A Los Angeles court invalidated abusive “Son of Boss” tax shelter scheme and imposed the maximum penalty of 40% on real estate investors James Thomas and Edward Fox last week. Thomas (who was once an IRS attorney) and Fox devised a scheme wherein they purchased an exotic form of a financial option that was supposed to protect them against the decline in real estate values, which they feared in the immediate aftermath of the terrorist attacks of September 11.
These options, which had a real value of only $1,000, were obtained through fallen accounting firm Arthur Andersen and bailout baby AIG …read more

Even before the results from the black box were in, the miracle working pilot of the US Airways Flight 1549 was offered help to keep his finances in the black. Inspired by his amazing water landing The Tax Club wants to help Veteran fighter pilot Chesley B. “Sully” Sullenberger III do his taxes.
With a view of the Hudson River from their headquarters in the Empire State Building, senior management at The Tax Club watched as Sullenberg and his crew managed to get all the passengers off of the plane safely. Now the company is offering Sullenberger free tax preparation services for life. …read more

Tax policy never seems to get less complex, and the more complicated it gets the more important it is for accounting firms to maintain a great tax department. At the same time we’re facing ever more complicated tax law, the tanking economy is causing firms to pull back on hiring. In a recent survey by Ajilon Professional Staffing, only 13% of accountants surveyed said they are planning to hire staff to handle the additional work required this tax season.
Jesse Ryan, market manager for Ajilon Professional Staffing, offers the following advice for managers to save money on recruitment and staffing costs as the …read more

Can cash ever be a de minimis fringe benefit?
Cash is generally intended as a wage, and usually provides no administrative burden to account for. Cash therefore cannot be a de minimis fringe benefit, with one exception:
Occasional meal or transportation money to enable an employee to work overtime. The benefit must be provided so that employee can work an unusual, extended schedule. The benefit is not excludable for any regular scheduled hours, even if they include overtime. The employee must actually work the overtime.
Meal money calculated on the basis of number of hours worked is not de minimis and is taxable …read more

In general, a de minimis benefit is one for which, considering its value and the frequency with which it is provided, is so small as to make accounting for it unreasonable or impractical.
In determining whether a benefit is de minimis, you should always consider its frequency and its value. An essential element of a de minimis benefit is that it is occasional or unusual in frequency. It also must not be a form of disguised compensation.
Whether an item or service is de minimis depends on all the facts and circumstances. In addition, if a benefit is too large to be …read more

The IRS –applying the concept of de minimis non curat lex (the law is not interested in trivial matters)– allows exemptions for De Minimis Fringe Benefits: a de minimis benefit is one for which, considering its value and the frequency with which it is provided, is so small as to make accounting for it unreasonable or impractical. De minimis benefits are excluded under Internal Revenue Code section 132(a)(4) and include items which are not specifically excluded under other sections of the Code.
These include such items as:

Controlled, occasional employee use of photocopier
…read more

In a 14 July post, TaxGirl reports small purchases for which a Tax Return has to be filed for each purchase.
June
Total purchases: $3.95
Total tax owed for June: $ .28
May
Total purchases: $16.83
Total tax owed for May $1.18
April
Total purchases: $ .99
Total tax owed for April $ .07
March
No purchases
Total tax owed for March 0
February
Total purchases $8.84
Total tax owed for February $.62
January
Total purchases $4.11
Total tax owed for January: $.29
She questions the reasonableness of the wasted time and administrative burden:
. . . I would have to file six different returns to date – and paid the princely sum of a total of $2.44 (with six …read more

Having just gone through the annual drudgery of filing your tax returns, you should examine your conscience and ask yourself the question: Have I optimized my tax return (tax avoidance) or have I put myself at risk (tax evasion)?
Tax avoidance is an ex ante (before the fact) situation. It is legal and is good business practice. You need a good Tax Lawyer and an experienced accountant. Both can do tax planning for you or your business, e.g., income recognition & reporting, applicable tax rates, allowable deductions & postponements, tax shields, preferential areas of business where tax …read more

It is the day after the deadline for filing tax returns. It is also the best time to prepare for the 2009 filing. Your filing woes, “should have done this & that,” misplaced documents, unreceived / unretrieved forms, are still fresh in your mind.
Learn from these and remember them and do not let history repeat itself again and again and again . . .
Organize your files and folders of supporting documents (Jennifer Hofmann of My Organized Biz can tell you how). Remember you have to keep supporting documents for taxes for 10 years (ask Kelly Erb of …read more

Tax avoidance is an ex ante (before the fact) situation. It is legal and is good business practice. You need a good Tax Lawyer (there’s one at Tax Girl) and an experienced accountant. Both can do tax planning for you or your business, e.g., income recognition & reporting, applicable tax rates, allowable deductions & postponements, tax shields, preferential areas of business where tax breaks are given in the early years of the business, etc.

Tax evasion is an ex post (after the fact) situation. It is a crime, lands you in jail, and is not good citizenship. …read more