July, 2013
By Jonathan Golub

All United States persons, including citizens, green card holders, and individuals considered US residents based on the duration of their stay in the United States, are required to annually report their ownership of, or signature authority over, foreign bank accounts.  The form for such reporting is the FBAR (or TD F 90-22.1), which form must be filed and received by the IRS by June 30th of each year.  Because June 30 is a Sunday, taxpayers should cause their 2012 FBAR to be received by the IRS by June 28, 2013.  Failure to file the FBAR can carry significant monetary penalties and even criminal charges.  Persons that have the obligation to file the FBAR and have missed the filing in prior years should consult their accountant or other tax professional.

Related to the FBAR filing is the filing of Form 8938 – Statement of Specified Foreign Financial Assets.  The Form 8938 is filed with a person’s tax returns, so for most people, such form was already due in April.  The Form 8938 can require reporting of some of the same information reported on the FBAR, but also includes reporting of certain other foreign assets outside of foreign financial accounts, including stock and other interests in foreign corporations and other foreign entities.  If you believe you may have had an obligation to file the Form 8938 but did not file such form, please contact your accountant or other tax professional.

The government has increased scrutiny and focus on foreign accounts and asset reporting.  To avoid monetary and criminal exposure, United States persons should be diligent in their reporting of foreign accounts and assets.

Please contact Jon Golub of the Royse Law Firm, PC, at jgolub@rroyselaw.com, if you would like to discuss the contents of this article.

September, 2012
By Jonathan Golub

In our blog post from December 2010, we discussed the potential for investors to acquire certain qualified small business stock (“QSBS”) and be eligible to exclude 100% of the gain realized on a subsequent sale of that QSBS, if held for at least five years. That 100% gain exclusion for QSBS was enacted by Congress as a part of the Small Business Jobs Act of 2010 (“SBJA 2010”) and then extended as a part of the Tax Extension Act of Dec. 17, 2010. Potential investors have a limited window to take advantage because this special exclusion only applies to QSBS acquired before January 1, 2012.

The 100% gain exclusion described above is, however, limited to the greater of (i) $10 million or (ii) 10 times such taxpayer’s basis in the QSBS. In the event the QSBS stock is acquired in an exchange (i.e. not for cash), the Section 1202 rules determine a taxpayer’s basis in its QSBS stock to be equal to the fair market value of property transferred. So, if the LLC, at the time of its conversion, has a value at least $1 million, the cap on the gain exclusion will be increased (since the cap is equal to 10 times that value).

While the gain exclusion described above benefits QSBS investors in a stock sale exit transaction, the LLC form may still be better in the event of an asset sale exit transaction. Many other differences exist between LLC’s and corporations, so all factors should be thoroughly considered before an LLC is converted to a corporation to take advantage of the QSBS benefits described above.

For additional information, contact Jonathan Golub.

June 18, 2012
By Jonathan Golub

All United States persons, including citizens, green card holders, and individuals considered US residents based on the duration of their stay in the United States, are required to annually report their ownership of, or signature authority over, foreign bank accounts. The form for such reporting is the FBAR (or TD F 90-22.1), which form must be filed and received by the IRS by June 30th of each year. Because June 30 is a Saturday, the 2011 FBAR should be received by the IRS by June 29, 2012. Failure to file the FBAR can carry significant monetary penalties and even criminal charges. Persons that have the obligation to file the FBAR and have missed the filing in prior years should consult their accountant or other tax professional.

Related to the FBAR filing is the filing of Form 8938 – Statement of Specified Foreign Financial Assets. The Form 8938 is filed with a person’s tax returns, so for most people, such form was already due in April. The Form 8938 can require reporting of some of the same information reported on the FBAR, but also includes reporting of certain other foreign assets outside of foreign financial accounts, including stock and other interests in foreign corporations and other foreign entities. If you believe you may have had an obligation to file the Form 8938 but did not file such form, please contact your accountant or other tax professional.

With the pending implementation of the Foreign Account Tax Compliance Act (FATCA) withholding regime and the various information exchange agreements being negotiated by the United States government, it is clear that the government has increased scrutiny and focus on foreign accounts and asset reporting. To avoid monetary and criminal exposure, United States persons should be diligent in their reporting of foreign accounts and assets.

Please contact Jon Golub of the Royse Law Firm, PC, at jgolub@rroyselaw.com, if you would like to discuss the contents of this article.

December, 2011
By Jonathan Golub

In our blog post from December 2010, we discussed the potential for investors to acquire certain qualified small business stock (“QSBS”) and be eligible to exclude 100% of the gain realized on a subsequent sale of that QSBS, if held for at least five years. That 100% gain exclusion for QSBS was enacted by Congress as a part of the Small Business Jobs Act of 2010 (“SBJA 2010”) and then extended as a part of the Tax Extension Act of Dec. 17, 2010. Potential investors have a limited window to take advantage because this special exclusion only applies to QSBS acquired before January 1, 2012.

The 100% gain exclusion described above is, however, limited to the greater of (i) $10 million or (ii) 10 times such taxpayer’s basis in the QSBS. In the event the QSBS stock is acquired in an exchange (i.e. not for cash), the Section 1202 rules determine a taxpayer’s basis in its QSBS stock to be equal to the fair market value of property transferred. So, if the LLC, at the time of its conversion, has a value at least $1 million, the cap on the gain exclusion will be increased (since the cap is equal to 10 times that value).

While the gain exclusion described above benefits QSBS investors in a stock sale exit transaction, the LLC form may still be better in the event of an asset sale exit transaction. Many other differences exist between LLC’s and corporations, so all factors should be thoroughly considered before an LLC is converted to a corporation to take advantage of the QSBS benefits described above.

For additional information, contact Jonathan Golub.

The Royse Law Firm Employment and Tax Law Newsletter

July, 2010
By Lisa Chapman, Esq. and Jonathan Golub, Esq.

When Should a Company Hire an Unpaid Intern?

DO YOU NEED TO HIRE EMPLOYEES, BUT FEEL BAD YOUR COMPANY CANNOT AFFORD IT? HOW TO TAKE ADVANTAGE OF “THE HIRE ACT” – THE FEDERAL GOVERNMENT’S LATEST PROGRAM AIMED AT INCENTIVIZING COMPANIES TO HIRE UNEMPLOYED WORKERS AND REDUCING THE COST OF LABOR

On March 18, President Obama signed the Hire Act into law. In a nutshell, this new law provides employers with an incentive to hire previously unemployed workers. Specifically, it exempts qualifying employers from paying a portion of the payroll taxes with respect to new hires, and even gives the employer an income tax credit. This, unlike other recent congressional and executive actions, is a direct subsidy to companies.

Like any new law, there are many rules that you need to know about. Here are some key points:

The potential new hire must have been unemployed for at least 60 days prior to being hired by the qualifying employer.

The qualifying employer will be exempt from paying its entire 6.2% share of social security taxes on wages paid to the qualifying employee during the period beginning on March 19, 2010 and ending on December 31, 2010. This exemption is claimed on Form 941, and must be accompanied by an affidavit signed by the qualifying employee.

A tax credit applies if the company retains the worker for at least 52 weeks. This credit is equal to the lesser of $1,000 or 6.2% of wages paid during that 52-week period, and it will be claimed on the qualifying employer’s 2011 income tax return.

Similar to other provisions of the federal government’s stimulus bills, this law has a short shelf life; unless extended the tax exemption will expire on January 1, 2011. This law does not apply to household employees. There are provisions in the text of the law that prohibit the firing of an employee for the purpose of taking advantage of this law.

TO ENSURE COMPLIANCE WITH THE REQUIREMENTS IMPOSED BY THE IRS, WE INFORM YOU THAT ANY TAX ADVICE CONTAINED IN THIS COMMUNICATION, INCLUDING ANY ATTACHMENT TO THIS COMMUNICATION, IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY ANY TAXPAYER FOR THE PURPOSE OF (1) AVOIDING PENALTIES UNDER THE INTERNAL REVENUE CODE OR (2) PROMOTING, MARKETING OR RECOMMENDING TO ANY OTHER PERSON ANY TRANSACTION OR MATTER ADDRESSED HEREIN.

LISA CHAPMAN, rroyselaw.com/people/lisa-chapman

JON GOLUB, rroyselaw.com/people/jonathan-golub