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Admiral101 posted:I misinterpreted the terms you were using in your example, specifically what you meant by "surplus". If you received 20k of cash and a 80k valued property in exchange for your 100k valued property, your taxable gain for federal purposes would be 20k. Your taxable gain for state purposes may be 20k, or it may be 50k. It depends on the state. Perfect! Then my understanding is correct. As far as the mortgage question: how does that affect things?
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Jun 11, 2014 00:26
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DNova posted:Perfect! Then my understanding is correct. Reductions in debt, such as mortgages, are the same as receiving cash. So if your current property has a 30k mortgage attached to it, and the property you're receiving has a 20k mortgage attached to it, you effectively received 10k in cash. This can affect your taxable gain as part of the exchange.
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Jun 11, 2014 01:38
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DNova posted:Hey let me ask you guys another question, because I am getting answered both ways by other sources. Say I want to 1031 a property that is now worth $100k, basis price $50k, and purchase something worth $80k. Is that legal to do under 1031 rules? If so, I assume I would pay capital gains on the $20k surplus (ignore depreciation for this hypothetical) while rolling over the other $30k in gains into the new property without being taxed on that portion. Depreciation recapture is taken into account should you have any taxable gain in the transaction. Section 1250 is taxed at 25% federal, not 15%, and section 1245 recapture is taxed at your ordinary income tax rates.
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Jun 11, 2014 21:01
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Thanks everyone for your responses, it has been very helpful. It makes complete sense to me the way it is. A lot of people vehemently claim it is otherwise and arbitrarily restrict themselves as a result.
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Jun 11, 2014 21:51
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DNova posted:Thanks everyone for your responses, it has been very helpful. If you have questions walk through the Form 8824 and see what the answers turn out to be.
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Jun 12, 2014 18:31
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I'm a sole proprietor of an LLC in Texas. I make games and have an artist in Ireland currently working on art for a game. The current plan is to do revenue share unless the game bombs. If the game bombs, I'll have him invoice me. Under these two situations, is there any weird tax stuff I need to deal with? For US independent contractors, I need to get a W-9 from them so I can send out the 1099s at the end of the year. Do I need some form from him? With an invoice, it's easy to say it's an expense of doing business, but what about revenue share? Is that considered an expense and how do I track this for tax reasons? LLC's are hard work (but I love it)!
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Jun 16, 2014 22:25
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A single member LLC is disregarded for U.S. federal income tax purposes. It's no different from a tax perspective than doing business directly (but a much better idea from a legal point of view, of course). Who will own the art? If you will own the art after the Irish artist has completed their work, then you are paying for services, which are generally foreign source when performed overseas. Consequently, you will not be required to withhold. I would still have the Irish artist give you a W-8BEN, however, so you can prove to the IRS that you were not required to issue a 1099/make backup withholding. If the artist will own the work, then you are likely licensing the right to use the art (at least partially) in the U.S., and your payments will be royalties, which are sourced to the place of use, i.e. the U.S. In that case you would need to withhold at 30% unless there is a tax treaty provision that would hold otherwise. Looking at the U.S.-Ireland tax treaty, it appears there is, and no withholding would be due. To claim this treaty benefit, the Irish artist will need to give you a W-8BEN, complete part II claiming Irish treaty benefits, and sign in Part III. They would also normally need to obtain a U.S. tax ID number (ITIN). However, with the latest FATCA regulations, the IRS changed the rule to allow certain persons to claim treaty benefits using their foreign tax ID number. Your Irish artist should qualify and could provide you a W-8BEN including their Irish tax ID numbers and claim zero withholding on US source royalties.
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Jun 17, 2014 00:16
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PatMarshall, I've seen you post a lot of good stuff about international tax issues. Would you happen to be available to hire? I'm a dual US/Australian citizen and I've been meaning to get my taxes legitimately in order, but I think it's way too much of an unholy mess for a couple quick questions in the thread to cover it.
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Jun 17, 2014 03:18
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PatMarshall posted:A single member LLC is disregarded for U.S. federal income tax purposes. It's no different from a tax perspective than doing business directly (but a much better idea from a legal point of view, of course). Who will own the art? If you will own the art after the Irish artist has completed their work, then you are paying for services, which are generally foreign source when performed overseas. Consequently, you will not be required to withhold. I would still have the Irish artist give you a W-8BEN, however, so you can prove to the IRS that you were not required to issue a 1099/make backup withholding. If the artist will own the work, then you are likely licensing the right to use the art (at least partially) in the U.S., and your payments will be royalties, which are sourced to the place of use, i.e. the U.S. In that case you would need to withhold at 30% unless there is a tax treaty provision that would hold otherwise. Looking at the U.S.-Ireland tax treaty, it appears there is, and no withholding would be due. To claim this treaty benefit, the Irish artist will need to give you a W-8BEN, complete part II claiming Irish treaty benefits, and sign in Part III. They would also normally need to obtain a U.S. tax ID number (ITIN). However, with the latest FATCA regulations, the IRS changed the rule to allow certain persons to claim treaty benefits using their foreign tax ID number. Your Irish artist should qualify and could provide you a W-8BEN including their Irish tax ID numbers and claim zero withholding on US source royalties. Holy moley that's a ton of good info. Thanks!
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Jun 17, 2014 05:20
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PatMarshall posted:A single member LLC is disregarded for U.S. federal income tax purposes. The IRS can make the argument that the Irish artist is a service partner receiving a profits interest with a guaranteed minimum (the invoiced alternative).
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Jun 17, 2014 12:40
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ThirdPartyView posted:The IRS can make the argument that the Irish artist is a service partner receiving a profits interest with a guaranteed minimum (the invoiced alternative). Well no contracts have been struck up yet so I don't know how they'd know I'm doing the invoice alternative. However, hiding from the IRS sounds like bad news bears. I'm assuming the IRS is going to ask for a copy of the contract to ensure proper profit share AND a guaranteed minimum? Also, if the guaranteed minimum is under 600 dollars, is there still a tax issue? I know I can pay people here and there small amounts as long as it's not 600 over the course of the year without needing the W-9s and 1099s. Correct?
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Jun 17, 2014 16:29
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I'm not really seeing how the Irish artist has a profits interest. He's essentially just getting a percentage of gross receipts. This is a royalty payment, not a profits interest. These types of deals are very common between authors and publishers. They do not translate into the author having a partnership with the publisher.quote:Well no contracts have been struck up yet so I don't know how they'd know I'm doing the invoice alternative. However, hiding from the IRS sounds like bad news bears. I'm assuming the IRS is going to ask for a copy of the contract to ensure proper profit share AND a guaranteed minimum? What exactly is your definition of the "revenue sharing" with the Irish guy? Is he getting a percentage of gross receipts? Or a share of the net profit from the business? Admiral101 fucked around with this message at 17:04 on Jun 17, 2014 |
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Jun 17, 2014 16:39
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poemdexter posted:Well no contracts have been struck up yet so I don't know how they'd know I'm doing the invoice alternative. However, hiding from the IRS sounds like bad news bears. I'm assuming the IRS is going to ask for a copy of the contract to ensure proper profit share AND a guaranteed minimum? The IRS won't know unless they audit you and find out about the arrangement. The real issue is that the IRS will see the profit-sharing and consider it as a profits interest in return for services contributed, which is currently governed under Revenue Procedure 93-27 (which is non-taxable at the time of receiving the interest if certain conditions are met; I haven't really dealt with the Effectively Connected Income consequences to the Irish person with regards to this in practice, however). The big issue is the profit sharing itself; a flat fee would the Irish guy treated as a vendor rather than as a partner. I imagine the International Tax consequences are less of a mess if the Irish guy is a vendor (besides ECI withholding requirements, as applicable). quote:Also, if the guaranteed minimum is under 600 dollars, is there still a tax issue? I know I can pay people here and there small amounts as long as it's not 600 over the course of the year without needing the W-9s and 1099s. Correct? The guaranteed payment will still have the partnership issue present. The $600 threshold is only for 1099-MISC, which is if the Irish guy is a vendor. Guaranteed payments are listed on a Form 1065 (Partnership return), particularly on the Irish guy's schedule K-1. For guaranteed payments there is no monetary threshold.
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Jun 17, 2014 16:54
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Admiral101 posted:I'm not really seeing how the Irish artist has a profits interest. He's essentially just getting a percentage of gross receipts. This is a royalty payment, not a profits interest. These types of deals are very common between authors and publishers. They do not translate into the author having a partnership with the publisher. That's exactly my point - a royalty is a fee off of some measurement (fixed or percentage) related to the assets in question. So if Irish guy is entitled only to a percent of game sales with his assets, you're right, but if it's all games, I can't see how it's not a profits interest. From the way I read it, it sounded like the latter, but maybe it's the former. Edit: After reviewing his post, it might be for that particular game, in which case you are correct. Horseshoe theory fucked around with this message at 17:42 on Jun 17, 2014 |
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Jun 17, 2014 17:26
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ThirdPartyView posted:The IRS won't know unless they audit you and find out about the arrangement. The statistics point to the audit rate for S Corps is way, way lower than that of Schedule C. Since he's an LLC that would be a simple matter to file the Form 2553 under Rev Proc 2003-43 and make it retro to 1/1/14.
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Jun 17, 2014 19:28
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Admiral101 posted:I'm not really seeing how the Irish artist has a profits interest. He's essentially just getting a percentage of gross receipts. This is a royalty payment, not a profits interest. These types of deals are very common between authors and publishers. They do not translate into the author having a partnership with the publisher. Percentage of gross receipts from the mobile game he's doing art for specifically, nothing else. The verbal agreement at the moment is whatever we pull in from the game will be split amongst me, another dev, and the artist. There's no equity or partnership or anything else in play here. Strictly just this one game.
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Jun 17, 2014 20:10
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Bifauxnen posted:PatMarshall, I've seen you post a lot of good stuff about international tax issues. Would you happen to be available to hire? I'm a dual US/Australian citizen and I've been meaning to get my taxes legitimately in order, but I think it's way too much of an unholy mess for a couple quick questions in the thread to cover it. Unfortunately, I am not really in a position to take you on as a client. I am a junior associate at a large accounting firm. I could certainly put you in contact with my firm, but any of the larger firms will also be able to help. I would also note that most large accounting firms tend to be really expensive, you may be better served talking to a local CPA (depending on the complexity of your problem and the experience and practice area of the smaller firm/sole practitioner). If your problem involves substantial unreported income or unreported bank accounts, you would probably be better served retaining an attorney (look for someone practicing tax controversy). poemdexter posted:Percentage of gross receipts from the mobile game he's doing art for specifically, nothing else. Sounds like a royalty, but a partnership is also a possibility (good catch ThirdPartyView). Partnerships can be created unintentionally, and no special documentation is required. If you have formed a partnership, then it is possible that the Irish artist could be considered to be engaged in a trade or business in the U.S. and that their percentage of profits could be attributable to a permanent establishment in the U.S. If so, they would need to file a tax return in the U.S., pay regular U.S. tax on their income, and the partnership would be required to withhold on income allocated or paid to the Irish artist at the highest applicable rate (usually 39.6%). The partnership would also need to file form 8804 to report the withholding, make quarterly payments on form 8813, and provide form 8805 to the Irish artist so they can claim credit for the withholding when they file. I would probably make it clear in the licensing agreement that the payments are royalties based on a percentage of profits, get a W-8BEN claiming Irish treaty benefits, and look into my 1042 filing requirements. I would also probably consult a CPA rather than strangers on the internet before doing anything 
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Jun 18, 2014 01:24
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PatMarshall posted:Unfortunately, I am not really in a position to take you on as a client. I am a junior associate at a large accounting firm. I could certainly put you in contact with my firm, but any of the larger firms will also be able to help. I would also note that most large accounting firms tend to be really expensive, you may be better served talking to a local CPA (depending on the complexity of your problem and the experience and practice area of the smaller firm/sole practitioner). If your problem involves substantial unreported income or unreported bank accounts, you would probably be better served retaining an attorney (look for someone practicing tax controversy). Thanks for the reply! To give a rough idea, I haven't been reporting anything since I moved to Australia. My Australian income and bank accounts have never been up to where I thought it would matter because of the thresholds and all, but it still makes me pretty nervous that I've just been burying my head in the sand and not doing things properly. The reason I'm finally trying to do something about it is because I have one savings account that's getting to where I might have to report it soon. And also my last recent trip to the US was an extended one where I took on some freelance contracting work that I'll probably have to report as US income this year. So they're going to twig onto me pretty soon, but I also don't want to spend too much on accounting cause it's not like I'm making secret mad stacks over here.
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Jun 18, 2014 01:45
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Did you have > $10,000 in foreign bank accounts (in aggregate) at any time in the past year? Because if so, you are obligated to file an FBAR and the penalties related to failing to file are particularly ugly. FATCA is ugly as well, but it's also a higher than FBAR in terms of the threshold.
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Jun 18, 2014 02:11
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It might have only crossed 10k just this year once you add together my joint banking account and my first home saver savings account. But it would have crossed over 10k earlier if you also count my husband's individual home saver account. (It's not like we split them up to be dodgy and not report it, we split them so we could both get the max benefit from the Australian first home saver scheme) er... yeah, that's another thing, I have an Australian husband so I don't even know how he affects what I'm supposed to be doing for my US taxes. He is not a US citizen or resident and has never lived or worked there. I'm asking some places for quotes now, anyone know anyone good to recommend?
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Jun 18, 2014 02:42
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Read this, as it may be something to consider: http://www.irs.gov/uac/Instructions-for-New-Streamlined-Filing-Compliance-Procedures-for-Non-Resident-Non-Filer-US-Taxpayers
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Jun 18, 2014 02:50
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PatMarshall posted:Unfortunately, I am not really in a position to take you on as a client. I am a junior associate at a large accounting firm. I could certainly put you in contact with my firm, but any of the larger firms will also be able to help. I would also note that most large accounting firms tend to be really expensive, you may be better served talking to a local CPA (depending on the complexity of your problem and the experience and practice area of the smaller firm/sole practitioner). If your problem involves substantial unreported income or unreported bank accounts, you would probably be better served retaining an attorney (look for someone practicing tax controversy). CPA is definitely on my TODO list but I thought I'd ask first to get a head start so I'm not walking in blind. Thanks!
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Jun 18, 2014 05:48
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poemdexter posted:CPA is definitely on my TODO list but I thought I'd ask first to get a head start so I'm not walking in blind. Thanks! If you go local CPA make sure they have experience. I've run my own practice for years but mostly work on privately held businesses and decline any work involving international tax since it's such a niche area.
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Jun 18, 2014 16:56
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I'm starting grad school in August, and I want to know if I should fund a 529 account in the next week. My state of residence where I've had income this year (DC) offers a tax deduction for contributions, but I'm still unsure if it's worthwhile for me to make a contribution?
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Jun 18, 2014 18:56
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In my infinite wisdom and attention to detail, this April (CY2013 return) I chose to submit my CY2012 Schedule A with my 1040. This leads the IRS to think I owe them more than I actually do, and they sent me a notice informing me of this. The notice says NOT to submit a new return, and I can't get anyone on the phone at the number on the notice. Seems like something an amended return should fix, or what am I missing?
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Jun 19, 2014 18:50
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I would submit an amended return as soon as you can and be done with it.
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Jun 19, 2014 21:07
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So I'm starting to think I might need to get an accountant/tax professional to handle the money I'm making from a few of my websites. Basically, I've already made about $25K this year and I'm estimating I'll make a total of around $30K-$35K by the end of the year. I'm setting aside 30% but I have a feeling that isn't enough. I don't even know if all this is technically considered a business... any advice would be great. Also, any idea how much I should expect to spend if I do hire someone to help me sort all this out?
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Jun 22, 2014 05:50
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Omits-Bagels posted:So I'm starting to think I might need to get an accountant/tax professional to handle the money I'm making from a few of my websites. Basically, I've already made about $25K this year and I'm estimating I'll make a total of around $30K-$35K by the end of the year. I'm setting aside 30% but I have a feeling that isn't enough. I don't even know if all this is technically considered a business... any advice would be great. Also, any idea how much I should expect to spend if I do hire someone to help me sort all this out? Have you been making quarterly estimated payments?
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Jun 22, 2014 06:18
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ThirdPartyView posted:Have you been making quarterly estimated payments? No. I'm guessing I need to do this.
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Jun 22, 2014 06:36
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Omits-Bagels posted:No. I'm guessing I need to do this. Start here for taxes: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Estimated-Taxes
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Jun 22, 2014 17:14
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Just a friendly reminder that FBARs are due by Monday!
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Jun 28, 2014 19:57
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My gross income this year is going to be like $57000, and I got Invisalign this year. It costs me $5400 over 19 months. Would it be silly to ask to pay another $400 or so, pay it off this year, and meet the 10% deduction for medical expenses? Or genius? Or silly?
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Jun 28, 2014 22:49
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Bumming Your Scene posted:My gross income this year is going to be like $57000, and I got Invisalign this year. It costs me $5400 over 19 months. Would it be silly to ask to pay another $400 or so, pay it off this year, and meet the 10% deduction for medical expenses? Or genius? Or silly? Go for it, but it's probably all deductible in the current year anyway, regardless of when you actually paid off the loan.
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Jun 28, 2014 22:56
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Bumming Your Scene posted:My gross income this year is going to be like $57000, and I got Invisalign this year. It costs me $5400 over 19 months. Would it be silly to ask to pay another $400 or so, pay it off this year, and meet the 10% deduction for medical expenses? Or genius? Or silly? Don't forget to keep track of any RX medications and any contacts or glasses. Those are frequently missed under the medical expense deduction.
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Jun 28, 2014 23:01
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scribe jones posted:Go for it, but it's probably all deductible in the current year anyway, regardless of when you actually paid off the loan. Huh? Just claim it all and continue paying it off over 19 months?
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Jun 28, 2014 23:42
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Bumming Your Scene posted:Huh? Just claim it all and continue paying it off over 19 months? I don't feel like looking it up right now, but my recollection is that if you incur debt (credit cards, etc.) for a medical expense, you can deduct 100% of the expense when the debt is incurred, regardless of when the debt eventually gets paid off.
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Jun 28, 2014 23:45
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scribe jones posted:I don't feel like looking it up right now, but my recollection is that if you incur debt (credit cards, etc.) for a medical expense, you can deduct 100% of the expense when the debt is incurred, regardless of when the debt eventually gets paid off. Publication 502 says it's the other way around: "You can include only the medical and dental expenses you paid this year, regardless of when the services were provided." http://www.irs.gov/publications/p502/ar02.html#en_US_2013_publink1000178852 I also don't understand why you would ask to pay more in order to deduct part of it. If you have no other medical expenses, that extra $400 would only allow a $100 deduction ($5800-($57,000*.1)=$100), which would probably only reduce your taxes by $25 ($100*25% rate). If you do have other medical expenses, you would probably be paying $400 to save $100 ($400*25% rate). JohnnyPalace fucked around with this message at 00:06 on Jun 29, 2014 |
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Jun 29, 2014 00:03
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Oh you only deduct what you pay over that 10%, gently caress.
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Jun 29, 2014 00:04
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JohnnyPalace posted:Publication 502 says it's the other way around: "You can include only the medical and dental expenses you paid this year, regardless of when the services were provided." quote:If you use a credit card, include medical expenses you charge to your credit card in the year the charge is made, not when you actually pay the amount charged. Also, quote:I also don't understand why you would ask to pay more in order to deduct part of it. If you have no other medical expenses, that extra $400 would only allow a $100 deduction ($5800-($57,000*.1)=$100), which would probably only reduce your taxes by $25 ($100*25% rate). If you do have other medical expenses, you would probably be paying $400 to save $100 ($400*25% rate).
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Jun 29, 2014 00:14
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scribe jones posted:But he's presumably only over the 10% floor this year because of the Invisalign. Unless he has high medical expenses next year, too, the leftover $400 won't be deductible at all. That would be the benefit of paying it all in one year. That is only correct if you presume that he has enough Schedule A itemized deductions in the aggregate that is greater than the standard deduction to warrant claiming it on the 2014 Form 1040. If the medical is his only itemized deduction then obviously it's in his best interest to take the standard deduction, in which case it doesn't matter which way he does it. If he's got mortgage interest, taxes paid and other itemized deductions to be greater than the standard then yeah, sure, it's a good idea. Horseshoe theory fucked around with this message at 00:47 on Jun 29, 2014 |
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Jun 29, 2014 00:44
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