By Cheryl Feldman, CPA

On June 29, President Obama signed into law two major trade bills: (1) the Trade Preference Extension Act of 2015 (TPE); and (2) and the Trade Priorities and Accountability Act of 2015 (TPA). The bills contain a variety of tax provisions, including:

In general, any amount paid or distributed out of an individual retirement plan is included in the gross income of the payee or distributee. There is an additional 10 percent "early withdrawal" tax on distributions from qualified retirement plans, taken before the individual reaches age 59-1/2, unless the distribution falls within a statutory exception.

One such exception is for distributions from a defined benefit governmental plan made to a "qualified public safety employee" who has separated from service after attaining age 50. An individual is a qualified public safety employee for this purpose only if he or she is an employee of a state or political subdivision (like a county or city) and his or her principal duties include services requiring specialized training in the area of police protection, firefighting services, or emergency medical services for any area within the jurisdiction of the state (or political subdivision).

Another exception to the early withdrawal tax is for distributions which are part of a series of "substantially equal periodic payments" made at least once per year for the life (or life expectancy) of the employee or the joint lives (or joint life expectancies) of the employee and his designated beneficiary. However, if this exception initially applies but the series of payments is later modified (other than because of death or disability), the early withdrawal tax will be imposed if the distribution method is changed either: (i) both before the close of the 5-year period that begins with the date of the first payment and after the employee reaches age 59-1/2; or (ii) before the employee reaches age 59-1/2.

Effective for distributions made after Dec. 31, 2015, the category of eligible governmental workers who can qualify for the exception is broadened to include specified federal law enforcement officers, customs and border protection officers, federal firefighters, and air traffic controllers who have similarly reached age 50, and the types of plans from which distributions eligible for the exception can be made is broadened to include defined contribution plans and other types of governmental plans. Additionally, the fact that a Federal public safety worker takes such newly permissible distributions won't constitute a modification of substantially equal periodic payments.

Individual taxpayers may qualify for tax credits-the American Opportunity Tax Credit and the Lifetime Learning Credit-or an above-the-line deduction, for qualified tuition and related expenses.

Higher education institutions must provide a return to IRS and a statement to the student, that indicate, among other things, the amount paid by or billed to the student for qualified tuition and related expenses for the tax year. Form 1098-T (Tuition Statement) is used for this purpose.

Under pre-Act law, there was no requirement that the taxpayer receive a Form 1098-T in order to take the credit or deduction.

Effective for tax years that begin after June 29, 2015, the TPE Act requires that, as a condition of receiving the credits or the deduction, a taxpayer receive a Form 1098-T that contains all of the information required by that form.

Higher education institutions must provide a return to IRS and a statement to the student, that indicate, among other things, the amount paid by or billed to the student for qualified tuition and expenses for the tax year and that include the student's taxpayer information number (TIN). Form 1098-T (Tuition Statement) is used for this purpose.

The IRS imposes penalties for not properly and completely preparing Form 1098-T.

Effective for returns required to be made, and statements required to be furnished, after Dec. 31, 2015, the TPE Act waives the penalty on educational institutions that fail to file Forms 1098-T with accurate TINs of students attending the educational institution if the institution certifies, under penalty of perjury, that it properly requested TINs from the students as required under Treasury regulations.

The Code imposes a penalty on taxpayers that fail to file correct information returns (e.g., IRS Form 1099) with IRS, as well as a separate, but parallel, penalty on taxpayers that fail to provide the payee with a correct copy of the information return filed with IRS. The penalties are based on the duration of the delinquency and whether the delinquency was intentional and are subject to maxima that depend on the size of the taxpayer.

Effective with respect to returns and statements required to be filed after Dec. 31, 2015, the TPE Act increases these penalties. For example, where an unintentional delinquency is corrected no more than 30 days after the return due date, the Act increases the per-return penalty from $30 to $50 and the maximum penalty for any calendar year, for a "small" taxpayer, from $75,000 to $175,000. 

By Chris Clark

As new, more creative scams surface, police departments everywhere continue warning residents to be cautious when receiving phone calls from the "IRS". The latest scam targets the elderly, new immigrants and those who speak English as a second language. The crooks preying on these vulnerable targets give fake IRS badge numbers and leave urgent callback requests; they are even able to alter caller ID numbers to make it appear that the IRS is making the call. In addition, there's been an uptick in calls to residencies claiming a lawsuit (or pending lawsuit) against them with the IRS. Police believe the scams are just an extension of the usual tax season schemes they encounter every year.

Rochester Police Department, a local agency in Michigan, shared the following tips with residents to avoid being victimized:
 

• The IRS uses postal mail (not email) to contact taxpayers
• They will never call you and demand immediate payment without first mailing a bill
• You would have been given an opportunity to appeal the amount that is supposedly owed
• You will never be required to use a specific payment method to pay your taxes
• Credit or debit card numbers are never requested over the phone
• The IRS will never threaten to involve police or local law enforcement to have you arrested for unpaid dues

New technology means new ways to commit fraud and create new scams. A good rule of thumb to avoid falling victim is simply to not give out personal information to someone you didn't call directly, and be 100% sure of who that person is or where they are calling from. Don't hesitate to contact your local police department and/or the IRS if you received a suspicious call. Though it's often tough catching the culprits because most of these calls are coming from overseas, new information is always helpful.

By Susan Wagner

The Michigan Department of Treasury now provides an "offer in compromise" program that allows individual or business taxpayers with a tax liability to submit an offer to settle with the state for less than the full amount due. A tax liability includes the tax and any related interest and penalty. A summary of the official guidelines, "Guidelines for Offer in Compromise Program, 12/16/2014", is as follows:

To submit an "offer in compromise", one or more of the following grounds must exist:
The taxpayer has received an offer in compromise from the IRS for the same tax periods for which the taxpayer is requesting state relief. Only tax debt for individual income tax or for corporate income tax is eligible for compromise under this ground.

• A doubt as to the collectability of the tax debt exists.
• The taxpayer must show both the amount offered is the most that can be expected to be paid or collected from the taxpayer's present assets and income; and
• The taxpayer does not have reasonable prospects for acquiring increased income or assets that would enable the taxpayer to pay a greater amount of the tax debt than the amount offered, within a reasonable period of time.
• A doubt as to the liability of the tax debt exists.
• Based on a review of the evidence provided by the taxpayer, Treasury must determine that the taxpayer would have prevailed in a contested case if the taxpayer had appealed the assessment.

Key items of the submission process:

• The offer must be submitted using Form 5181.
• A non-refundable payment of $100 or 20 percent (whichever is greater) of the offer must be made. The payment will be applied toward the outstanding tax debt.
• Submission of the offer does not suspend interest or penalties from accruing.
• All of the following statements must be true:
• The taxpayer must have been assessed for the tax liabilities;
• Opportunities to contest the tax debt and appeal an assessment must have expired;
• The taxpayer must have filed returns for all taxes for all outstanding periods;
• The taxpayer cannot have open bankruptcy proceedings; and
• The taxpayer must agree to all the conditions of the offer, as stated in Form 5181.

• A lump sum amount;
• In five or fewer equal or unequal monthly installments; or
• In equal monthly installments made over six months or more.
• Note: The taxpayer is expected to pay the entire amount of the offer in as short as time as possible and generally not more than 24 months past the acceptance date.

Acceptance and rejection of an offer by the Department:

• Acceptance is conveyed by the Department of Treasury sending the taxpayer a letter of acceptance.
• Rejection of the offer primarily results when the taxpayer has not followed the submission process, provided correct documentation or made false statements. If rejected, an independent administrative review of the rejection is available upon request by the taxpayer.
• Any compromise is subject to continuing review by Treasury. The Department may revoke an accepted compromise if any of the following occurs:
• Concealed property or income belonging to the taxpayer, the estate of the taxpayer, or any other person liable for the tax;
• The taxpayer intentionally misled the Department by withholding, destroying, falsifying documents submitted or made false statements, relating to the estate or financial condition of the taxpayer to induce a compromise; or
• The taxpayer fails to comply with any of the conditions that were part of an accepted offer or fails to file required returns or pay tax liabilities after an accepted compromise within 20 days after Treasury issues a notice and demand to the person stating that the failure to comply with the conditions of the accepted offer in compromise or the continued failure to file the required returns or pay the tax may result in the revocation of the compromise.
• Note: If a revocation is determined, Treasury will send a letter revoking the offer and reinstating the uncompromised tax debt.

For additional information on Michigan's offer in compromise program, contact your tax specialist at UHY LLP in Detroit 313 964 1040, Farmington Hills 248 355 1040 or Sterling Heights 586 254 1040, or visit us on the web at www.uhy-us.com.

By Fabian Gammo, CPA

June 19, 2015 marked a very exciting day for small businesses and investors alike. The implementation of Title IV of the JOBS Act, also known as Regulation A+, has leveled the playing field for investors by granting early stage companies the ability to raise capital from anyone as opposed to only accredited investors.

Previously, an accredited investor was an individual who had earned income exceeding $200,000 (or $300,000 with a spouse) in each of the prior two years and "reasonable expects the same for the current year" according to the Securities and Exchange Commission (SEC). This made up only 3.5 percent of US households. Now, an investor can be anyone with the following income limitations:

Crowdfunding intermediary platforms, also known as funding portals, must register [under Section 15A of the Exchange Act] and comply with SEC requirements before offering investment opportunities to the general public. Funding platforms will use the power of the internet, social media, and television to market investment prospects to the general public. A company looking to sell shares should expect roughly $40,000 to $50,000 in regulatory expenses. Strategic consideration of using this method to raise capital should be discussed with your advisor to consider the related cost-benefit. Clients in the emerging technology and application development industries can more easily attract prospective investors and fund their next big idea giving entrepreneurialism a fighting chance at success.

The SEC has set disclosure requirements for these emerging start-ups including, but not limited to:

Though this change presents opportunities for a new population of investors, challenges can also be foreseen. On the flip side, less experienced businesses that were otherwise unable to raise capital through banks, private equity and other conventional methods will be among the companies offered with this wave of investing. Industry research, due diligence and sound advisory are highly suggested for clients embarking on these new investment opportunities.

By Chris Clark

The jock tax is an income tax levied by state and local governments throughout the country for road games played by athletes in those states. Typically, the tax is calculated using the "duty day" method. For example, if a season had 100 duty days (or days in which a player participates in team activities) and a player was in a particular state for one day, then one percent of his or her income would be taxable in that state. There are other less traditional jock tax methods, such as the "game day" method or flat rates by game, which have all been scrutinized since inception as poor tax policy, and in some cases illegal. A recent settlement between the NHL Players Association and the Tennessee Department of Revenue (Tennessee's jock tax levied a flat tax rate of $2,500 per game) is just the most recent of many cases against the controversial "jock tax". With the settlement, more than 850 NHL players will soon receive checks ranging between $1,250 and $11,250. A few months ago, the Ohio Supreme Court ruled that Cleveland's jock taxing system ("game day" method) was illegal. If the law suit trend continues, it could spell the end of the jock tax.

The jock tax has been around since the late 60s, but was only enforced in the early 90s. It is said that the jock tax originated after the state of California began to tax Chicago Bulls star Michael Jordan after the Bulls beat the Lakers in five games in the NBA finals. Since that incident, more than a dozen states and some cities have passed their own "jock tax bills" that require traveling professionals to pay income taxes in every state where they earn income or have an "economic nexus". While it may seem like pocket change to pro athletes making millions of dollars to play a single game, the tax also applies to the trainers, equipment managers and other lower-earning staff positions that travel with the team. Some states have extended jock taxes to visiting musicians and lawyers as well. 

 

Tired of the old approaches to finance and accounting? Come learn from the experts why Modern Finance is changing the industry.

Join us at UHY's training center in Farmington Hills on Thursday, August 20 for The Modern Finance Tour in Detroit. You'll learn directly from the experts at BlackLine and co-hosting partner, UHY Advisors, how Modern Finance is transforming the finance and accounting processes in organizations, including best practices for account and intercompany reconciliations and for accelerating the financial close. You'll also hear first-hand how a successful company has accelerated their processes and improved the way finance and accounting work across their organization. The schedule of events is as follows:

3:00-4:00 Accelerate and modernize your finance transformation

Learn best practices and accounting insight for modernizing processes from BlackLine's finance transformation expert, Bob Davenport.

4:00-4:30 Improving the finance and accounting function

UHY Advisors' Brad Baer demonstrates how they've worked with global clients to improve accounting, finance, governance, risk and compliance.

4:30-5:00 Open discussion

5:00-6:00 Cocktail reception and networking

This complimentary event is geared towards companies who currently face challenges in creating an efficient and effective record-to-report process and how new accounting automation tools can help address these challenges. Finance and accounting professionals should take advantage of this great opportunity to network with their colleagues and learn how Modern Finance can enhance controls for reporting and compliance purposes, as well as assist in a more strategic use of finance and accounting resources.

8/25 UHY LLP SALT BREAKFAST FORUM: THE FUTURE OF SALES TAX - ARE YOU READY?
Michigan enacts new legislation effective October 1 - are you ready for it? No matter the size or nature of your business, every organization must deal with the complexity of sales tax. Join us in Farmington Hills on Tuesday, August 25 for a discussion on current sales tax issues and how use tax can unknowingly impact your business. The schedule of events is as follows:

7:30AM-7:50AM Registration, breakfast and networking
7:50AM-8:00AM Opening commentary
8:00AM-8:45AM Sales and use tax discussion including Michigan 2014 Public Acts 553 & 554
8:45AM-9:15AM Making sales tax less taxing
9:15AM-9:30AM Interactive discussion

CPE credit will be offered. Pre-registration for this complimentary program is required. Breakfast will be provided. Space is limited. Multiple registrations are welcome. To RSVP contact Jessica Dalessandro.

9/15 UHY LLP ANNUAL NOT-FOR-PROFIT UPDATE
Please join us at UHY's training center in Farmington Hills on Tuesday, September 15 from 7:30AM-9:30AM for the Annual Not-For-Profit Update. Discussions include industry developments and risk alerts, proposed changes to NFP financial reporting, upcoming changes to the Single Audit, other best practices and developments, and an interactive discussion.

CPE credit will be offered. Pre-registration for this complimentary program is required. Breakfast will be provided. Space is limited. Multiple registrations are welcome. To RSVP contact Drew Matthews.

10/22 UHY LLP ANNUAL MANUFACTURING OUTLOOK
Save the date for Manufacturing Outlook "Built To Compete: Embracing Risk For a Sustainable Future". Join us at The Detroit Athletic Club to learn more about developing industry trends including government policy and legislation, economic forecast, corporate governance, technology, business sustainability, and staying competitive.

Thursday October 22
7:30AM-11:30AM

CPE credit available. Shinola watch to be auctioned off to benefit The Empowerment Plan. Pre-registration for this complimentary program is required. Breakfast will be provided. Space is limited. Multiple registrations are welcome. To RSVP contact Jessica Dalessandro. Formal invitation to follow.
 

SAVE THE DATE! MORE UHY EVENTS ARE JUST AROUND THE CORNER...
11/12 UHY LLP Construction Outlook 2016
12/2 UHY LLP Annual Accounting and Regulatory Update 

• Audit Manager, 7+ years of experience, manufacturing experience is highly preferred
• Audit Manager, 7+ years of experience, SEC experience is highly preferred
• Audit Accountant, 2-10 years of experience working with municipalities
• Audit Senior Staff Accountant, 2-4 years of experience
• Internal Audit Risk & Compliance Manager, 7+ years of experience
• R&D Tax Specialist, 7+ years of experience
• Tax Manager, 7-10 years of experience
• Tax Senior Consultant, 4-5 years of experience, Big 4 experience is required
• Tax Senior Accountant, 5-7 years of experience, CPA required
• Director of Litigation, testifying experience required municipalities
• Senior Associate (Corporate Finance), 2-4 years of Big 4 experience highly preferred