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IRS Continues to Attack Accrued Bonus Plans
Posted by Michael Corrente on Tue, Sep 9, 2014 @ 10:04 AM

Businesses with annual employee bonus plans have long operated under the assumption that as long as they pay bonuses within 2 ½ months after the end of the year in which the bonuses are earned, the bonuses are deductible in the year earned, rather than in the year paid. While it is true that the "2 ½ month rule" must be satisfied in order to deduct the bonus in the year earned, other requirements must be met as well. The IRS has issued several rulings in the last few years illustrating how many bonus plans may fail these requirements. While these rulings may cast doubt upon the deductibility of many employers' current bonus plans, they also shed light on how to structure a bonus plan to withstand IRS scrutiny.

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Topics: tax issues, Michael Corrente, tax, IRS Updates, Bonus Plans

Rhode Island Analyzes Two-Year Study; Considers Combined Reporting
Posted by Tarra Curran on Mon, Apr 7, 2014 @ 09:24 AM

Back in 2011, Rhode Island Gov. Lincoln D. Chafee proposed in his FY2012 budget that the state change its business corporation tax statute to a combined method of reporting. At the time, the proposal drew criticism from the Rhode Island Public Expenditure Council (RIPEC), which claimed there wasn’t enough data to evaluate the implementation of combined reporting.

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Topics: tax issues, tax update, Tarra Curran, tax returns, tax

Recent Developments Concerning the Domestic Production Activities Deduction
Posted by Kristen Shepley on Thu, Mar 20, 2014 @ 09:04 AM

In the past year, there have been several developments concerning the application of the IRC §199 Domestic Production Activities Deduction ("DPAD"). The DPAD provides eligible taxpayers a deduction of up to 9% of their taxable income from qualifying production activities. Many of these recent developments provide guidance on the types of activities that qualify as "manufacturing or production" for purposes of the DPAD. Taxpayers currently not claiming the DPAD should review their position in light of these rulings.

Background

The DPAD enables domestic manufacturers and producers to deduct for the tax year 9% of the lesser of:

  1. The taxpayer's qualified production activities income ("QPAI"), or
  2. The taxpayer's taxable income (modified adjusted gross income, for individual taxpayers), without regard to the DPAD.

The DPAD cannot exceed 50% of the W-2 wages from domestic production activities of the taxpayer. Under (2) above, taxpayers with an overall net loss receive no DPAD benefit.

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Topics: tax issues, tax update, Domestic Production Activities Deduction

Who Deducts Transaction Costs - Acquiring Corporation or Target Corporation?
Posted by Kristen Shepley on Thu, Mar 13, 2014 @ 09:18 AM

When one corporation acquires another, the legal, advisory and facilitation costs can be significant. Not only must the taxpayers determine to what extent those transaction costs are currently deductible, but they must also determine whether those costs are allocable to the target corporation immediately before the transaction or to the affiliated group after the transaction. Those determinations may impact tax attributes that pass to the affiliated group as well as who benefits from those tax deductions.

When a target corporation ("Target") is acquired and becomes part of the consolidated group of an acquiring corporation ("Acquiring"), Target's tax year ends on the date of acquisition and it must file a short-year tax return. Its short tax year closes at the end of the day of its status change (known as the "end of the day rule"). Subsequent to the date of acquisition, its activity becomes includible in the tax year of the common parent. The taxpayers may make an election under the consolidated return regulations to ratably allocate general items of income, gain, deduction, loss and credit between the two periods.

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Topics: tax issues, acquiring corporation, target corporation, tax deductions

Is it Possible to do 2012 Tax Planning?
Posted by Grafton Willey on Mon, Nov 5, 2012 @ 09:27 AM

Too Many Unknowns and Uncertainties Make This Year’s Tax Planning More Difficult than Ever 

Author: Grafton "Cap" Willey, CPA

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Topics: tax issues, tax planning, tax, Cap Willey, year-end tax planning, tax changes, election year, IRS, compliance

IRS Offers New Guidance on the Offshore Voluntary Disclosure Program (OVDP)
Posted by Kristen Shepley on Wed, Sep 26, 2012 @ 09:13 AM

Program allows taxpayers with undisclosed foreign accounts and assets to “come clean” in exchange for reduced penalties and protection against criminal prosecution

Are You Eligible?

The IRS has issued guidance on its current Offshore Voluntary Disclosure Program (OVDP) and tightened eligibility requirements. Good news: taxpayers with undisclosed foreign accounts and assets can “come clean” in exchange for reduced penalties and protection against criminal prosecution.

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Topics: tax issues, Kristen Shepley, tax, IRS, OVDP, U.S. citizens, Offshore Voluntary Disclosure Program, tax relief

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