What Are Your Year-End State and Local Tax Needs?
Would you like to know what state and local tax services your company or clients may need help with, especially at this time of year?
If so, I have provided a brief list of discussion topics or ideas that might apply to your clients:
- Nexus and FIN 48: At this time of year, it is a good time for companies to address their nexus position in advance of their FIN 48 analysis and year-end. We may be able to restructure operations in advance of 2013. If your client utilizes telecommuting employees or independent contractors and hasn’t addressed their nexus position in a while, this may be a good time. In addition, states are becoming more aggressive in asserting economic nexus and imposing nexus on shareholders or partners in S corporations and partnerships.
- Sales and Use Tax: It is also a good time to conduct a reverse sales tax audit to identify sales and use tax refund opportunities and potential exposure. If your client has started to sale items over the Internet, we should talk. If your client has purchased any software, SaaS or cloud computing recently, they may want to talk to confirm there is no sales or use tax exposure. We can also help companies improve their manual process of complying with sales and use tax, and if interested, help them choose a software solution for their sales tax compliance needs.
- Income Tax: For your C corporation clients, we could perform a reverse income tax audit to identify state income/franchise and gross receipts tax refund opportunities and potential exposure. Combined reporting, apportionment, or business v. nonbusiness income determination issues or opportunities may exist. If your client has had a federal audit that results in an amended return, most states require that corresponding state return changes be filed within 60 to 90 days. Clients generally don’t have the time or resources to comply with this requirement. We can relieve clients of this burden by preparing the various state tax returns affected by the federal audit in time to meet the required deadlines. Another popular service has been state IRC Sec. 382 limitations on net operating losses and net operating losses utilization planning.
- Income Tax: For your flow-through entity clients, we could perform a reverse income tax audit on your client’s major states, which may include Texas, Michigan, Washington, Pennsylvania, Illinois, Tennessee, etc. As with C corporation clients, combined reporting, apportionment, or business v. nonbusiness income determination issues or opportunities may exist as well for flow-through entity clients. We can also provide nonresident withholding, composite return filing analysis and guidance.
- Credits and Incentives: If your clients are entering into new states, hiring / training new employees, building new facilities, etc. we can assist in identifying and capturing credit and incentive opportunities in any state.
- Transaction Due Diligence: If your clients are entering into any acquisitions of other companies or assets, we can provide state and local tax due diligence services to mitigate potential exposure and plan for future operations.
- Residency Issues: For individual tax clients that have changed their residency to another state or are considering such a change, we can provide guidance in regards to what records they need to maintain, etc. We can also provide audit defense when necessary.
- Unclaimed property: If your clients have a material amount of uncashed payroll and accounts payable checks, customer overpayments, gift certificates, merchandise credits and accounts receivable balances, they may have unclaimed property exposure. Generally, all businesses are required to report and remit unclaimed property, also known as abandoned property. After a certain time period, a state may acquire such property that is abandoned or remains unclaimed or uncollected by its rightful owner. The rules in this area vary by state. We can review a client’s situation to identify and quantify exposure. As necessary, we can then assist them in complying with such requirements.
Brian Strahle is the owner of LEVERAGE SALT, LLC where he provides state and local tax technical services to accounting firms, law firms and tax research organizations across the United States. He also writes a weekly column in Tax Analysts State Tax Notes entitled, "The SALT Effect." For more info, visit his website: www.leveragestateandlocaltax.com
You can reach Brian at firstname.lastname@example.org.
Because state and local taxes are deceptively simple and endlessly complicated.