Chicago Tax Lawyers

Details of the Payroll Tax Extension

horowitz — Thu, 19 Jan 2012 17:01:33 +0000

On December 23^rd 2011, the United States Congress passed and President Barack Obama signed into law a two month continuation (into January and February 2012) of the 2% 2011 Social Security Payroll Tax reduction for employees. The dynamics that the tax cut is limited to two months inherently creates a potential tax strategy for sharp taxpayers, tax lawyers, tax attorneys, tax accountants and tax advisors. Had Congress not had the foresight to anticipate and close the opportunity for this tax strategy (tax loophole) taxpayers and tax professionals could have bunched their income into the first two months of 2012 to take advantage of the 2% reduction most or all of the year regardless of whether the Social Security Payroll Tax reduction is continued for the remainder of 2012. To forestall this strategy, Congress included a “recapture” provision which essentially limits the 2% reduction to two twelfths of the $110,100 2012 Social Security Wage Base. A parallel provision accomplishing the same result for self employment taxes is also included. For employers who use payroll service or payroll software the additional computations should be hardly noticeable. For employers who manually prepare their payroll this makes payroll preparation even more exciting.

For more information on payroll tax or other tax related legal concerns, contact the Chicago tax lawyers at Horowitz & Weinstein.

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Illinois Sales Tax – It’s News To Us

horowitz — Thu, 10 Nov 2011 22:24:55 +0000

According toa recent report in the Huffington Post, Illinois ranks in only the eighth position of the top ten highest sales tax States in the United States. That may come as a surprise to many residents of Cook County and perhaps even more of a surprise to residents of the City of Chicago where the local sales tax rate is 9.25% for general merchandise and can be even higher in restaurants and higher still in restaurants in special taxing zones. The reason for the surprising eighth position is that the rankings are statewide averages. If you look at a list of top highest sales tax cities in the United States, Chicago ranks more in keeping with where one would expect it. Collections of Illinois Sales Tax, Retailers Occupation Tax (ROT), Use Tax (UT), Motor Fuels Tax, Service Use Tax (SUT) and Service Occupation Tax (SOT) are enforced by the Illinois Department of Revenue through Sales Tax Audits and Illinois Department of Revenue Collection Acts which could include Levy of bank accounts, levies on other property, revoke suspend, or hold a business certificate, and revoke a sales tax business certificate.

For more information on Illinois sales tax, the Illinois Department of Revenue, or other tax law concerns, contact Horowitz & Weinstein.

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A Brief History of Online Sales Tax

horowitz — Thu, 06 Oct 2011 14:58:41 +0000

In 1992 the Supreme Court ruled in a case about mail order that a state could not charge sales tax on an out-of-state company unless that state had sufficient nexus within that state. The gold standard since then has been a brick and mortar presence. Companies with physical stores in a state charge sales tax on online purchases for that state while companies without physical stores do not.

In 2008, New York passed a first of its kind law that expanded the definition of nexus to include companies with affiliate ties to that state. The statute stated that if a company received business through referrals from New York affiliates, then that company had sufficient presence within the state to be charged sales tax. Since 2008, eight states have passed their own versions of New York’s law, Rhode Island, North Carolina, Colorado, Illinois, Arkansas, Hawaii, Connecticut and California. For the most part in these states, e-retailers like Amazon have responded by discontinuing their affiliate programs rather than charging sales tax.

Currently Vermont, New Mexico, Massachusetts, Missouri and Minnesota are all considering affiliate tax bills of their own. Meanwhile South Carolina and Texas have given Amazon in particular, the online retailer that has become somewhat of the flagship in this debate (they have sued to have the New York law declared unconstitutional and are sponsoring a ballot measure to repeal California’s law) special protections against sales tax to encourage the company to build facilities within their states and bring jobs.

The 1992 Supreme Court ruling left open the possibility for Congress to pass new laws, to set new rules for interstate commerce, thus allowing mail order and online retailers to be required to collect sales tax. For several years now a proposal for this has waxed and waned in popularity and exposure, something called the Streamlined Sales Tax Agreement. The idea is that states join the Agreement and agree to abide by some common rules for sales tax in exchange for the ability to collect sales tax on out of state retailers. The biggest push in support for this measure has come most recently from Senator Dick Durbin (D-IL) who has introduced the Main Street Fairness Act into the Senate. It would provide official Congressional support for the SSTA and would allow it to go into effect once 10 states approved it.

Perhaps most importantly, online retailers like Amazon and Overstock.com have put their support behind Senator Durbin’s initiative, arguing it is the fairest resolution to the current debate.

For more information on the affiliate tax, other sales or use tax issues, or for assistance with any tax law concern, contact Horowitz & Weinstein.

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State Cracks Down on Gas Station Sales Tax Evasion

horowitz — Thu, 29 Sep 2011 17:19:00 +0000

Within the last 18 months the Illinois grand juries have indicted 14 gas station operators, charging they withheld a portion of the sales tax they owed to the state. Attorney General Lisa Madigan has said more than one-fourth of Illinois gas station operators have underreported their fuel taxes. Along with the Illinois Department of Revenue, Madigan is now investigating the state’s gas stations as well as tax preparers involved in the cases.

Last year’s tax amnesty program saw many gas station operators coming forward. With the program now over, those who could have participated but did not will now face doubled fines and interest.

In addition to the owed taxes, those the state has indicted face penalties for tax evasion and interest on their unpaid taxes.

For more information on sales tax audits, tax evasion cases, or other tax law concerns, contact the Chicago tax lawyers at Horowitz & Weinstein.

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The Obama Jobs Bill

horowitz — Mon, 19 Sep 2011 14:25:32 +0000

Last week President Obama presented The American Jobs Act to a joint session of Congress. The Act includes a number of measures, all billed at helping the still reeling economy and in particular the job market. In addition to allocating money to schools, for projects to improve infrastructure and modifications to unemployment insurance, the Act contains a number of tax provisions.

The Act calls for payroll taxes to be cut in half on the first $5 million in payroll. The White House says this will cover 98% of businesses in the country. The Act also calls for an elimination of the payroll tax for firms that increase their payroll by adding staff. This measure is currently capped at $50 million in payroll increases.

The 100% expensing measure passed as part of the extension of the Bush Tax Cuts last winter would be extended through 2012. The Act also contains a number of additional reforms and regulatory reductions to help entrepreneurs and small businesses.

For workers, the Act will cut payroll taxes in half for 160 million workers in 2012, extending the payroll tax cut passed last winter.

As with any legislation, the American Jobs Act is likely to change before (and if) it becomes law.

For more information on the American Jobs Act, payroll taxes, or other tax related legal concerns, contact the Chicago tax lawyers at Horowitz & Weinstein.

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Reportable Transactions

horowitz — Fri, 09 Sep 2011 15:43:32 +0000

The IRS has recently clarified the rules regarding failure to report reportable transactions and clarified the penalties for failing to do so. There had previously been some uncertainty around the issue, specifically how provisions in the Small Business Jobs Acts of 2010 had affected the regulations and the penalties.

The IRS has since clarified the situation. Failure to report reportable transactions means failing to include any information required by the Internal Revenue Code when submitting a return or other statement.

The new regulations the IRS released have clarified several issues such as the window for leniency on failure to file and the penalty amount for failure to file, but the IRS has not yet clarified other issues such as how exactly those penalties are computed.

For more information on failure to report cases or other IRS and tax related legal concerns, contact the Chicago Tax Lawyers at Horowitz & Weinstein.

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2011 OVDI Deadline Extended

horowitz — Tue, 30 Aug 2011 15:59:29 +0000

Because of Hurricane Irene, the IRS has decided to extend the application deadline for the 2011 Offshore Voluntary Disclosure Initiative to September 9th. The deadline had previously been August 31. This extension also applies to Report of Foreign Bank and Financial Accounts (FBAR) forms.

The OVDI is a tax amnesty initiative by which taxpayers with undisclosed offshore or foreign tax liabilities receive reduced penalties in exchange for coming clean with the IRS.

For more information on the current OVDI or for other offshore and foreign tax concerns, contact Horowitz & Weinstein.

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The Affiliate Tax, Then and Now

horowitz — Thu, 25 Aug 2011 17:25:56 +0000

Perhaps most importantly, online retailers like Amazon and Overstock.com have put their support behind Senator Durbin’s initiative, arguing it is the fairest resolution to the current debate.

For more information on the affiliate tax, other sales or use tax issues, or for assistance with any tax law concern, contact Horowitz & Weinstein.

Disclaimer.

Sales and Use Tax in Illinois

horowitz — Tue, 23 Aug 2011 20:00:05 +0000

It can be helpful to think of sales tax and use tax as mirror images of each other. They’re closely related and they’re generally two ways of getting at the same thing. In both cases the state is collecting a tax on a purchase or a service. The main difference is whether that tax appears on the receipt (sales tax) or whether it’s the responsibility of the purchaser to report and pay the tax later (use tax).

In Illinois there are four main types of sales and use tax. They are the Retailers’ Occupation Tax (ROT), the Retailers’ Use Tax (RUT), the Service Occupation Tax (SOT) and the Service Use Tax (SUT). There are other sales and use taxes, but these four are the main ones.

It can be confusing to try to keep these four taxes straight. Try to think of them as pairs. There’s a sales tax and a use tax for retail purchases (ROT and RUT) and then there’s also a sales tax and a use tax for services (SOT and SUT).

So if you go to the drugstore on the corner and make a purchase, the sales tax on your receipt is ROT. If you bought something out of state and used it in Illinois you are required to declare that purchase and pay use tax (RUT) on it. SOT and SUT work in the same way, the only difference being that they are assessed on services instead of retail products.

For more information on the four kinds of sales and use tax in Illinois or for help with other tax related legal concerns, contact the Chicago tax lawyers at Horowitz & Weinstein.

Legal Disclaimer.

Before the debt ceiling we were talking about sales tax

horowitz — Fri, 12 Aug 2011 15:02:28 +0000

With the debt ceiling raised and the beginnings of a compromise on dealing with the long term US debt laid down–and thus far, these plans do not include any of the rumored tax changes such as the elimination of the AMT fix–the world of tax has turned its focus back to the issue on online sales tax.

California has joined the roster of states to institute its own version of New York’s 2008 affiliate tax law. The addition of California is particularly significant because New York and California tend to be trend setters among states. Laws often start in one of those states and eventually spread to whole of the union. To have both of these big names behind the online sales tax discussion will likely add impetus to the conversation.

It was first mentioned back in April, but now Senator Dick Durbin (D-IL) has finally submitted his Main Street Fairness Act, which would allow states to charge sales tax to online retailers like Amazon and also on mail order retailers, both of which can currently avoid paying sales tax in states where they do not have a brick and mortar presence.

The Act achieves this through something first proposed in 2002, the Streamlined Sales and Use Tax Agreement (SSUTA). SSUTA has been previously endorsed by Amazon and other online retailers. It is an agreement states voluntarily join. They agree to common sales and use tax rules and in exchange they gain the power to charge sales tax on online and other out of state retailers. Currently, the sales tax systems in the country vary wildly state to state.

At present the Act has been submitted to the Senate and a counterpart is in the House.

For more information on sales tax, use tax or other tax related legal concerns, contact the Illinois tax attorneys at Horowitz & Weinstein.

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