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It's the fourth quarter of the year so it's time to talk about next year. We went to Sidney Kess, CPA, tax mastermind, to get his thoughts on how you can prepare with tax research.
"The thing you should realize, research has changed," said Sidney Kess, CPA, senior consultant of Citrin Cooperman and of counsel for Kostelanetz & Fink. "With new technology, you're not using print products anymore. And a lot of the material, you don't even have to pay for. The Joint Committee, for example, publishes a general explanation of the tax law. No sooner is bill passed, the people who wrote the law come out with a general explanation of the Joint Committee on the new tax legislation. You get all of this material for nothing.
"The part that I think is very important is no one is going to do the reading for you. The person who takes the time to master these new changes is the one who is the leader in the field."
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Undefeated boxer Floyd Mayweather may be more famous for defeating MMA fighter Conor McGregor but he is so busy endorsing initial coin offerings, or ICOs, on his Instagram and Twitter accounts he has dubbed himself Floyd “Crypto” Mayweather.
Mayweather has now promoted three ICOs: Hubii Network, Stox and now Centra, a cryptocurrency debit card.
While an initial public offering, or IPO, offers shares of ownership in a company to the public, an ICO is a cryptocurrency which represents a percentage of ownership in the currency based on its business described in the ICO’s documentation.
In an IPO and ICO, investors expect the value of their ownership to increase in value. While few regulations existed worldwide for ICOs before July, it is changing. The SEC decided ICOs are securities and subject to SEC registration in most cases while China is forbidding them as illegal.
Buying “coins” in an ICO is buying a token issued on a distributed computer ledger referred to as a blockchain which can be traded on a digital currency exchange.
A Blockchain is a continuously growing digital file of encrypted transactions distributed or copied to a peer-to-peer (P2P) network of computers. Their stability is based on the data being replicated on thousands or millions of different computers worldwide.
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Did you know you can get up to $7,500 in Federal tax credits for buying a new electric car? That explains why we have seen all those Teslas on the road lately. Not only that, electric cars don’t pay any of the 18.4 cents per gallon Highway Trust Fund. Not to mention the 31 cents, on average, each state adds per gallon of gas.
However, it may be coming to an end. Each car manufacturer can only offer a tax credit on 200,000 cars and Tesla is reaching its limit.
At least five states have special fees on electric vehicles: Colorado, Nebraska, North Carolina, Virginia and Washington. However, they’re minimal.
Just remember, the tax credit is only available to the buyer if the electric vehicle is purchased. If you lease an electric vehicle, the leasor receives the tax credit, typically causing them to reduce the leasee’s monthly payments.
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A rental income tax break known as the “Masters exemption,” permits homeowners to rent their homes for less than 14 days and not report that income to the IRS. The exemption was named after residents near the Masters Golf Tournament at the Augusta National Golf Club renting their homes out during the event earning as much as $20,000.
You need to know, however, these rentals are not exempt from city or state lodging tax. Some states and cities impose occupancy taxes on short-term rentals and the host is required to collect the tax directly from renters and submit the money to the tax authority. The host is responsible for remitting the tax whether it is collected or not.
Some companies, like Airbnb, collect and submit the taxes in San Francisco, Chicago and 34 states. In other locations the owner is responsible for the occupancy tax which may be up to 15% and it may need to be filed monthly. Ideally, the occupancy tax should be shown as a line item on the bill submitted to the guest as the host is responsible for remitting the tax whether it is collected or not.
In some areas, private home rentals are exempt from occupancy tax — but owners should check with their state. Short-term in most states is less than 30 days. In Hawaii and Florida, short-term is up to six months. Penalties typically range from 10 to 25% of the tax due, plus interest and late fees.
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This week the IRS issued tips to prevent ransomware attacks warning they are on the rise stating a handful of tax practitioners who have been victimized. Ransomware is used to lock users out of their files until they pay a ransom. The most common method is using emails to lure you or your employees to open a link or an attachment.
In May the infamous ransomware, WannaCry, targeted computers running older unsupported systems such as Windows XP demanding $300 in Bitcoin.
If you are attacked:
1) Don’t pay the ransom. “Remember, you’re dealing with criminals,” according to Christopher Budd, a global threat communications manager with the digital security firm Trend Micro.
2) Disconnect from the network.
3) Save all important files you’ve been working on.
4) Reboot your computer in safe mode. You run a system restore from safe mode by choosing Advanced Boot Options and selecting Repair Your Computer. Choose the option for System Restore to restore your system back to a previous period, prior to the ransomware attack.
5) Once you’ve rebooted, run download a copy of the Microsoft Safety Scanner using a clean, non-infected PC. Copy the downloaded file to a blank USB drive or CD, and then insert it into the infected PC.
6) Reinstall your files from a backup.
If none of that works, you may need to consider your files gone forever. Reformat your hard drive, reinstall your operating system and set up an automatic backup. Going forward, make sure your operating system and anti-virus software is automatically updated and verify the integrity of regularly data backups.
Tax professionals should immediately report attacks to their IRS stakeholder liaison and to the FBI at the Internet Crime Complaint Center, www.IC3.gov.