• Live streamers are evolving into powerful digital brands, and managing your growth like a business is essential for long-term success.

• To stay financially healthy, you need to separate personal and business finances, track all income sources, and budget for quarterly taxes and year-end planning.

• Having professional support can help you make smarter decisions, handle unpredictable income, and turn short-term wins into sustainable growth.

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Live streaming is more than a trend — it’s a movement. Platforms like Twitch, YouTube Live, Instagram Live, and TikTok are turning everyday creators into digital stars by allowing real-time interaction with fans. And thanks to the ability to repurpose and share live content across multiple platforms, your audience isn’t just watching — they’re building a relationship with you.

That connection is powerful. Whether you’re streaming gameplay, makeup tutorials, or experiences in haunted houses, live streaming is reshaping how audiences engage with content. But, as your following grows, your responsibilities grow with it. You’re not just entertaining anymore — you’re building a brand. So how do you make the most of your momentum?

3 Questions Every Live Streamer Should Be Asking

If you’re serious about turning your streaming success into a real business, these are the questions that can shape your future — creatively and financially:

1. How Can I Monetize My Content and Grow My Business?

You’ve got the audience — now it’s time to turn your stream into a business. The good news is, you’re not waiting for a record deal or TV contract. You have direct access to revenue streams like ad revenue, subscriptions, sponsorships, merch, and even licensing deals. That gives you full control — but also full responsibility.

Growth doesn’t just mean more followers — it means building a sustainable business. That starts with thinking like a brand. Top streamers are forming business entities, tracking income and expenses, and hiring teams to handle editing, scheduling, and outreach. And they’re diversifying beyond just one platform — because relying on an algorithm is risky. Building direct-to-audience channels like newsletters or merch stores can create more stable income streams and reduce platform dependence.

Learn more about how you can take control of monetization.

2. What Am I Missing When It Comes to Taxes and Accounting?

If you’re earning money from your content, you’re running a business — and that means you likely owe taxes, whether you’re aware of them or not. It’s helpful to track expenses and delineate between your business and personal finances. Use dedicated accounts for income, expenses, taxes, and savings. By doing this, it keeps things cleaner for tax reporting and helps you see the full picture in an organized way.

Also, keep detailed records. That includes ad revenue, sponsorships, “gifts” from brands (which are often taxable), merch income, and even crypto or NFTs. Many creators miss out on valuable deductions for equipment, software, and home office use — all of which can reduce your tax bill. And don’t forget to plan (or save) for tax payments. In certain cases, you may need to pay the IRS quarterly or during year-end planning. A sudden spike in income without proper planning could mean trouble down the road.

Get 10 vital tax and accounting tips every creator need to know.

3. Do I Need a Business Manager?

The moment your income becomes unpredictable, inconsistent, or complicated — it’s time to bring in help. A business manager acts as your personal CFO, handling everything from bill payments and budgeting to tax planning, investment vetting, and estate strategy. They free you up to focus on creating while managing the financial foundation of your career.

It’s not just about managing success — it’s about preparing for what’s next. Business managers help smooth out income peaks and valleys, forecast future needs, and protect against costly mistakes. Whether it’s helping you avoid a bad investment, forming a business entity, or simply translating what your earnings really mean after fees and taxes — they’re there to protect your interests. Bringing one on early in your journey can help you build good financial habits from the start.

Find out why every entertainer needs a business manager.

Turn Your Streams Into a Sustainable Business

You’re not just creating content, you’re running a business. That means thinking beyond daily views and focusing on long-term goals. Whether you’re looking to increase revenue, navigate taxes, or plan for the future, our dedicated Entertainment, Sports, and Media team provides the financial guidance you need. Reach out to our team today to find out how we can help you take your business to the next level.

The post Live Streamers: Are You Managing Your Business Like a Pro? appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Implementing basic accounting practices and understanding tax implications can help individuals working independently in creative fields gain clarity, meet obligations, and maximize income.

• Separating business and personal finances, tracking income and expenses, and budgeting for estimated taxes can help creators be proactive in their financial planning.

• Creators earning income across state lines or internationally need to be aware of varying taxation requirements in different jurisdictions.

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Today’s creators need to view themselves as both businesses and creatives. Whether you are a YouTuber, Instagrammer, painter, digital artist, photographer, website designer, or any type of artist or influencer, understanding and managing your financial obligations is a crucial aspect of sustaining a thriving career.

Here are 10 tips to help you meet your tax reporting responsibilities and get the most from your hard-earned income:

1. Separate Your Finances

To make your accounting more efficient and streamline the tax-filing process, it is a smart idea to separate your business and personal finances. Designate a dedicated business account to track income and expenses related to your artistic endeavors. This separation not only simplifies tax reporting but also enhances financial clarity, making it easier to assess the overall health of your creative enterprise.

Tip: Establish a separate account for business transactions, or multiple business accounts to allocate money for categories such as expenses, taxes, and savings.

2. Record All Transactions

Sometimes it can be challenging to determine what constitutes income. That’s why it’s important to track everything. Gifts received by sponsors are often taxable, especially if they are products in exchange for services (e.g., promotion of product). “Donations” from various fundraising activities like Kickstarter are also considered revenue. On the other hand, crypto and non-fungible tokens (NFTs) are considered property. Selling them usually generates a capital gain or loss.

Tip: Log all payments and gifts received, even if you are unsure, so your tax preparer can report appropriately.

3. Track Your Expenses

Creators and artists can benefit from various tax deductions tailored to their industry. Deductible expenses may include art supplies, equipment, software subscriptions, professional development, and even a portion of your home used as a dedicated workspace. While expenses should not be excessive, any “ordinary and necessary” expenses of your craft can be deducted.

Tip: Save receipts and track expenses in real-time using a spreadsheet, app, or software for easy recording and reporting.

4. Consider Forming an Entity

Creators who run their own business are often independent contractors. Consider setting up an entity for the business — which can help protect your personal assets from your business assets and offer tax savings. S corporations and LLCs are common for smaller businesses. For larger businesses where investors are coming in, C corporation may make sense.

Tip: Do some research or talk to a tax professional to find out if setting up an entity makes business and financial sense for you.

5. Explore Credits You May Be Eligible For

Artists also may be eligible for various tax credits that can help offset their tax liability. Research and development (R&D) credits can be applicable to certain creative processes, rewarding innovation in your artistic pursuits. For instance, software development is considered to be R&D for income tax purposes.

Tip: Consult a tax professional about ways to maximize credits and minimize your tax liability. 

6. Don’t Overlook State and Local Taxes (SALT)  

Beyond federal taxes, SALT significantly impact overall tax liability. When selling art or merch online (whether physical or digital), be mindful of sales tax requirements, which are determined by local laws. Whether revenue is from “tangible” versus “intangible” products (physical objects versus services, ideas, software, etc.) can dictate where taxation occurs — affecting if your income is subject to sales tax or not.

Tip: Stay informed about varying tax rates, and be cautious of sales and use tax implications tied to transmitting creative art across state lines.

7. Plan for Estimated Taxes

As an independent contractor with variable income streams, you should plan for estimated taxes to avoid financial surprises. These quarterly payments encompass income taxes on your profits plus the self-employment tax (covering Social Security and Medicare). For those earning up to $160,200 in net income, the self-employment tax rate currently stands at 15.3%. The silver lining is that you can deduct half of this self-employment tax when filing your income taxes.

Tip: Set aside a portion of your income for estimated tax payments, ensuring proactive financial planning throughout the year.

8. Report Global Income and Claim Foreign Tax Credits

United States (U.S.) citizens or residents earning abroad must report all worldwide income to the Internal Revenue Service (IRS). If you’re earning income in or from foreign countries, it’s crucial to understand foreign tax credits, filing requirements, and deductibility in various jurisdictions. Every tax jurisdiction may have a different method to tax your creation; and different tax implications may arise based on where brands and intellectual property are created and protected.

Tip: Work with a tax professional to evaluate the potential benefits of foreign tax credits for non-U.S. income.

9. Learn Your Options for Transferring Wealth

Digital assets such as domain names, electronically stored photos, and videos to email and social media accounts all have value. When transferring these as gifts or bequests, there may be tax implications that can be circumvented if the transfer is appropriately structured or organized.

Tip: Consider trusts and estate planning for more tax-efficient wealth transfer.

10. Adapt a Business Owner Mindset

As a creator, embracing a business owner’s perspective is essential for long-term success. Understanding basic financial statements like balance sheets and profit and loss (P&L) statements allows you to gauge profitability, identify your most valuable revenue sources, and streamline your efforts. Elevating your financial literacy empowers you to make more informed decisions — which can lead to greater freedom and flexibility in your career.

Quick Tip: Learn to read a balance sheet and create a basic P&L statement for a clearer financial picture.

Integrate Financial Management into Your Creative Journey  

Effective financial planning is like a great work of art — every brushstroke matters. By taking these steps today you can better position yourself to continue pursuing your creative passion tomorrow.

Need a hand with taxes and accounting for your creative venture? Our Entertainment, Sports, and Media practice works with a diverse range of artists and creators — from musicians and photographers to YouTubers and influencers — and our International Tax and State and Local Tax teams can provide guidance to help you address areas like sales tax or foreign tax credits. Reach out to MGO today.

This article was originally created in collaboration with HUG, a global community for artists and art lovers.

The post 10 Tax and Accounting Tips Every Creator Needs to Know appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Short-term rental investors can unlock valuable tax benefits by qualifying for non-passive income with just 100 hours of material participation.

• Qualifying under the 100-hour rule allows you to offset ordinary income, take advantage of accelerated depreciation, and claim a wider range of business expense deductions.

• Careful documentation and strategic planning — like property grouping and timing of improvements — are essential to take advantage of the tax benefits available to short-term rental investors.

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If you’ve been exploring real estate investment opportunities, you may have heard about the significant tax advantages available to real estate professionals. But what if you’re specifically focused on short-term rentals like Airbnb or VRBO properties? Good news: there’s a special tax provision that could substantially benefit you with a much lower time commitment requirement.

The Short-Term Rental Tax Advantage

While traditional rental property investors must qualify as “real estate professionals” (requiring 750+ hours and more than half your working time) to unlock certain tax benefits, short-term rental owners can access similar advantages with significantly less time investment.

The key difference? Short-term rental properties with an average stay of seven days or less aren’t classified as “rental activities” in the traditional sense by the IRS. Instead, they’re considered “business activities,” which opens the door to different qualification requirements and substantial tax benefits.

The 100-Hour Rule: Your Path to Tax Savings

For short-term rental investors, the magic number is as little as 100 hours. To qualify for non-passive income treatment (and the valuable tax benefits that come with it), you need to:

1. Own properties where the average guest stay is seven days or less.

2. Materially participate in the activity for at least 100 hours during the year.

3. Participate at least as much as any other individual involved in the activity.

This dramatically lower hours threshold in comparison to real estate professional status makes these tax benefits accessible to many more investors, including those with full-time jobs in other fields.

Material Participation: What Counts?

Material participation for short-term rentals can include activities such as:

• Property management and maintenance

• Booking management and guest communication

• Marketing your property

• Financial management and bookkeeping

• Renovations and improvements

• Researching market trends and adjusting pricing

Just like with real estate professional status, detailed documentation of your hours and activities is crucial.

The Tax Benefits Explained

When your short-term rental activity qualifies as non-passive, you gain these tax benefits:

1. Offset ordinary income: Use losses from your short-term rental (including depreciation) to offset other income sources like W-2 wages.

2. Accelerated depreciation: Take advantage of bonus depreciation and cost segregation studies to front-load deductions and significantly reduce your tax liability.

3. Business expense deductions: Claim a wider range of business expenses related to your property.

For example, if your short-term rental property generates positive cash flow of $15,000 annually but shows a tax loss of $10,000 after depreciation, you could potentially use that $10,000 loss to offset your income from other sources — saving thousands in taxes while still enjoying positive cash flow.

Tracking Your Hours: Essential Documentation

The IRS scrutinizes these claims carefully, so meticulous record-keeping is essential. Some strategies that can assist you include:

• Using time-tracking apps and tools

• Maintaining detailed logs of all activities related to your property

• Saving emails, messages, and call logs with guests, contractors, and property managers

• Documenting travel time to and from your properties

Strategic Considerations for Increased Benefit

To optimize your tax position as a short-term rental investor, consider:

1. Property grouping: You can elect to group all your short-term rental properties as one activity, making it easier to meet the 100-hour threshold.

2. Timing of improvements: Strategic timing of property improvements can maximize your deductions in years when you have higher income.

3. Entity structure: The right business structure can enhance your tax benefits while providing liability protection.

The right tax strategy can significantly increase the profitability of your real estate portfolio. With the 100-hour advantage, your short-term rental investments can become one of your most valuable tax planning tools.

How MGO Can Help

While understanding these tax advantages is important, applying them to your specific situation requires personalized guidance. Our Real Estate team helps short-term rental investors identify opportunities to reduce tax burden while maintaining IRS compliance. We can help you implement proper documentation systems, optimize your property structure, and develop tax strategies tailored to your investment goals.

Reach out to our team today to discover how we can help you enhance the tax benefits of your short-term rental investments.

The post Accessing Tax Benefits for Your Short-Term Rental Property appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Staying on top of tax deadlines is crucial for businesses, with specific filing requirements varying by business structure and impacting financial health.
• The article provides a 2025 tax deadline calendar, highlighting key dates for different forms, estimated tax payments, and filing requirements.
• Proactive tax planning — including maintaining accurate records, setting reminders, and consulting with tax professionals — can help businesses navigate tax obligations effectively and avoid penalties.

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Missing a tax deadline isn’t just about potential penalties — it’s about protecting your business’s financial health. Proactive tax planning is your secret weapon, enabling your company to maintain clear financial records, optimize your tax strategy, and reduce the last-minute scramble that often leads to costly errors.

With the right preparation, you can transform those daunting deadlines from a source of stress to a strategic opportunity for your business.

Federal Tax Deadlines: Know What’s Relevant for Your Business

Your federal tax deadlines depend on your business structure. For instance, C corporations operating on a calendar year (January 1 to December 31) must file their federal income tax return (Form 1120) by April 15, 2025, while fiscal year corporations typically have until the 15th day of the fourth month after their fiscal year ends.

Understanding these deadlines is essential for staying compliant and avoiding penalties. If your business has complex filing requirements, consult a tax professional to clarify your obligations and meet submission deadlines.

2025 Tax Deadline Calendar

We’ve outlined key dates your business needs to know:

January 2025

January 15

• Fourth quarter estimated tax payments for 2024 due (Form 1040-ES).

January 31

• W-2 forms due to employees.
• 1099 forms due to contractors.
• Copy B of Form 3921 due to employees (for ISO exercises).
• Form 940 (Federal Unemployment Tax Return) due.

February 2025

February 15

• File W-2 and 1099 forms with the Social Security Administration.
• Provide Affordable Care Act (ACA) forms to employees.

February 28

• Paper filing deadline for Forms 1099-MISC, 1099-NEC, and W-2.
• Paper filing deadline for Form 3921.

March 2025

March 15

• Tax returns for S corporations (Form 1120-S) and partnerships (Form 1065) due.
• Furnish Schedule K-1 to partners/shareholders.
• Deadline to elect S corporation status for 2025 (Form 2553).

March 31

• Electronic filing deadline for Form 3921.

April 2025

April 15

• Tax returns for C corporations (Form 1120) and individuals (Form 1040) due.
• First quarter estimated tax payments for 2025 due.
• Deadline to file for an automatic extension (Forms 4868 or 7004).

June 2025

June 15

• Second quarter estimated tax payments for 2025 due.

September 2025

September 15

• Third quarter estimated tax payments for 2025 due.
• Extended deadline for S corporations and partnerships.

October 2025 

October 15

• Extended deadline for C corporations and individual returns.

December 2025

December 15

• Fourth quarter estimated tax payments for corporations (fiscal year ending December 31).

January 2026

January 15

• Final estimated tax payment for Q4 2025 due.

Important Considerations

Tax deadlines may shift if they fall on weekends or holidays, moving to the next business day. Additionally, state tax deadlines often differ, so it’s critical to check with your state’s tax authority. Working with a tax professional can help you stay compliant and adapt to any changes in tax laws or unique circumstances.

What You Can Do to Stay Ahead

Don’t let tax deadlines catch you off guard. Follow these tips:

• Mark all relevant dates on your calendar.
• Prepare documentation well in advance. 
• Set up reminders for estimated tax payments.
• Maintain accurate financial records throughout the year.
• Consult with a tax professional for personalized guidance.

How MGO Can Help

Navigating tax deadlines doesn’t have to be overwhelming. Whether you are a private or public company with straightforward or complex filings, our team of experienced tax professionals is here to help. From filing requirements to strategic planning, we provide the guidance you need to stay compliant and focused on growing your business. Reach out to our team today and learn how we can support your success in 2025 and beyond.

The post Every Tax Deadline Your Business Needs to Know for 2025 appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• The upcoming election cycle has introduced uncertainty in U.S. tax policy, so corporate boards should be ready for potential changes — namely the expiration of the 2017 TCJA provisions.
• Boards should stay flexible in their tax planning. Divergent tax policies from both parties mean the election outcome could yield drastic differences in tax rates, capital gains treatment, and deductions.
• Boards should regularly review tax strategies for alignment with corporate goals and regulatory standards, maintaining oversight of the corporate tax posture.
• Stakeholders expect companies to be transparent and socially responsible in tax. Boards should prioritize this.

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The upcoming U.S. election cycle gives rise to ambiguity in business tax planning. Companies must prepare for a shifting tax landscape while considering differing priorities of Republicans and Democrats regarding U.S. tax policies, such as the approaching expiration of some components of the 2017 Tax Cuts and Jobs Act (TCJA). This environment emphasizes the importance of the board’s oversight role and its understanding of a company’s total tax strategy, emerging compliance complexities, the impact of potential election results and associated tax planning scenarios, and the need for a broad perspective on total tax posture and associated social responsibility of the company.

The TCJA

The TCJA brought significant changes to the U.S. tax code, but many of its provisions are set to expire in 2025. Notably, the corporate tax rate will remain at 21%, but other aspects of the act will sunset, potentially leading to increased tax liabilities for businesses and individuals. Future tax policies will be shaped by the House of Representatives, the Senate, and the White House, and a resulting mix of political power within these bodies will necessitate compromises to pass proposed legislation.

Political Corporate Tax Priority Outlines

Boards should have a clear understanding of their company’s current tax strategy, which takes into consideration the total tax liability – the composite total of all taxes owed by a taxpayer for the year. Next, consideration of the impact of and response to various tax scenarios and business operations, while ensuring compliance with existing tax law and regulations, should inform oversight of the company’s tax strategy.

Regular reviews of the company’s current tax strategy is a fundamental component of the board’s oversight responsibility. Key questions for management and tax advisors include:

• What is the company’s current tax strategy? Do they support the company’s corporate strategy?
• Is the tax department evaluating how potential tax scenarios may impact the company?
• Is management developing alternative action plans in response?

Tax Considerations and Questions the Board Should be Asking: Big Picture

Election-related risk factors, such as potential tax code changes, are top of mind in boardrooms. Directors know changes may be coming, and proactive management will facilitate a timely response. An effective tax strategy can positively impact the company’s bottom line, help to mitigate risks, and drive growth. Boards play a pivotal role in overseeing these efforts, ensuring management remains vigilant in weighing tax impacts in making informed and responsible strategic decisions. Read on for key tax considerations for boards and the questions they should be asking of management.

Total Tax Posture

Understanding the company’s total tax posture is essential. This includes not only corporate income tax liability but also other tax responsibilities such as payroll, real estate, sales, and value-added taxes (VAT). For example, a company with large net operating losses (NOLs) may not pay corporate income taxes but may still have other tax obligations to consider.

• Has risk oversight responsibility for total tax posture been allocated to the full board or a committee of the board? If so, has the company disclosed this at the board or appropriate committee level?
• Who is responsible for managing and reporting total tax posture? Does the company have adequate resources to fulfill this responsibility?
• What KPIs are being used to track the company’s total tax posture?
• How do company KPIs compare to those of competitors?

Global Tax Compliance

Global tax compliance is a complex undertaking, involving issues such as the U.S. global intangible low-taxed income (GILTI) and the base erosion and anti-abuse tax (BEAT). Global tax compliance requires a deep understanding and active monitoring of current and evolving international tax laws and regulations in multiple jurisdictions. Boards need to be proactive in overseeing how management is addressing these complexities to ensure compliance and avoid potential legal and financial risks.

• Who is responsible for and how is the company monitoring global tax compliance?
• Does the company have adequate resources dedicated to tax compliance?
• Have there been instances of noncompliance? How were they resolved?
• How does the company monitor evolving domestic and international regulations and legislation impacting compliance?

Tax Transparency and Social Responsibility

Tax transparency and social responsibility are increasingly important in today’s business environment. Companies should strive to be transparent about their tax practices within financial reporting and demonstrate their contributions to society through tax postures. Boards should consider how stakeholders, including investors and the community, see the company’s contribution to social responsibility through taxes. This includes evaluating the company’s tax practices and their alignment within the context of broader social goals.

• Who is responsible for drafting and monitoring all tax disclosure?
• Is the company conducting any stakeholder engagement around tax transparency and social responsibility?
• How is the company using information obtained from stakeholders to adjust its tax planning strategy?
• How do the company’s tax contributions align with competitors and stakeholder expectations?

Engineering Value Chain Efficiencies

Proactive tax structuring and value-chain planning are crucial for optimizing tax efficiency. Boards need to consider how much engineering for tax efficiency is acceptable and what might be perceived negatively by the tax authorities or the public. While manipulating the value chain for tax mitigation is generally acceptable, significant legal structuring and non-arm’s-length transactions, such as the use of shell companies or intercompany transfers, may raise speculation and scrutiny.

• What options are available for value chain efficiencies?
• Does the company have policies regarding tax structuring and value-chain planning?
• Were any structuring and planning policies considered and rejected? If so, why did we decide not to adopt them?

Conclusion

As the expiration of the 2017 TCJA approaches and pending November 2024 U.S. election results clarify which political priorities may evolve into legislation, companies must stay informed and prepare for potential changes in tax policy. By understanding their current tax strategy, planning for various domestic and international taxation scenarios, and emphasizing tax transparency and social responsibility, businesses can better navigate the complexities of the tax landscape and ensure compliance. Boards have the responsibility to play a critical oversight role in guiding these efforts and ensuring that the company management remains proactive and responsible in formulating its tax practices and executing its tax strategy.

How MGO Can Help 

Our tax team is here to help your board navigate today’s complex tax landscape with tailored strategies that directly address shifting policies and compliance challenges as they arise. From strategic planning and global compliance support to enhancing overall tax transparency and optimizing value chain efficiencies, we provide proactive solutions that align with your company’s goals — as well as your shareholders’.

Be prepared for whatever changes come your way, all while maintaining robust tax oversight and committing to social responsibility and long-term success. Reach out to our team today.

Written by Amy Rojik, Todd Simmens and Matt Becker. Copyright © 2024 BDO USA, P.C. All rights reserved. www.bdo.com 

The post Navigating the Future of Tax Policy: A Guide for Corporate Boards appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Vineyards and wineries must report all fixed asset changes, including obsolete or abandoned property, for accurate tax assessments.

• Properly classifying assets as either personal property or real estate impacts tax obligations.

• Investing in fixed asset management software can help you track and report assets to minimize your vineyard or winery’s personal property tax liability.

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Vineyards and wineries are unique in their operations — combining agriculture, manufacturing, and hospitality. This complexity brings specific challenges in managing personal property taxes.

Common Personal Property Tax Challenges for Vineyards and Wineries

Let’s look at a few specific aspects of vineyards and wineries that make personal property tax compliance unique:

Obsolescence and Abandonment

Continued taxation of obsolete or abandoned property is one of the most common issues for vineyards and wineries. It’s not unusual to see old tractors, farm equipment, or other machinery sitting unused on vineyard land — sometimes for decades.

Although these assets are no longer functional and are not being depreciated on the books, they continue to appear on the personal property tax rolls and are subject to tax. Vineyard owners must take action to remove obsolete items from both their property and property tax renditions (personal property returns).

Asset Classification

Another challenge in managing personal property taxes for vineyards and wineries is correctly identifying and classifying the property type. The classification determines whether the asset is considered depreciable or real property, as each has different tax implications.

For example, mobile equipment — such as tractors used in the field and carts for transporting grapes to the processing center — is classified as personal property and assessed immediately upon being placed in service. On the other hand, in California, vines planted in the ground are not assessed until three years after the season of planting in vineyard form, giving them time to become productive.

Storing wine or grape juice in large vats adds another layer of complexity. Whether these vats are classified as real estate or personal property depends on whether they are affixed to the ground or movable.

In a tasting room, there may be tables, racks, and stools, all of which are depreciable property. However, if the room has a built-in bar, it is considered part of the building, having a much longer depreciable life.

It takes a deep understanding of the multitude of tax rules and the various types of property used in vineyard and winery operations to optimize the company’s tax position.

Technology

Modern wineries might also have high-tech equipment, such as computers and specialized machinery, that should be listed separately on tax renditions. These assets often have shorter depreciation lives, and accurate tracking helps avoid overpaying taxes.

Exemptions

The wine industry benefits from many specialized tax rules and exemptions.

For example, changes to the California property tax rules in 2017 allowed vineyards to write off certain planting costs, such as fertilizer, stakes, and wires, rather than capitalizing and depreciating them. Additionally, some counties offer exemptions for startup vineyards, which can provide significant tax savings.

If you (or your tax advisor) aren’t familiar with these exemptions, they are easy to overlook.

Multiple Entities or Locations

It’s not uncommon for larger operations to have separate entities for growing grapes and producing wines. An operator might also owe tax to multiple jurisdictions because the property is located in different towns and counties. Staying on top of property tax obligations for various entities and locations can be confusing and time-consuming.

Resources for Personal Property Tax Compliance

Your annual business property tax affidavit — California form BOE-571-L or BOE-571-A, operation dependent) — is typically due to the county on January 1. Once submitted, the county uses the property tax affidavit to calculate the business property tax liability.

Many companies remember to add new property purchased during the year and remove sold property but neglect to report obsolete and abandoned property. It’s the property owner’s responsibility to document and report obsolete items to prevent unnecessary tax payments. Neglecting this aspect of property tax reporting leads to overpaying taxes and issues during audits.

Investing in fixed asset software can help ensure accuracy. These tools help track acquisitions, disposals, and other changes in the asset base, making certain you report up-to-date and accurate information to the county.

Given the specialized nature of personal property tax issues in the wine industry, you can benefit from working with a firm that has experience and expertise in this area. This knowledge can be invaluable for understanding the various personal property tax exemptions available to vineyards and wineries.

How MGO Can Help

MGO offers comprehensive tax services — including income taxes, property taxes, and sales and use taxes — tailored to the unique needs of vineyards and wineries.

Reach out to our Vineyards and Wineries team for help reconciling your internal records with the county’s asset lists to identify and correct discrepancies. We can also recommend fixed asset software to help you maintain accurate records going forward. Then, you can focus on what you do best: producing exceptional wines.

The post Managing Personal Property Taxes: A Guide for Vineyards and Wineries appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Cannabis companies face critical tax decisions following the notice of proposed rulemaking to reschedule cannabis.
• Areas of consideration include reviewing open and estimated tax years, as well as assessing your current structure and its costs/benefits moving forward
• Companies should also prepare for potential M&A opportunities and explore tax credits and incentives that could become available in a post-rescheduling world.

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The federal government’s proposal to move cannabis from Schedule I to Schedule III carries significant tax implications beyond the (non-)application of 280E. It’s essential for your business to navigate this new landscape and make informed decisions to optimize your tax position.

Here are four key areas to consider:

1. Reviewing Open and Estimated Tax Years

Now is the time to review prior year tax returns, considering recent court cases and other factors to determine if protective claims or amended returns are warranted and could be beneficial. Evaluating how recent events should impact your 2024 quarterly estimated tax payments and future tax strategies is crucial.

2. Structuring for Post-280E Tax Efficiency

Legal and operating structures designed for a 280E environment may no longer be optimal post-rescheduling. Assess the costs and benefits of maintaining your current structure and explore tax-efficient alternatives to avoid phantom income and simplify transactions between related companies.

3. Navigating M&A Tax Considerations

With merger and acquisition (M&A) activity expected to accelerate, it is crucial to optimize your company’s tax structure for potential transactions. Whether you’re an acquirer or a target, understanding the tax due diligence process and making informed decisions in light of the rescheduling announcement is essential.

4. Leveraging Tax Credits and Incentives

Post-rescheduling, cannabis companies can finally take advantage of federal, state, and local tax credits and incentives previously unavailable. Identifying and qualifying for credits related to research and development, employees, clean energy, and more will be beneficial for your business.

How MGO Can Help

MGO’s dedicated Cannabis practice has the experience and knowledge to help you navigate the complex tax implications and opportunities of rescheduling. Reach out to our team today.

The post Optimize Your Cannabis Business’s Tax Efficiency for Rescheduling appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• In April 2023, the U.S. Tax Court made news when it ruled in favor of businessman Alon Farhy, who challenged the Internal Revenue Service (IRS)’s authority to assess penalties for the failure to file IRS Form 5471.
• IRS Form 5471 is the Information Return of U.S. Persons With Respect to Certain Foreign Corporations.
• In May 2024, the U.S. Court of Appeals for the D.C Circuit reversed the Tax Court’s initial ruling — underscoring the significance of context in assessing penalties for international information returns.

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UPDATE (May 2024):

Recent developments in the Farhy v. Commissioner case have captured significant attention in the tax and legal sectors. On May 3, 2024, the U.S. Court of Appeals reversed the Tax Court’s initial decision, highlighting the importance of statutory context in penalty assessments for international information returns. This ruling emphasizes the need for a closer examination of statutory language, altering perspectives on penalty applicability for non-compliance.

The implications of this case extend to taxpayers and practitioners, as detailed in analyses by MGO (see below). The decision underscores the need for meticulous compliance practices and adept navigation of the complexities of U.S. international tax law, along with a deep understanding of judicial interpretations of tax regulations.

MGO’s professionals are well-positioned to assist clients in navigating the complexities arising from the recent Farhy v. Commissioner decision. With a comprehensive understanding of the changing landscape in penalty assessments for international information returns, we provide guidance to help companies adapt to new judicial interpretations and maintain compliance with evolving tax regulations.

ORIGINAL ARTICLE (published June 8, 2023):

On April 3, 2023, the U.S. Tax Court came to a decision in the case Farhy v. Commissioner, ruling that the Internal Revenue Service (IRS) does not have the statutory authority to assess penalties for the failure to file IRS Form 5471, or the Information Return of U.S. Persons With Respect to Certain Foreign Corporations, against taxpayers. It also ruled that the IRS cannot administratively collect such penalties via levy.  

Now that the IRS doesn’t have the authority to assess certain foreign information return penalties according to the court, affected taxpayers may want to file protective refund claims, even if the case goes to appeals — especially given the short statute of limitations of two years for claiming refunds. 

Our Tax Controversy team breaks down the Farhy case, as well as what it may mean for your international filings — and the future of the IRS’s penalty collections.  

The IRS Case Against Farhy

Alon Farhy owned 100% of a Belize corporation from 2003 until 2010, as well as 100% of another Belize corporation from 2005 until 2010. He admitted he participated in an illegal scheme to reduce his income tax and gained immunity from prosecution. However, throughout the time of his ownership of these two companies, he was required to file IRS Forms 5471 for both — but he didn’t.  

The IRS then mailed him a notice in February 2016, alerting him of his failure to file. He still didn’t file, and in November 2018, he assessed $10,000 per failure to file, per year — plus a continuation penalty of $50,000 for each year he failed to file. The IRS determined his failures to file were deliberate, and so the penalties were met with the appropriate approval within the IRS.  

Farhy didn’t dispute he didn’t file. He also didn’t deny he failed to pay. Instead, he challenged the IRS’s legal authority to assess IRC section 6038 penalties.  

The Tax Court’s Initial Ruling

The U.S. Tax Court then held that Congress authorized the assessment for a variety of penalties — namely, those found in subchapter B of chapter 68 of subtitle F — but not for those penalties under IRC sections 6038(b)(1) and (2), which apply to Form 5471. Because these penalties were not assessable, the court decided the IRS was prohibited from proceeding with collection, and the only way the IRS can pursue collection of the taxpayer’s penalties was by 28 U.S.C. Sec. 2461(a) — which allows recovery of any penalty by civil court action.  

How This Decision Affects Your International Penalty Assessments 

This case holds that the IRS may not assess penalties under IRC section 6038(b), or failure to file IRS Form 5471. The case’s ruling doesn’t mean you don’t have an obligation to file IRS Form 5471 — or any other required form.  

Ultimately, this decision is expected to have a broad reach and will affect most IRS Form 5471 filers, namely category 1, 4, and 5 filers (but not category 2 and 3 filers, who are subject to penalties under IRC section 6679).  

However, the case’s impact could permeate even deeper. For years, some practitioners have spoken out against the IRS’s systemic assessment of international information return (IIR) penalties after a return is filed late, making it impossible for taxpayers to avoid deficiency procedures. The court’s decision now reveals how a taxpayer can be protected by the judicial branch when something is deemed unfair. Farhy took a stand, challenged the system, and won — opening the door for potential challenges in the future.  

It’s uncertain as to whether the IRS will appeal the court’s decision. But it seems as though the stakes are too high for the IRS not to appeal. While we don’t know what will happen, a former IRS official has stated he expects that, for cases currently pending review by IRS Appeals, Farhy will not be viewed as controlling law yet.  

The impact of the ruling is clear and will most likely impact many taxpayers who are contesting — or who have already paid — IRC 6038 penalties. It may also affect other civil penalties where Congress has not prescribed the method of assessment in the future. 

How You Should Respond to the Court’s Decision 

You should move quickly to take advantage of the court’s decision, as there is a two-year statute of limitations from the time a tax is paid to make a protective claim for a refund. It’s likely this legislation wouldn’t affect refund claims since that would be governed by the law that existed when the penalties were assessed. Note that per IRC section 6665(a)(2), there is no distinction between payments of tax, addition to tax, penalties, or interest — so all items are treated as tax.  

If you’ve previously paid the $10,000 penalty, it’s important to file your protective claim now, unless you’ve entered into an agreement with the IRS to extend the statute of limitations, which can occur during an examination. Requesting a refund won’t ever hurt, but some practitioners believe the IRS may try to keep any penalty money it collected, even if the assessment is invalid — because, in its eyes, the claim may not be. Just know, you can file your protective claim for a refund, but may not get it (at least not any time soon).   

The Farhy decision could likewise be applied to other US IRS forms, such as 5472, 8865, 8938, 926, 8858, 8854. Some argue the Farhy decision may also be applied to IRS Form 3520.

How MGO Can Help

Only time will tell if the court’s decision will open the government up to additional criticisms for other penalty assessments. If you have paid your penalties and are wondering what your current options are, MGO’s experienced International Tax team can help you determine if you’re eligible to file a refund claim.  

Contact us to learn more.

The post How the Tax Court’s Ruling on Farhy v. Commissioner Could Affect Your Penalty Assessments appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• California Governor Newsom strives to amend the personal income tax laws to prevent wealthy taxpayers from utilizing Incomplete Gift Non-Grantor trusts.
• California residents use this by transferring assets into trusts held by nonresident trustees in states without income tax.
• If this legislation passes, taxpayers will no longer be able to take advantage of the strategy.

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If You Reduce California Income Tax With an ING, Newsom Is Onto You

Californian legislators propose to amend the personal income tax laws to close a little-known-but-effective loophole for the wealthy by targeting Incomplete Gift Non-Grantor (ING) trusts set up in other states with more favorable income tax rules. To date, California residents have had the opportunity to transfer assets into these trusts held by nonresident trustees in states without income tax, utilizing the state’s sourcing rules to avoid the tax. If approved, this new legislation will put a stop to this tax planning strategy. 

Taxing the Rich in California

As it stands, the ING trust is not commonly used. There are about 1,500 California residents with this trust in states without income tax — and if implemented, California would see a minimal revenue increase (about $30 million in the first year and $15 million in the following years). However, this would put an end to a tax planning strategy the wealthy have been using to their benefit for about 20 years.  

Because California is home to more billionaires than any other state at the same time as it also has the highest rate of poverty in the U.S., the concept of taxing the rich holds a certain appeal. In the past, Newsom has opposed proposals to raise taxes — but this proposal was included in the governor’s $223.6 billion budget plan for the next fiscal year, which begins in July. Whether the item survives the legislative process remains to be seen, but if New York’s passage of a similar law in 2014 is any indication, we are likely to see the end of this tax planning strategy for California’s ultra-rich.  

Moreover, this proposal has a retroactive element, differentiating it from New York’s and opening it up to potential lawsuits (New York trust holders had a five-month period to move their accounts to a different type of trust without incurring the tax). Newsom is pushing for the measure to begin the calendar year after its implementation.  

How the ING Works (Worked)

What is an ING, and why is Newsom trying to prevent its use? California taxpayers can transfer their assets into out-of-state, incomplete, non-grantor trusts (INGs), which constitute separate, taxable entities under state and federal tax law, and this move avoids California income tax on any appreciation or gains from those assets because it is “sourced” to another state based on the location of the trustee (i.e., the bank or whatever financial institution offers the trustee services in the other state). The non-grantor aspect comes into play when the taxpayer establishing the trust (the “grantor”) gives up control over managing investments or distributing assets to the trustee (contrast with a “grantor trust” in which the grantor continues to control how money is invested/distributed within the trust during their lifetime). For the trust to be deemed “incomplete,” the grantors specify how the money can be used.

Some of the states where these trusts are typically established include Florida, Wyoming, Delaware, Nevada, Tennessee, and South Dakota. For example, a California resident (TP) may decide to transfer stock in their business into an ING established in South Dakota. If TP held the stock directly, then as a resident, all the dividends (or if he sold it, the gain) would be taxable by California on their personal income tax return. But since TP doesn’t hold the asset – the ING does – the ING recognizes the income relating to the stock. California’s current rules provide that the income is sourced to (and thus taxable in) the state where the trustee is domiciled, and for this ING that location is South Dakota, which, incidentally, does not tax this sort of income.

Newsom is hoping that by eliminating this tax-free option, the state of California will be able to increase tax revenue in a way that will not alienate a large number of voters.

How MGO Can Help

If you are a California resident and currently use an ING as a tax strategy, there are steps to take now to avoid a negative impact. MGO’s experienced Private Client Services team can help you identify and implement an effective response.

The post California Cracks Down on Out-of-State Trusts appeared first on MGO CPA | Tax, Audit, and Consulting Services.

The tax relief postpones tax filing and payment deadlines occurring between January 8, 2023, and May 15, 2023, to a new due date of October 15, 2023. 

Some of the filings and payments postponed include:

• Individual income tax returns due on April 18 
• Business tax returns normally due on March 15 and April 18 
• 2022 contributions to IRAs and health savings accounts 
• Quarterly estimated tax payments normally due January 17 and April 18 
• Quarterly payroll and excise tax returns normally due on January 31 and April 30 

The current list of counties that qualify for this relief can be found here. 

If you qualify for this postponement, you generally do not need to contact the IRS or FTB to obtain relief. Relief is automatically granted for affected taxpayers who have an address of record located in one of the designated counties. However, if you still receive a late filing or late payment notice and the notice shows the original or extended filing, payment, or deposit due date falling within the postponement period, you should call the number on the notice to have the penalty abated.  

If you have questions or need assistance, contact MGO’s experienced State and Local Tax team. 

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