Contingent Fee Auditors Are Interested in Your Company’s Unclaimed Property

Enforcement of unclaimed property regulations has evolved to include not only large corporations, but also small to midsize businesses. Entities that were previously off the auditing radar are now facing fines, penalties and interest for non-compliance. This is a direct result of states’ rapidly changing escheatment laws and their use of third-party contingent fee based auditors in 40 states.

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During these difficult economic times, tax-exempt organizations are searching for new sources of revenue which could ultimately generate unrelated business income tax. However, nonprofits are under increasing scrutiny, and the IRS is focusing its attention on the commercial activities conducted by nonprofit organizations. Join Cherry, Bekaert & Holland for a discussion on unrelated business income and its history. We will provide examples of taxable and nontaxable activities, explain the various statutory exclusions, and addresses recent IRS activity.

At the conclusion of this seminar, attendees should be able to:

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Within President Obama’s proposed budget is a measure bringing some concern to not-for-profits. The President proposed capping the income rate applicable to charitable giving at 28 percent.

The current deduction amount is calculated by multiplying the amount of the donation by that individual’s top income tax rate. For example, a taxpayer with a top income tax rate of 33 percent who donates $100,000 to a qualified organization can deduct $33,000 on that year’s return. Under the proposed budget, that same taxpayer’s deduction would be reduced by $5,000.

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The IRS has suspended efforts to update employer-provided cell phone tax laws pending legislative action by Congress. When first introduced in 1989, the law recognized company-issued cell phones as luxury perks, and requires phones be categorized as “listed property.” This designation demands detailed usage records on calls, minutes and texts.

IRS Commissioner Doug Shulman said, “Congress had a busy year last year … When they come back, our hope is that the tax-writing committees take this up. In the meantime, we’re not doing anything special or moving forward with any initiatives. Our hope is that there will be legislation to clean this up.”

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According to the North Carolina (NC) Department of Revenue Directive PD-10-1, effective January 1, 2010, a payer is required to withhold North Carolina income tax of four percent from non-wage compensation paid to either of the following:

• A nonresident individual or nonresident entity for personal services performed in North Carolina.
• An Individual Taxpayer Identification Number (ITIN) holder who is a contractor and not an employee for services performed in North Carolina.

The requirement to withhold applies to payers who, in the course of a trade or business, expect to pay more than $1,500 within a calendar year of non-wage compensation. That compensation must be paid to nonresident or ITIN contractors, with certain exceptions. Payers should file and pay withholding taxes on contractors with ITINs just like they would for regular employees.

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IRS Commissioner Shulman shocked most tax preparers and professionals last week at a New York State Bar Association Tax Section Meeting when he proposed that businesses should be required to provide detailed information in their tax returns regarding uncertain tax positions taken on their returns. Under the Commissioner’s proposal, taxpayers would be required to provide a “few sentences” of information explaining the nature of each uncertain tax position, and taxpayers who fail to disclose these “uncertain tax positions” would be subject to significant penalties.

If it sounds like the Commissioner is asking taxpayers to do the IRS’s job for them, you are at least partially right. The Commissioner is concerned that the IRS is spending too much time attempting to identify tax issues and believes that requiring the disclosure of uncertain positions will enable the IRS to resolve these issues much more quickly and efficiently than it is doing right now.

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Join Cherry Bekaert & Holland and Bernstein Global Wealth Management for a presentation on Bernstein’s overall economic outlook for 2010.

Topics to be discussed:

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On January 22, 2010, President Obama signed into law a provision accelerating the itemized charitable donation tax deduction for qualifying individual contributions to Haiti earthquake relief efforts. Qualifying contributions made between January 11 and March 1 this year are now eligible for deduction on 2009 tax returns.

Qualifying Contributions

Contributions must be made in cash in order to qualify, which would include donations made by check, credit card, and text message. Contributions through marketable securities and contributions from corporations do not qualify. Taxpayers have the option of deducting these contributions on either their 2009 or 2010 tax return, but not both.

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As reported last week by The Statesman, the IRS recently launched audit efforts at several colleges and universities throughout the country, focusing on executive compensation practices and income unrelated to the university’s educational mission. According to Patti Ohlendorf, vice president for legal affairs at the University of Texas:

“IRS agents will be on site periodically, and they are asking us for information regarding various campus activities, and they will review those activities with respect to income and expenses. The exact details I really can’t give you since it just started. It will take some number of months.”

 

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The IRS issued guidance today designating last week’s Haiti earthquake as a qualified disaster for federal tax purposes. Under this guidance, recipients of qualified disaster relief payments can exclude those payments from income on their tax returns.

The guidance also allows employer-sponsored private foundations to assist victims in areas affected by the earthquake without affecting their tax-exempt status.

Charities usually fall into one of two categories — public charities or private foundations. Under the tax law, a private foundation that is employer-sponsored may make qualified disaster relief payments to employees affected by a qualified disaster. These payments generally include amounts to cover necessary personal, family, living or funeral expenses that were not covered by insurance. They also include expenses to repair or rehabilitate personal residences or repair or replace the contents to the extent that they were not covered by insurance. Again, these payments would not be included in the individual recipient’s gross income. …

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