Living abroad as a self-employed U.S. expat comes with unique financial benefits, one of which is the Foreign Housing Deduction. This deduction can significantly lower your taxable income by allowing you to deduct certain housing costs from your earnings. This guide will provide a clear and concise understanding of how the Foreign Housing Deduction works, who qualifies, and how to maximize your tax savings.

WHAT IS THE FOREIGN HOUSING DEDUCTION?
The Foreign Housing Deduction allows self-employed expats to deduct foreign housing expenses from their gross income. Unlike the Foreign Housing Exclusion, which applies to employer-provided amounts, the deduction is specifically for those with self-employment income. This can help reduce your tax liability and make living abroad more affordable.

WHO QUALIFIES?
To qualify for the Foreign Housing Deduction, you must:

Have self-employment income.
Have a tax home in a foreign country.
Pass either the bona fide residence test or the physical presence test for an uninterrupted period that includes an entire tax year.
Bona Fide Residence Test: You must be a bona fide resident of a foreign country for an uninterrupted period that includes an entire tax year. This means you must establish a residence in the foreign country and intend to live there for a substantial period.
(more…)

Living abroad as a self-employed U.S. expat comes with unique financial benefits, one of which is the Foreign Housing Deduction. This deduction can significantly lower your taxable income by allowing you to deduct certain housing costs from your earnings. This guide will provide a clear and concise understanding of how the Foreign Housing Deduction works, who qualifies, and how to maximize your tax savings.

WHAT IS THE FOREIGN HOUSING DEDUCTION?
The Foreign Housing Deduction allows self-employed expats to deduct foreign housing expenses from their gross income. Unlike the Foreign Housing Exclusion, which applies to employer-provided amounts, the deduction is specifically for those with self-employment income. This can help reduce your tax liability and make living abroad more affordable.

WHO QUALIFIES?
To qualify for the Foreign Housing Deduction, you must:

Have self-employment income.
Have a tax home in a foreign country.
Pass either the bona fide residence test or the physical presence test for an uninterrupted period that includes an entire tax year.
Bona Fide Residence Test: You must be a bona fide resident of a foreign country for an uninterrupted period that includes an entire tax year. This means you must establish a residence in the foreign country and intend to live there for a substantial period.
(more…)

The R&D tax credit is a governmental incentive designed to encourage research and development activities in the US. This credit offers a dollar-for-dollar reduction on federal taxes for qualified expenses related to developing new or improved products, processes, software, technique, formula, or invention.

Although claiming this credit can offer considerable benefits for companies engaged in Research and Development efforts, the process is not without its challenges. Three Common Challenges You May Face while Claiming R&D Tax Credits:

Documentation of Qualified Activities and Expenses

Insufficient documentation is a common challenge with the R&D tax credit. Accurately identifying what constitutes a qualifying R&D activity and having the proper support can be challenging for taxpayers. It is important that the taxpayer implements a system for maintaining records and documentation. While R&D activities must meet specific criteria related to developing new or improved products, processes, or software, having a robust record keeping process is important.
Companies must keep track of their activities and expenses and make sure they are tied to the qualifying activities while adhering to IRS regulations.

Updates To R&D Tax Credit Law

The R&D Tax Code is complex, and lack of awareness and understanding is a common challenge for the taxpayer. Staying informed of any updates in tax legislation is crucial. Being up to date ensures an understanding of how changes to the code might affect your company’s qualifying R&D activities

To overcome the challenge of ever-changing tax laws, taxpayers should engage experts who specialize in R&D tax credits
(more…)

Virginia has introduced a new policy allowing a one-time safe harbor for contractors who have omitted or inaccurately remitted retail sales and use taxes. Starting from July 1, 2024, the Department of Taxation can use a contractor’s erroneously collected retail sales tax payments to offset a use tax assessment related to the transaction.

How To Qualify

To qualify for this safe harbor, the contractor must demonstrate that the property for which sales tax was incorrectly collected and remitted is the same property used in realty and is subject to a use tax assessment.

Next Steps

After receiving this relief, the contractor must either pay sales tax to its vendors or remit the use tax directly to the Department for its purchases of tangible personal property used in its real property contracts. This relief is a one-time opportunity designed to help contractors in response to industry confusion. This new policy is aimed at providing a temporary reprieve for contractors who may have inadvertently erred in their tax remittances, offering them a chance to rectify the situation and ensure compliance with tax regulations moving forward.

For more information, reach out to Thompson Tax today. We are your Trusted Tax Advisors.

On June 28, 2024, the US Supreme Court overturned its 40-year-old precedent concerning deference (often referred to as “Chevron deference”) given to a federal agency’s interpretation of a statute in Loper Bright Enterprises, et. al., v. Gina Raimondo, No. 22-451 (S. Ct. 2024). Since the issuance of the Loper Bright opinion, tax professionals have been speculating as to the impact of the opinion. For example, see our email blast on July 2, 2024.

Exhibit 2 from the 2022 Tax Forum was a simplified version of the facts in the case of Tribune Media Co., et al. v. Commissioner, TC Memo 2021-122 (Oct. 26, 2021), which involved the sale of the Chicago Cubs to the Ricketts family. Unlike the senior debt, the junior debt was determined by the court to be equity and, therefore, treated as additional sale consideration rather than a debt-financed distribution under Reg. §1.707-5(b) (that is not tainted by the disguised sale rules). One of the issues in Tribune Media, now pending in the Seventh Circuit Court of Appeals, is the “general” partnership anti-abuse rule of Reg. §1.701-2, which is the topic of today’s email.

REGISTER HERE

On July 3, 2024, counsel for Tribune Media submitted a letter to the Seventh Circuit Court of Appeals about the impact of Loper Bright on the validity of the partnership anti-abuse rule of Reg. §1.701-2. In the letter, counsel claimed that the regulation is an “extraordinarily broad assertion of agency authority,” and that “the agency [i.e., Treasury] even contends that it can invalidate a transaction that follows ‘the literal words’ of a statute that Congress enacted.” Counsel reiterated that “Loper Bright confirms that this Court should scrutinize [Treasury’s] assertion of authority carefully to ensure that the agency stayed within permissible statutory bounds.”

The IRS countered a week later, filing a letter with the Seventh Circuit in which it argued that the partnership anti-abuse regulation is grounded in established tax-abuse precedent. The IRS’s response asserted that the partnership anti-abuse rule can be directly traced to the historic case of Gregory v. Helvering, 293 U.S. 465, 467-70 (1935). (Gregory involved a reorganization where all the technical requirements were met, but the transaction “was without substance and must be disregarded.”) The IRS argued further that the partnership anti-abuse rule is consistent with the business purpose requirement of Reg. §1.701-2(a)(1) as well as the codification of the economic substance doctrine in §7701(o). Finally, the IRS asserted that Reg. §1.701-2 fits within the regulatory framework of what is now §7805(a), the statute by which Treasury is authorized to prescribe all rules and regulations for enforcing the Internal Revenue Code.
(more…)

Many industries invest in research and development to drive innovation and maintain a competitive edge within their respective markets. By investing in this credit, businesses can increase their cash flow and reduce their tax rate, thus opening opportunities to further invest in advancements within their industry. Some of the common industries include and are not limited to:
Aerospace
Architecture & Engineering
Blockchain Development
Chemical
Construction/MEP
Consumer Products
Contract Manufacturing
Financial Services
Food & Beverage
Game Development
Manufacturing
Metal Fabrication
Mortgage & Banking
Oil & Gas
Pharma
Plastics/Injection Molding
Software Development
Tool & Die

The Impact of R&D
The R&D Tax Credit has played a crucial role in technological advancements and economic growth within the U.S. By offsetting the substantial costs associated with developing new products and processes, this credit empowers companies of all sizes—including startups—to embark on projects that otherwise would have been too costly.
(more…)

On June 28, 2024, the US Supreme Court overturned its 40-year-old precedent concerning deference (often referred to as “Chevron deference”) given to a federal agency’s interpretation of a statute in Loper Bright Enterprises, et. al., v. Gina Raimondo, No. 22-451 (S. Ct. 2024). Since the issuance of the Loper Bright opinion, tax professionals have been speculating as to the impact of the opinion. For example, see our email blast on July 2, 2024.

Exhibit 2 from the 2022 Tax Forum was a simplified version of the facts in the case of Tribune Media Co., et al. v. Commissioner, TC Memo 2021-122 (Oct. 26, 2021), which involved the sale of the Chicago Cubs to the Ricketts family. Unlike the senior debt, the junior debt was determined by the court to be equity and, therefore, treated as additional sale consideration rather than a debt-financed distribution under Reg. §1.707-5(b) (that is not tainted by the disguised sale rules). One of the issues in Tribune Media, now pending in the Seventh Circuit Court of Appeals, is the “general” partnership anti-abuse rule of Reg. §1.701-2, which is the topic of today’s email.

On July 3, 2024, counsel for Tribune Media submitted a letter to the Seventh Circuit Court of Appeals about the impact of Loper Bright on the validity of the partnership anti-abuse rule of Reg. §1.701-2. In the letter, counsel claimed that the regulation is an “extraordinarily broad assertion of agency authority,” and that “the agency [i.e., Treasury] even contends that it can invalidate a transaction that follows ‘the literal words’ of a statute that Congress enacted.” Counsel reiterated that “Loper Bright confirms that this Court should scrutinize [Treasury’s] assertion of authority carefully to ensure that the agency stayed within permissible statutory bounds.”
(more…)

We all know that there will always be one surefire aspect to business – and that’s taxes. But the question then is: are you sure, wherever you operate as a business, that you know your tax liability? It can be a messy matter, especially if you’re an international business operating in the US. And that’s what we’ll be talking about here – this guide is specifically tailored to help foreign businesses understand the essential steps involved in calculating sales tax in the US.

Navigating the US tax system can be particularly challenging for international businesses. The US has a complex and varied approach to sales tax, which differs significantly from the VAT systems common in many other countries. For foreign companies, understanding these nuances is essential to ensure compliance, avoid penalties, and accurately calculate sales tax liabilities. So, whether you’re selling products or services in all, many, or a few states, determining the correct amount of sales tax to collect and remit will ensure you stay on the right side of tax authorities, and compliant as an international business in the US.

Understanding Sales Tax Rates – Explore the variability of sales tax rates across US states and localities with examples.
Finding the Correct Sales Tax Rate – Learn how to determine the correct sales tax rate by identifying the sale location and checking state and local rates.
The Sales Tax Calculation Formula – Discover the formula for calculating sales tax and see a practical example applied step-by-step.
Calculating Sales Price with Tax – Understand the methodology for determining a sales price that includes tax, with a detailed example.
Backward Sales Tax Calculation – Learn how to calculate the pre-tax sales price from a total price that includes sales tax.
State and Local Sales Tax Rates, 2024 – Get a breakdown of state and local tax rates for the year 2024.
Using Sales Tax Calculators – Find out how to leverage automated sales tax calculators for accuracy and compliance, with recommended tools and steps.

1. Understanding Sales Tax Rates

(more…)

Don’t wait until the IRS mandates e-file for forms 720 and 8849. Act now to stay ahead of the game.

Visit and Contact us Today at https://akorefederal.com

Still, filing your Excise Tax Returns through paper? It’s time to switch to digital e-filing and eliminate paper returns. The IRS offers an e-filing option for excise tax forms 720 and 8849, and only Akore Federal Excise Tax E-File Software has the enterprise-level solution.

TaxConnections is excited to introduce AKORE Federal Tax Software by Richard Carrier (CEO):

• IRS Authorized: Akore is the only e-file Provider with enterprise-level security for excise tax e-filing.
• Top-rated Security: Backed by an AKORE Trust Document, ensuring critical security checks and reliability.
• e-File 2024 Q3 and Q4: Get e-File ready now with introductory pricing through 12/31/24.

Flexible E-filing Solutions: Akore Federal provides an e-filing service tailored for everyone—individual tax experts, CPA firms handling hundreds of returns, and large corporate filers. No matter the volume, Akore has you covered.

Join the expanding number of companies utilizing Akore’s Federal e-Filing service to not only expedite your refunds and streamline your tax processes, but also to experience the peace of mind that comes with choosing certified, secure excise tax software. Akore’s existing clients are primarily large enterprises that demand professional support and trusted security certification.

Visit and Contact us Today at https://akorefederal.com

If you are tasked with the great responsibility of leading a tax team, it is important to remember your team will feed off the energy that emanates from the top. When you are leading an organization, those under you will feel your energy and attitude towards your team. You can manage a team by staying in your office or you can manage your team by engaging with them frequently in positive interactions. This article provides three ideas to successfully manage, motivate and inspire your tax team members to higher levels of production and success. There was an experience learned early on in developing my management skills that taught me a valuable lesson in motivating our team. Someone who reported to me early on in my career told me how much they appreciated the inspirational quotes I sent out to staff during the week. It was only during a review process that I learned how impactful the inspiration and motivational quotes sent to my team members contributed to their positive attitude and overall success. During an annual review, one individual expressed in writing how much they appreciated the inspirational quotes I would send out in team communications. They communicated to me in writing how they were struggling privately with a deeply personal situation. This person told me they looked forward to the inspirational quotes I would often send out to team members. They said the quotes I sent them got them through some of their most challenging days. Another person on my team shared that by sending them the motivational quotes, it made them feel I was thinking about them in a positive way.

This experience taught me a valuable lesson about managing people. We often are unaware of what is happening in the lives of those we manage. Little did I know at the time, small acts of kindness like sending an inspirational quote to a team member would have such an impact on their mindset. The impact of these small motivational quotes communicated in writing was stronger than I ever imagined. It was a lesson I was fortunate to learn early in managing people. You must consistently feed your people positive energy to get positive results.
You are most welcome to download a complimentary copy of our 300+ Inspirational Quotes eBook: https://www.taxconnections.com/motivational-inspirations.
(more…)