to pay what is owed but not paying more can be hard to do right, and that is why many people work with state tax attorneys whenever they have complex tax issues.
Source: Houston Chronicle, "Texas tax code loopholes," March 21, 2013
Find out more about state taxes by visiting our Austin franchise tax law web page.
]]>Senator Kevin Eltife believes that raising the sales tax from 6.25 percent to 6.75 percent, at least temporarily, could help fund $1 billion for the Texas Department of Transportation. Although this could provide considerable help to the Department, the Department has also indicated that it needs $4 billion more every year just to maintain the status quo. The state's population growth, as well as the growth of the number of vehicles on the road, is increasing congestion on the roads.
]]> The Department of Transportation is currently reporting $13 billion in bond debt. This figure comes from the state selling debt in exchange for the funds necessary to pay for state services. According to Eltife, the state is especially likely to use this bond debt method when it comes to building new highways. Eltife is just one of many legislators who have introduced legislation concerning taxes, but he is one of the few who seeks to raise taxes.Regardless of whether this bill passes, this story indicates the variety of different tax measures on the table. Although Texans would not need to think much about an increase in the sales tax, as the amount is incorporated into the purchase of an item, it is possible that some of the hundreds of tax bills that have been filed this session will cover a more complex aspect of tax law, requiring the help of a state tax attorney.
Source: The Texas Tribune, "Republican Senator Proposes Tax Hike for Transportation," Aman Batheja, March 6, 2013
Find out more about the sales tax in Texas by visiting our website.
]]>Critics have said that it is highly unlikely that the bill would ever make it through the House, and there has also been opposition from interest groups throughout the state. Citing the already tight budget that public schools have in Texas and the $5.4 billion cut to public education's budget, the Coalition for Public Schools lambasted the plan.
]]> At the same time, Patrick's proposal has garnered some support, as well. Both Governor Rick Perry and Lieutenant Governor David Dewhurst have said they think the tax credit is a good idea. According to Patrick, this bill is an important step toward providing quality education to all Texans.What do you think?
Regardless of your view on whether business should be allowed to get a tax break in exchange for a school voucher system, this bill highlights the intricacies of state and local tax law. Tax law is always changing and keeping up with the nuances of the Texas tax system often requires working closely with a Texas tax attorney.
Learn more about this story by reading our previous post on the business tax credit.
Source: The Texas Tribune, "Patrick Presents Details of Tax Credit Scholarship," Morgan Smith, March 8, 2013
]]>Not that long ago, the United States was primarily a goods-producing society and limiting the sales tax to goods alone made sense. With most people purchasing goods, states could make a considerable amount of money on the sales tax alone. Now, however, the proportion of goods to services has shifted dramatically. Yet, states have been slow to start taxing these services, and there has only recently been a move to increase state revenue by taxing things like legal services or managing real estate.
]]> Some economists also believe that taxing the many services that Texans and other Americans purchase is a better way of raising money for the state. Not only does it net a lot of money, but it is believed that it will be better for the overall economy, although the latter is widely debated. Many people do agree, however, that it is less of a shock to pay small taxes on goods and services throughout the year than it is to pay all one's taxes at the end of the year.Although Texas does not have an income tax, that does not mean that taxes are any simpler for Texans than they are for residents of states with taxes. There are numerous questions that arise as taxes are prepared that many people without a background in tax law cannot answer on their own. Working closely with a tax attorney can be one of the best ways to ensure that taxes are done correctly the first time around.
Source: Star Tribune, "Minnesota is one of several states weighing shift to sales tax," Adam Belz, March 4, 2013
If you want to know more about Texas' state taxes, please visit our website.
]]>When the IRS is going through everyone's taxes, they may spend most of their time on the biggest earners, those for whom the tax liability is the largest. While only 1 percent of people making less than $200,000 a year will face an audit each year, an audit can still be a stressful and frightening experience. Anyone can get audited for even the simplest of mistakes, which means that it is important to work closely with a tax planning attorney when preparing for an audit, because if the audit is because of a mistake, the individual likely won't pick up on it on his or her own.
]]> So, what is the IRS looking for when it decides to audit an individual? There are certain red flags that may trigger an audit, including simple mistakes on major things. If you had some errors adding up your deductions or accidentally checked "single" when you are married, the IRS may look deeper. It is important to look over everything before you submit or to send your taxes to a tax professional before they are due.Another big problem is when individuals who are self-employed try to claim business entertainment deductions. As the only person in the business, it may be difficult to prove that a trip was a business necessity or that a meal was part of the job, but it is essential to have supporting documents and receipts that support these deductions. Failing to do so will definitely alert the IRS to potential tax fraud.
Finally, although it should go without saying, it is important that everyone reports all of their income. This may be simpler than it may seem, however, especially if you have a former employer that is hard to track down or you did some temporary work for only a few months. No matter how much of a hassle it may be to find the relevant tax forms, it will be a lot easier than having to go through an audit.
Source: USA Today, "Tax tips: How to avoid an IRS audit," Jeff Reeves, Feb. 5, 2013
Our law firm has represented many people in Austin in their IRS audits. You can learn more about our practice and the complexity of tax law by visiting our Austin taxation and tax planning website.
]]>One of the problems appears to be that the 66 year old had to replace his accountant. The accountant that replaced the original later died, which meant that he had to find a third accountant. The third accountant, however, caused considerable problems, as he was "not adequate." Not only did that accrue him a considerable amount of tax liability, but the same incident caused some confusion as to whether he was still operating energy corporations in Texas, as a staff member did not let the appropriate authorities know that the millionaire was closing down some of his firms.
]]> Though the above tax liability was eventually paid off, he still owes approximately $1.2 million in taxes within Texas. He originally owed $1.6 million, but he has already paid back $400,000. His current tax liability arose from a very peculiar stockholding arrangement, but one that only created liability but no actual income.While many people in Texas won't be dealing with situations in which they accrue more than 1 million dollars in tax liability, there are many people who are unaware that their actions are increasing how much they will owe in taxes. By consulting a tax attorney, many people in Texas may be able to vastly shrink their tax bills.
Source: The Telegraph, "Anna Wintour's boyfriend 'owes US government $1.2 million in taxes,'" Jon Swaine, Jan. 28, 2013
If you have any questions about tax liability in Texas, please visit our website for more information.
]]>It is clear that taxes are intertwined in all aspects of our lives, but they play an especially important role in divorce and family law. For example, someone who receives alimony or spousal support from a former husband or wife will need to pay taxes on his or her alimony. The ex who pays the alimony, however, will be able to write off however much he or she pays in a year, reducing his or her overall tax liability.
]]> With the new American Taxpayer Relief Act, this could have very serious consequences among Texas' wealthier couples. With the new tax law roping everyone who makes more than $400,000 in adjusted gross income into the highest income bracket, receiving a large divorce settlement could also expose a new divorcé(e) to more tax liability than he or she had originally planned for.Because of the complexity of both tax and family law, it is best to work with a tax attorney who can accurately guide anyone going through a divorce on how best to minimize tax liability. What may seem best in the short run could end up costing someone a lot more through taxes than what the divorce settlement would have ever been worth.
Source: The Wall Street Journal, "New Tax Rules Complicate Divorce," Arden Dale, Jan. 31, 2013
You can learn more about the importance of tax planning by visiting our website.
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