September 7, 2012

Can A Church Amend A Pastor's Housing Allowance

by Kenneth Hoffman in Church Counsel, Church Issues

While neither the IRS nor the courts have addressed this question, it seems perfectly reasonable to conclude that the church can amend its housing allowance designation during the course of the year if changed circumstances render the allowance inadequate. However any changes to an allowance cannot be applied retroactively.

For example, the church runs on a fiscal calendar year that runs January to December. A proposed adjustment is made in October. The adjustment would apply for the months of October, November, and December; everything prior to October (January to September) would operate under the original housing allowance amount set heading into the fiscal year.

K.R. Hoffman & Co., LLC, counsels Entrepreneurs, Professionals and Select Individuals in taking control of their taxes, and businesses. Discover how we can help you overcome your tax and business challenges. For more information or to become a client, call Kenneth Hoffman at (954) 591-8290 Monday - Friday from 8:30 a.m. to 1:00 p.m. for a no cost consultation, or drop me a note.

September 7, 2012

Can You Prove Basis When Selling Property

by Kenneth Hoffman in Tax Planning, Tax Preparation

In Jovita Diaz (T.C. Memo. 2012-241) the taxpayer sold two pieces of real property. The purchase prices were not in dispute. But in the first property she argued she made $60,000 in improvements after purchase. The costs included $40,000 for renovating the garage to be used as a daycare center and $20,000 for improving the driveway and walkway.

She testified that she hired a contractor to perform the improvements, but she did not introduce any records which supported the costs. She did not introduce an invoice from the contractor, a canceled check, a construction permit for the improvements, or before and after pictures.

Also, she did not introduce any records that showed the property was used as a daycare center. The taxpayer contended that she did not have documentation because she kept moving from one place to another. The Court found her testimony was unpersuasive in support of her claim of $60,000 of improvements. The taxpayer claimed $10,000 in improvements (installation of a lawn) with respect to the second property, but again, could show no support. The Court disallowed any increase in basis for the improvements. In addition, the Court allowed the imposition of the accuracy-related penalty for failure to keep records.

K.R. Hoffman & Co., LLC, counsels Entrepreneurs, Professionals and Select Individuals in taking control of their taxes, and businesses. Discover how we can help you overcome your tax and business challenges. For more information or to become a client, call Kenneth Hoffman at (954) 591-8290 Monday - Friday from 8:30 a.m. to 1:00 p.m. for a no cost consultation, or drop me a note.

September 5, 2012

Players Behaving Badly

by Kenneth Hoffman in Business Counsel, Tax Planning

Football season is back! College teams have started already, and the pros kick off this weekend. So welcome back to the energy and excitement of game day. Enjoy the pageantry and the tailgating as the days get shorter and the air gets crisp. And don't forget the tax liens!

What?!? Don't forget the tax liens . . . ? That's right, sometimes the surest hands in the game drop the ball on their taxes.

We'll start our tour of NFL tax offenders with Plaxico Burress. The free-agent wide receiver, who once signed a $25 million contract with the New York Giants, owes New York state a cool $59,241 in tax. Of course, Burress is no stranger to the law -- he spent nearly two years scrimmaging behind bars after accidentally shooting himself in the leg at Manhattan's glitzy Latin Quarter nightclub.

Running back Jamal Anderson played eight seasons for the Atlanta Falcons, where he earned the nickname "Dirty Bird" for his touchdown celebration dance. But the IRS will be dancing in the end zone when they collect $478,247.57 in unpaid taxes for 2007 (when he appeared on MTV's "Celebrity Rap Superstar") and $627,015.94 for 2008 (when he appeared as an analyst for ESPN). Like Burress, Anderson has also had brushes with the law -- in 2012, he was arrested for drunk driving, and in 2009, he was arrested after Atlanta police reported him snorting cocaine off a toilet bowl in the Peachtree Tavern's restroom.

Quarterback Ken Stabler led the Oakland Raiders to a 32-14 win over the Minneapolis Vikings in Super Bowl XI. (That was so long ago, people paid more attention to the game than the commercials!) Now it looks like he'll be playing for the IRS. Earlier this summer, a federal judge sacked Stabler for $259,851 in unpaid business and personal taxes. (Oh, and the IRS piled on for another $5,509 in penalties.) Stabler's attorney says the former passer has sold his house to help pay the debt, and will also make monthly payments out of income he earns appearing at NFL events.

At least Burress, Anderson, and Stabler actually filed their returns, even though they didn't pay. Cornerback William James played for the New York Giants, Philadelphia Eagles, Buffalo Bills, Jacksonville Jaguars, Detroit Lions, and San Francisco 49ers. Apparently he lost his W2 in one of those moves. Federal prosecutors say he earned over $9 million during his career -- but failed to file returns for 2005-2009. Now he faces up to a year in prison and $100,000 in fines when he's sentenced later this month. Oops!

And what about everyone's favorite former All-Pro felon, O.J. Simpson? Would you be shocked to learn that "the Juice" is fumbling his taxes, too? That's right, the IRS announced just last week that they had tackled him with liens for $15,927.89 for 2007, $105,119.71 for 2008, $49,490.27 for 2009, and $8,897.20 for 2010. Of course, taxes are probably the least of O.J.'s worries right now, considering he's got 29 years left to serve on armed robbery and kidnapping charges. And he still owes murder victim Ron Goldman's family $33 million in civil damages!

There's not really a specific tax-planning lesson here -- we just hope you're paying more attention to the game than these guys are! Either way, you can trust us to keep an eye downfield for you, and help you stay out of those IRS tackles!

K.R. Hoffman & Co., LLC, counsels Entrepreneurs, Professionals and Select Individuals in taking control of their taxes, and businesses. Discover how we can help you overcome your tax and business challenges. For more information or to become a client, call Kenneth Hoffman at (954) 591-8290 Monday - Friday from 8:30 a.m. to 1:00 p.m. for a no cost consultation, or drop me a note.

I truly value your business and I appreciate your referrals. Refer your family, friends, acquaintances, and business colleagues to KR Hoffman & Co., LLC. If your referral retains our services, we will send you a $25 gift card and your referral will receive a $25 discount on their first invoice.

Follow us on Twitter at @TaxReturnCoach, and let us know how we're doing.

September 4, 2012

3rd Quarter Estimated Taxes Are Due

by Kenneth Hoffman in Business Counsel, Tax Counsel, Tax Due Dates

If you haven't done so already, calculate your third estimated tax payment for 2012. September 17th will sneak up on you faster than you expect, so it's best to have this taken care of early.

For most people, tax day comes just once a year - on April 15. But, for most entrepreneurs, Uncle Sam expects a check four times a year.

Who pays?
The rules are complex, but we will make this easy. You need to pay estimated taxes if:

If you are an sole proprietor, partner or S corporation shareholder AND you expect to owe at least $1,000 in federal income taxes when you file your personal income tax return in April; or
If your business is a C corporation AND you expect to owe at least $500 in federal income taxes when you file your annual corporate income tax return.

When payments are due.

For the 2012 tax year, estimated tax payments are due on April 17th, June 15th, September 17th and January 15th, 2013.

How much to pay.
The official answer is you must calculate your expected AGI, taxable income, taxes, deductions, and credits for the year, then use Form 1040-ES to figure your estimated tax.

Simplified: Take the total amount of federal income tax you paid last year and divide it by 4 to calculate your quarterly tax payment amount.

How to pay.

Mail : send a check or money order with a payment voucher from Form 1040-ES. If your business is a corporation, you must use the EFTPS system.

Phone: pay with a credit or debit card by calling 1-888-729-1040 or 1-800-272-9829

Online: pay with a credit or debit card at www.pay1040.com, www.officialpayments.com or www.payusatax.com

Underpayment of Estimated Tax

If you did not pay enough tax throughout the year, either through withholding or by making estimated tax payments, you may have to pay a penalty for underpayment of estimated tax. Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller. There are special rules for farmers and fishermen. Please refer to Publication 505, Tax Withholding and Estimated Tax, for additional information.

August 29, 2012

Trillion Dollar Taxpayer

by Kenneth Hoffman in Business Counsel, Tax Counsel, Tax Planning

When America's biggest corporations make news for their taxes, it's usually for how little they pay. One recent study, for example, argues that 26 big corporations, including AT&T, Boeing, and Citigroup, paid their CEOs more than they paid Uncle Sam in federal income tax. (Comparisons like that might bring to mind an old Babe Ruth quote. In 1930, a reporter pointed out that Ruth's $80,000 salary was more than the President's -- to which the Babe replied "I know, but I had a better year . . .") Now, another corporate giant is making headlines for its taxes. And for once, the surprising news involves how much it paid, not how little.

Exxon and Mobil are iconic corporate names. Both began life as parts of John D. Rockefeller's original Standard Oil Company. Both were spun off in 1911 when the U.S. Supreme Court found Standard Oil guilty of illegally monopolizing the oil refining industry. ("Standard Oil Company of New Jersey" eventually grew into Exxon, while "Standard Oil Company of New York" morphed into Mobil.) When the two giants re-joined to create ExxonMobil in 1999, they instantly became the biggest publicly-traded corporation on earth. And since then, they've only gotten bigger, with a "market capitalization" (total value of outstanding publicly-traded shares) topped only by tech giants Apple and Microsoft, and the largest company on earth by revenue.

You would expect a corporation this size to pay a lot in taxes, right? And for once, you would be right. In fact, a recent study by economist Mark Perry reveals that ExxonMobil has paid over one trillion dollars in taxes since that merger. That's a full three times the profit the company earned for its actual shareholders.

Take 2008, for example. ExxonMobil's profit reached a staggering $46.87 billion, the highest annual profit since the Romans invented the corporation. But they also paid $36.53 billion in income taxes, $34.51 billion in excise taxes, and $41.72 billion in other taxes, including sales taxes. Do the math and you'll see that totals $112.76 billion -- $9.4 billion per month, $2.17 billion per week, $309 million per day, and $214,535 per minute.

Skeptics might reply that ExxonMobil doesn't actually "pay" all those taxes out of its own pocket. They argue that the corporation just passes the cost of excise taxes on to customers and merely collects sales taxes imposed by state and local governments on buyers. But there's no arguing that the economic activity generated by this particular actor ultimately led to that trillion dollars in worldwide tax revenue.

We're not here to champion "Big Oil" in general, or ExxonMobil in particular. We realize ExxonMobil has been criticized for inadequately responding to various oil spills, funding research disputing "global warming" claims, and even violating workers' human rights in Indonesia. We're here to champion the value of surprising information -- especially when we can use that information to your benefit.

You'd probably be surprised, for example, to learn that some business owners deduct their family's medical bills as a business expense. But that's exactly what a medical expense reimbursement plan allows. You'd probably be surprised to learn that you can deduct the cost of crashing your car if it happens while you're driving for work. But that's what the law allows.

We constantly go to the well for smart tax strategies, so you don't have to. Call us if you want to put this sort of information to work for you! And remember, we're here for your friends, family, and colleagues, too.

August 22, 2012

Linsanity!

by Kenneth Hoffman in Tax Counsel, Tax Planning

The clock is ticking down on "summer." July 4th barbecues are a distant memory, and Labor Day is looming near. Forget about baseball's pennant races starting to heat up. Forget about the upcoming NFL season. It's time to talk basketball!

Taiwanese-American point guard Jeremy Lin played college ball at Harvard, where he notched an Ivy League-record 1,483 points, 487 rebounds, 406 assists, and 225 steals. That might have been enough to get drafted if "Ivy League" earned any respect with NBA scouts. Instead, he walked on to the Dallas Mavericks and warmed various benches for the Golden State Warriors, Houston Rockets, and (Chinese Basketball Association) Dongguan Leopards before catching fire with the New York Knicks. He averaged 18.5 points and 7.6 assists over 26 games before leaving because of a torn meniscus. But those 26 games were enough to ignite "Linsanity," with New York bars and restaurants introducing "Lintinis," asian-spiced chicken "Lings," and asian-inspired "lin-burgers" for beleaguered Knicks fans who finally had a reason to cheer.

At the end of the season, Lin became a restricted free agent. This meant he could sign an offer with another team -- but the Knicks could match it and keep him. Last month, the Houston Rockets re-signed him to a three-year, $25.1 million deal, which New York declined to match, and now, Linsanity moves south to Houston. So naturally, we want to know what it means for Lin's tax bill!

Let's start with Lin's rooting section at the IRS. Regardless of where he plays, he'll pay federal income tax at the top marginal rate of 35%. He'll also pay Medicare tax of 2.9%. If the Bush tax cuts expire at the end of the year, as they're already scheduled to do, that top rate will rise to 39.6%. And the Medicare tax jumps to 3.8% on January 1 as tax hikes included in the Affordable Care Act take effect.

Now let's look at his old tax bill for the Knicks. In "New York, New York", Frank Sinatra sings "If I can make it there, I'll make it anywhere." What ol' Blue Eyes probably meant is that if he could afford the taxes there, he can afford them anywhere. So, Lin starts out owing Uncle Sam anywhere from 37.9 to 43.4%. New York State shakes him down for 8.82%. Then New York City runs up the score for another 3.876% more. If Lin counted baskets like he paid taxes, he would have scored 481 points for the Knicks -- but kept just 239 after taxes!

Now let's look at his new tax bill for the Rockets. Lin will be glad that basketball is an indoor sport when he gets a taste of Houston humidity. But he'll find the tax climate a lot cooler. He'll pay the same amount to Uncle Sam, of course. But neither Texas nor Houston impose any tax on his income at all. None! So this difference could mean as much as a million dollars more per year in Lin's oversized pockets. Smart planning for a guy who graduated with an economics degree and a 3.1 GPA!

Of course, as is usually the case with taxes, things aren't quite so simple. Professional athletes pay state and local taxes wherever they play. That means that when Lin travels back to Gotham to play the Knicks, he'll renew his friendship with New York tax collectors -- but when he plays the Orlando Magic or Miami Heat, he'll enjoy the same zero percent tax rate in Florida that he gets in Texas. And of course he can deduct state and local taxes he pays from his federal taxable income.

Are you expecting an outstanding season in 2012? Maybe wondering where it makes the most sense to play ball? We're here to prevent the IRS from "calling a technical" on your finances. And remember, we're here for your teammates, too!

August 18, 2012

Documentation Is Key To Surviving A Sales Tax Audit

by Kenneth Hoffman in Business Counsel, Tax Counsel

Inadequate business records are not only a problem for an income tax audit by the IRS or state, the issue is critical for sales tax purposes. While the rules differ among the states, in most cases sales tax auditors can reconstruct the sales for a multi-year period based on a one or two day test period if your records are inadequate. That could prove disastrous if the test period is a particularly good day, or if your current sales are much higher than in the recent past. You could end up paying more in taxes than if you had kept good records.

You should also be aware than in most states payment of sales tax, like withholding taxes on employees, can become a personal liability of the responsible party, for example, an owner, corporate officer or stockholder. That responsibility may not be discharged in bankruptcy, either.

States are in need of revenue and are hard pressed to raise tax rates. Instead, they are becoming more aggressive at enforcing current tax laws. Sales tax is a very lucrative area; $200,000 in gross revenue may result in little or no income tax to the state. However, it could easily amount to $10,000 in sales tax.

The key to surviving a sales tax audit (actually, almost any audit) is good documentation. If your documentation is poor, the agent will reconstruct from a day's or a few days' sales or from some other criteria. And agents know that if a taxpayer's documentation is poor, their adjustment will be much larger. Moreover, courts have often held that a taxpayer with inadequate records can't challenge the state's approach since the problem was of the taxpayer's own making.

You must keep records of every sale, the amount of the sale, and the sales tax on the sale. If you give a receipt to the purchaser, you must keep a copy of the receipt or other evidence. Otherwise, you must keep a daily record of all cash and credit sales in a daybook or similar journal. Ask your accountant for help if you aren’t sure how to do this.

One state requires vendors to keep copies of:

sales slip, invoice, receipt, contract, statement, or other memorandum of sale;
guest check, hotel guest check, receipt from admissions such as ticket stubs, receipt from dues; and
cash register tape and any other original sales document.

If you sell both taxable and nontaxable goods or services, you must identify which of the items you sell are subject to sales tax and which are not on the invoice or receipt. For example, a cash register tape must list each item sold with enough detail to determine whether that item is subject to sales tax. You must always separately state the amount of sales tax due on the invoice or receipt that you give your customer. All of your records must be dated and kept in good order. You must be able, through your records, to connect an exempt sale to a particular purchaser to the exemption certificate you have on file for that sale or purchaser. If you issue an exemption certificate when you make a purchase, you must maintain a record of the purchase and be able to prove the exempt use.

The burden of proving that a sale, etc. is not taxable falls upon the vendor. Thus, an exemption document from the customer is necessary to relieve the vendor of his liability for not collecting the sales tax. Or, in the case of nontaxable items, you should be able to show the reason an item or service was not taxable. Some states now have an on-line database that you can check to insure a purchaser is registered. You must still have an exemption certificate, but if the ID and name on the exemption certificate doesn't match the on-line database, you should reject the certificate. Failure to check the database could be costly.

Make sure you and your employees know which items or services are subject to tax and which are not. If your accounting or POS software can handle this task, so much the better.

Maintain a record of:

total sales;
taxable sales;
purchases by the business subject to tax on which no tax was paid to the seller;
credits (if any);
sales and use taxes due for each locality; and
any other special taxes due.

If you deliver goods outside of the state they will probably be exempt from tax in your home state. You must maintain records which substantiate points of delivery. The records should include receipts from delivery services, common carriers, truckers, the United States Postal Service, foreign freight forwarders and logs from company vehicles. The documents must be referenced to specific sales transactions.

In support of deductions, or claims for tax credit or refund for bad debts, returned merchandise, and cancelled sales, vendors must maintain records showing:

date of original sale,
name and address of purchaser,
amount purchaser contracted to pay,
amount on which vendor paid tax, and
all payments or other credits applied to the account of the purchaser and the date of such payments or credits.

You should be able to reconcile your general and subsidiary books of account such as the general ledger, a sales ledger, etc. to your sales documents.

August 17, 2012

Tax Tips For NewlyWeds

by Kenneth Hoffman in Tax Counsel, Tax Planning

If you’ve recently updated your status from single to married, you’re not alone – late spring and summertime is a popular period for weddings. Marriage also brings about some changes with your taxes. Here are several tips for newlyweds from the IRS.

Notify the Social Security Administration It’s important that your name and Social Security number match on your next tax return, so if you’ve taken on a new name, report the change to the Social Security Administration. File Form SS-5, Application for a Social Security Card. The form is available on SSA’s website at www.ssa.gov, by calling 800-772-1213, or visiting a local SSA office.
Notify the IRS if you move IRS Form 8822, Change of Address, is the official way to update the IRS of your address change. Download Form 8822 from IRS.gov or order it by calling 800-TAX-FORM (800-829-3676).
Notify the U.S. Postal Service To ensure your mail – including mail from the IRS – is forwarded to your new address, you’ll need to notify the U.S. Postal Service. Submit a forwarding request online at www.usps.com or visit your local post office.
Notify your employer Report your name and/or address change to your employer(s) to make sure you receive your Form W-2, Wage and Tax Statement, after the end of the year.
Check your withholding If you both work, keep in mind that you and your spouse’s combined income may move you into a higher tax bracket. You can use Publication 505, Tax Withholding and Estimated Tax, to help determine the correct amount of withholding for your marital status, and it will also help you complete a new Form W-4, Employee's Withholding Allowance Certificate. Fill out and print Form W-4 online and give it to your employer(s) so the correct amount will be withheld from your pay.
Select the right tax form Choose your individual income tax form wisely because it can help save you money. Newlywed taxpayers may find that they now have enough deductions to itemize on their tax returns rather than taking the standard deduction. Itemized deductions must be claimed on a Form 1040, not a 1040A or 1040EZ.
Choose the best filing status A person’s marital status on Dec. 31 determines whether the person is considered married for that year for tax purposes. Tax law generally allows married couples to choose to file their federal income tax return either jointly or separately in any given year. Figuring the tax both ways can determine which filing status will result in the lowest tax, but filing jointly is usually more beneficial.

Bottom line: planning for your wedding may be over, but don’t forget about planning for the tax-related changes that marriage brings. Contact us for more information about changing your name, address and income tax withholding.

K.R. Hoffman & Co., LLC, counsels Entrepreneurs, Professionals and Select Individuals in taking control of their taxes, and businesses. Discover how we can help you overcome your tax and business challenges. For more information or to become a client, call Kenneth Hoffman at (954) 591-8290 Monday - Friday from 8:30 a.m. to 1:00 p.m. for a no cost consultation, or drop me a note.

I truly value your business and I appreciate your referrals. Refer your family, friends, acquaintances, and business colleagues to KR Hoffman & Co., LLC. If your referral retains our services, we will send you a $25 gift card and your referral will receive a $25 discount on their first invoice.

Follow us on Twitter at @TaxReturnCoach, and let us know how we're doing.

August 15, 2012

Living the Tax-Free Life

by Kenneth Hoffman in Tax Counsel, Tax Planning

As the 2012 election draws near, and taxes take center stage in that election, politicians and pundits are weighing in on Republican nominee Mitt Romney's personal taxes. Will he release any of his returns for years before 2010? Did he really not pay any tax at all in some of those years? Is there something in those returns that he fears might jeopardize his campaign?

But Mitt Romney isn't the only candidate enjoying tax-advantaged income. President Barack Obama, like Presidents before him, enjoys tax-free benefits that would make most corporate CEOs drool with envy. And it's not a scandal -- it's all out in the open for any voter to see.

Let's start with the basics. The President earns a $400,000 annual salary -- barely enough, by itself, to put him in the much-vaunted "1%." He also gets a $50,000 annual entertainment allowance, which helps support those State Dinners.

But salary and allowance are just the tip of the President's compensation iceberg. For starters, there's a 55,000 square-foot house on 18 prime acres of Washington real estate that Zillow.com estimates would rent for $1,752,296 per month. (The tax alone on the value of that rent is $7.36 million per year.) There's also a rustic cottage just outside DC, staffed by the U.S. Navy and Marine Corps, that he uses as a vacation retreat.

Next, there's security. Plenty of CEOs and celebrities hire bodyguards to ward off real or imagined threats. And that security may be tax-deductible. (Hard for the IRS to collect tax on your income if you're not alive to earn it.) But the President's Secret Service protection is tax-free, and his guards are the best of the best. While the exact value of the President's protection is a closely-guarded secret, the House of Representatives voted $113 million in funding for the 2012 campaign.

Those of you travel often will probably agree that the President's most valuable perk is the ability to fly without the usual TSA "perp walk." CEOs typically fly Gulfstreams, Bombardiers, and similar aircraft, with barely enough headroom to stand up straight. The President, on the other hand, enjoys not one, but two fully-loaded 747-200Bs, both equipped with executive stateroom, office, conference room, and state-of-the-art navigation and communications systems that let him conduct business in the air, even if the country is under attack. (The term "Air Force One" doesn't refer to a specific plane -- it's the official air traffic control signal for any aircraft carrying the President.)

Corporate jets typically carry a dozen passengers and cost $3,000 to $6,000 per hour to operate, while Air Force One carries 102 passengers and crew and costs a whopping $181,000 per hour.

Then there are the "little" perks that ease the stress of leading the free world. The fawning staff. The private chefs. The first-run movies, delivered straight to your own "media room." Fully tax-free, of course . . . who can even figure out how to tax them?

The perks won't stop when the President leaves office. As with all former Presidents, he'll enjoy a pension equal to a Cabinet-level salary (currently $199,700). He'll enjoy continued Secret Service protection, for himself and his family, for 10 years from the date he leaves office. He'll get reimbursed for staff, travel, and office expenses. And he'll be able to earn a small fortune writing memoirs and giving speeches -- although that fortune will be fully taxable.

Most of us would agree that any President earns every dime we pay him, whether that income takes the form of salary or benefits. But you don't have to be President of the United States to profit from tax-free perks and benefits. Helping you make the most of those opportunities for your business is a big part of our business. Call us for a plan that makes the most of your opportunities!

I truly value your business and I appreciate your referrals. Refer your family, friends, acquaintances, and business colleagues to KR Hoffman & Co., LLC. If your referral retains our services, we will send you a $25 gift card and your referral will receive a $25 discount on their first invoice.

Follow us on Twitter at @TaxReturnCoach, and let us know how we're doing.

August 12, 2012

Generating Income In More Than One State

by Kenneth Hoffman in Business Counsel, Tax Counsel

The rules for multiple state taxation are very complicated, including when your business is subject to income tax or required to collect sales tax. In California, a business can elect to base its California franchise (income) tax on only a sales factor, or on a three-factor (property, payroll and sales) formula. For service-based businesses with the single (sales) factor formula, income is sourced to the state where the customer benefits from the services. If the three-factor formula is elected, income is sourced where the cost is incurred. Obviously, there can be radically different results under the two elections.

You might have heard that internet businesses can be required to collect California sales tax if they have “affiliates” to whom they pay commissions for referral links to their web sites. The chief target of this rule is Amazon.com.

If you are selling goods or services in several states, you really should be discussing these issues with your tax advisor. To discuss your sales tax concerns, call Kenneth Hoffman at (954) 591-8290 Monday - Friday from 8:30 a.m. to 1:00 p.m. for a no cost consultation, or drop me a note.

K.R. Hoffman & Co., LLC, counsels Entrepreneurs, Professionals and Select Individuals in taking control of their taxes, and businesses. Discover how we can help you overcome your tax and business challenges. For more information or to become a client, call Kenneth Hoffman at (954) 591-8290 Monday - Friday from 8:30 a.m. to 1:00 p.m. for a no cost consultation, or drop me a note.