Most tax disputes are resolved directly with the IRS or in Tax Court, and very few make it to "real" courts. When they do, billions of dollars can turn on the decision.
Sometimes, though, tax litigation turns on less profound issues.
A British court just confronted one such instance when it ruled that Pringles are potato chips.
You may not like Pringles yourself -- but you've certainly tried the uniformly-shaped chips from the tube-shaped can. Pringles start life as baked dough, with just 42% actual potato content.
They come packed in tubular can with foil-lined interior and resealable plastic cap.
That packaging is so distinctive that when its inventor died, his children honored his
wishes to actually bury his cremated ashes in one of those cans!
The issue reached court because Britain levies a 15% value-added tax on "products made from the potato, or from potato flour, or from potato starch." The tax naturally makes potato chips more expensive. So Proctor & Gamble, the chips' manufacturer, argued that Pringles don't look like chips, don't feel like chips, and don't taste like chips.
A lower court agreed with Proctor & Gamble. However, a Court of Appeals panel ruled last week that it wasn't the lower court's job to look into scientific or technical questions about the chips' composition, and that a child could give a "more relevant and sensible answer" than a food scientist. The court's decision could cost Pringles $31 million in tax per year.
This Memorial Day weekend marks the unofficial start of "summer." If you're like most clients, you'll spend your share of time around picnic tables loaded with snacks. Don't waste too much time crying for Pringles. But let this story serve as a lesson in just how far "tax planning" reaches into all of our lives. And don't be afraid to let us help you navigate your way through whatever tax questions you have!
Wednesday, May 27, 2009
Friday, May 22, 2009
Obama's New Tax Credit
Most of you have heard that under the Obama Administration's American Recovery and Reinvestment Act you will be receiving a "Making Work Pay" tax credit. But what does this actually mean to you? When can you expect to receive the money?
In 2009 and 2010, the "Making Work Pay" provision of the American Recovery and Reinvestment Act will provide a refundable tax credit of up to $400 for working individuals and up to $800 for married taxpayers filing joint returns.
Note: This tax credit is calculated at a rate of 6.2 percent of earned income and will phase out for taxpayers with modified adjusted gross income in excess of $75,000, or $150,000 for married couples filing jointly.
For people who receive a paycheck and are subject to withholding, the credit is typically handled by their employers through automated withholding changes. These changes needed to begin by April 1, 2009 and may result in an increase in take-home pay. The amount of the credit will be computed on the employee's 2009 income tax return filed in 2010. Taxpayers who do not have taxes withheld by an employer during the year can also claim the credit on their 2009 tax return.
It is not necessary to submit a Form W-4 to get the automatic withholding change. However, an employee with multiple jobs or married couples whose combined incomes place them in a higher tax bracket may choose to submit a revised W-4 to ensure enough withholding is held to cover the tax for his or her combined income.
If you have questions about the Making Work Pay provision, call us at (636) 916-1010.
In 2009 and 2010, the "Making Work Pay" provision of the American Recovery and Reinvestment Act will provide a refundable tax credit of up to $400 for working individuals and up to $800 for married taxpayers filing joint returns.
Note: This tax credit is calculated at a rate of 6.2 percent of earned income and will phase out for taxpayers with modified adjusted gross income in excess of $75,000, or $150,000 for married couples filing jointly.
For people who receive a paycheck and are subject to withholding, the credit is typically handled by their employers through automated withholding changes. These changes needed to begin by April 1, 2009 and may result in an increase in take-home pay. The amount of the credit will be computed on the employee's 2009 income tax return filed in 2010. Taxpayers who do not have taxes withheld by an employer during the year can also claim the credit on their 2009 tax return.
It is not necessary to submit a Form W-4 to get the automatic withholding change. However, an employee with multiple jobs or married couples whose combined incomes place them in a higher tax bracket may choose to submit a revised W-4 to ensure enough withholding is held to cover the tax for his or her combined income.
If you have questions about the Making Work Pay provision, call us at (636) 916-1010.
Tuesday, May 19, 2009
Summer Entertainment Deductions
Summer's almost here, and you're probably looking forward to some summer entertaining. So today we'll review the rules for making the most of your summer fun expenses.
Meals and entertainment you host in the course of your business are deductible if they're directly related to the active conduct of your business or they take place directly before or after a substantial, bona fide discussion directly related to the active conduct of your business. That means, clients, customers, or patients; prospective clients, customers or patients; referral sources; and other business relationships (vendors, professional colleagues, etc.).
The general rule is that you can deduct 50% of most meals. Specific deductions include meals, drinks, taxes and tips. Now for the fine print:
You'll need a diary, day planner, or similar log to verify your deductions. IRS Publication 463 directs you to record the cost of the meal, date of the meal, establishment where the meal takes place, the business purpose for the expense (or business benefit you gain or expect to gain from the meal), and your business relationship with your guest.
You'll need receipts for expenses over $75. (Many clients mistakenly think they have to keep receipts for expenses over $25.) Credit card statements work if you corroborate them by recording the business purpose of the expense in your business diary.
You can't deduct meals with your spouse unless you're traveling together for business. However, you can include the cost of a spouse or other "closely connected" person (such as children or parents) if your guest brings their spouse.
Too many clients forget the cost of entertaining at home! You can deduct costs for small gatherings at your home under the same rules that apply when you go out to eat. If you invite more than 12 guests, you can deduct "reasonable" costs if your primary purpose is business. To prove your primary purpose is business, include your employees; let your guests know your business purpose; and discuss or display your product or service at the event.
Expenses for sporting and theatrical events, golf and boating outings, and similar entertainment are also 50% deductible if they take place directly before or after a substantial, bona fide discussion directly related to the active conduct of your business. You can deduct the face value of tickets (but not a scalper's premium) to sporting and theatrical events, food and beverages, travel and parking expenses, taxes, and tips.
Meal and entertainment expenses are easy to overlook -- especially when it comes to entertaining at home. But over time, those little expenses add up. Don't lose out on those easy savings!
Meals and entertainment you host in the course of your business are deductible if they're directly related to the active conduct of your business or they take place directly before or after a substantial, bona fide discussion directly related to the active conduct of your business. That means, clients, customers, or patients; prospective clients, customers or patients; referral sources; and other business relationships (vendors, professional colleagues, etc.).
The general rule is that you can deduct 50% of most meals. Specific deductions include meals, drinks, taxes and tips. Now for the fine print:
You'll need a diary, day planner, or similar log to verify your deductions. IRS Publication 463 directs you to record the cost of the meal, date of the meal, establishment where the meal takes place, the business purpose for the expense (or business benefit you gain or expect to gain from the meal), and your business relationship with your guest.
You'll need receipts for expenses over $75. (Many clients mistakenly think they have to keep receipts for expenses over $25.) Credit card statements work if you corroborate them by recording the business purpose of the expense in your business diary.
You can't deduct meals with your spouse unless you're traveling together for business. However, you can include the cost of a spouse or other "closely connected" person (such as children or parents) if your guest brings their spouse.
Too many clients forget the cost of entertaining at home! You can deduct costs for small gatherings at your home under the same rules that apply when you go out to eat. If you invite more than 12 guests, you can deduct "reasonable" costs if your primary purpose is business. To prove your primary purpose is business, include your employees; let your guests know your business purpose; and discuss or display your product or service at the event.
Expenses for sporting and theatrical events, golf and boating outings, and similar entertainment are also 50% deductible if they take place directly before or after a substantial, bona fide discussion directly related to the active conduct of your business. You can deduct the face value of tickets (but not a scalper's premium) to sporting and theatrical events, food and beverages, travel and parking expenses, taxes, and tips.
Meal and entertainment expenses are easy to overlook -- especially when it comes to entertaining at home. But over time, those little expenses add up. Don't lose out on those easy savings!
Subscribe to:
Posts (Atom)
