If you have offshore assets that are not yet properly disclosed, you should consider contacting an attorney immediately for assistance, before a civil or criminal investigation begins. On April 3, 2016, the International Consortium of Investigative Journalists (ICIJ), with the help of German newspaper Süddeutsche Zeitung, revealed approximately 11.5 million documents on 214,000 shell companies that operated between the 1970s and 2016, causing extreme embarrassment and panic for many of the world's leading figures. Although shell companies are not illegal to own, using them to avoid paying your taxes is.
The US Supreme Court issued its decision in Franchise Tax Bd. of California v. Hyatt on April 19, 2016, affirming the jurisdiction of the Nevada courts but limiting the damages it could award against the California tax agency. This decision lays to rest a case in which taxpayer Gilbert Hyatt sued the FTB in Nevada for abusive audit and investigation practices. The original award was for nearly $500 million. However, because Nevada limits damages that can be awarded against its own state agencies, the taxpayer may only be granted up to Nevada's $50,000 limit.
Not surprisingly, a recent declaratory action has challenged South Dakota's bold move to require many out-of-state sellers to register with the state and begin collecting sales tax (previously discussed here). American Catalog Mailers Associations and NetChoice v. Gerlach questions the constitutionality of the economic nexus legislation based upon the physical presence rule from Quill Corp. v. North Dakota.
On April 28, 2016, the House Ways and Means Committee voted to pass a trio of bills affecting taxpayer information. One bill requires the IRS to notify victims of identity theft and also imposes new penalties on identity thieves; another bill limits the information certain tax-exempt organizations must reveal regarding their contributors; the third bill allows the IRS to provide taxpayer information to the police to help find missing children. The three bills, respectively, are H.R. 3832; H.R. 5053; and H.R. 3209.
The death of music icon Prince on April 21, 2016, presents an example for estates of all sizes of the privacy an estate plan can provide. Last week, Prince's sister, Tyka Nelson, filed a petition with the Carver County, Minnesota probate court stating Prince did not have estate planning documents to direct the management and disposition of his estate. As a result, the administration of his estate will be a matter of public record, easily accessed by the media. Reporters will be able to find a list of all of Prince's assets, the values of such, the names of beneficiaries inheriting, as well as exactly how much and which assets they will receive. This is an unfortunate posthumous development, considering just how private the artist appeared to be in life.
The Internal Revenue Service (IRS) recently released a new study, Tax Gap Estimates for Tax Years 2008-2010. According to this period report, "there has been no significant change in the amount of the tax gap or the rate of compliance since the last report was issued." Including enforcement activities and late payments, the average annual net tax gap for the 2008-2010 period was $406 billion, with an estimated rate of compliace of 83.7 percent. For more information and links to older estimate reports, click here: https://www.irs.gov/uac/The-Tax-Gap
The California Franchise Tax Board (FTB) has delayed the tax refund process for at least 16,000 state taxpayers in order to complete extra identity verification steps to prevent refund fraud and identity theft. The FTB is sending letters to some taxpayers whose returns were prepared professionally to request confidential information using various form letters to validate their claims for refund.
Recently, Forbes magazine named South Dakota as one of the top 10 states for business, particularly since it ranked number one in the cost of doing business. A new state law will likely keep South Dakota in first place for in-state business statistics, to the detriment of out-of-state sellers. Last month, South Dakota Governor Dennis Daugaard signed into law a bill that requires many out-of-state sellers to register with the state and begin collecting sales tax. All sellers conducting more than 200 transactions with South Dakota purchasers, or making more than $100,000 in gross sales to South Dakota, must register with the state.
On April 19, 2016, Internal Revenue Service Commissioner Koskinen testified before the House Ways and Means Committee Subcommittee on Oversight regarding the 2016 filing season and data security. His testimony provided a summary of data current through the beginning of April.
Employers who wish to utilize independent contractors in their business model may often do so, however, adequate review of the employers' documents and practices is crucial to a successful business plan based on an independent contractor workforce. This week, Uber learned this lesson the hard way.