The IRS has issued Revenue Procedure 2022-38, which sets forth inflation-adjusted items for various provisions of the Internal Revenue Code which will be applicable in 2023. Here are some of the highlights:
Income Tax Adjustments. Below is the tax table applicable to married individuals filing joint returns (and “Surviving Spouses”), for tax years beginning after December 31, 2022:
| If Taxable Income Is | The Tax Is |
| Not over $22,000 | 10% of the taxable income |
| Over $22,000 but not over $89,450 | $2,200 plus 12% of the excess over $22,000 |
| Over $89,450 but not over $190,750 | $10,294 plus ... |
The State of South Carolina has now adopted legislation allowing “pass through” entities to elect each year to be taxed at the entity level on their active trade or business income instead of having their owners taxed at the individual level on this income. This includes partnerships, S-corporations and LLCs taxed as partnerships or S-corporations. This election can be filed for tax years beginning after December 31, 2020.
South Carolina has now joined a growing number of states that have enacted federal state and local tax “workaround” legislation, and which shifts state ...
Each municipality and county in South Carolina (a taxing jurisdiction) is authorized to impose a business license tax based on the gross income of a business that operates within its borders. Businesses operating in South Carolina have been faced with registration requirements, filing deadlines, and rate classes that vary by taxing jurisdiction. The South Carolina Business License Tax Standardization Act (the Act) was signed into law by the Governor on September 30, 2020, and seeks to simplify the burdens of complying with business license tax requirements. The majority of the ...
On March 27, 2019, the Senate Finance Committee launched an investigation into the abuse of syndicated conservation easement transactions. The transactions being investigated involve promoters selling interests in tracts of land to taxpayers looking for large tax deductions. The taxpayers get allegedly inflated appraisals of those tracts of land and grant conservation easements on that land. The resulting charitable deductions are then split among the taxpayers.
Fourteen separate letters were sent to individuals who appear to be associated with the promotion of syndicated ...
The Tax Cuts and Jobs Act of 2017 (“TCJA”) added new Section 461(l) to the Internal Revenue Code (the “Code”). This new Code section limits the ability of noncorporate taxpayers, including individuals and “pass-thru” business entities (e.g., partnerships and S corporations), to deduct business losses against nonbusiness income. This new rule works together with the passive activity loss limitation rules of Code Section 469.
In particular, Section 461(l) denies noncorporate taxpayers a deduction for “excess business losses.” An “excess business loss” ...
The United States has a voluntary income tax reporting system. U.S. citizens, permanent residents, and businesses here must annually file income tax returns with the IRS, reporting their "worldwide income," deductions, and their "net taxable income," and pay income taxes to the IRS based on this amount. The rate of tax is "progressive;" that is, it increases as taxable income goes up. There is a minimum level of income for which an annual tax return is not required to be filed and which varies on filing status. For example, in 2016 for a single (unmarried) taxpayer, the individual must ...
Residents of South Carolina are required to file an income tax return, even if they do not earn income in the state. A resident is an individual who is "domiciled" in South Carolina. South Carolina law does not define domicile. The South Carolina Administrative Law Court (ALC) in a recent decision, however, has analyzed whether a taxpayer was domiciled in South Carolina for purposes of our state income tax. Floyd v. S.C. Dept. of Rev., Admin. Law Ct., Dkt. No. 15-ALJ-17-0458-CC (February 11, 2016).
The taxpayer was a native of Spartanburg, South Carolina. She lived in Oxford ...
The "hobby loss" rules of Internal Revenue Code Section 183 are commonly overlooked limitations that restrict the amount of loss a taxpayer may claim from an "activity not engaged in for profit" - i.e., a hobby. The definition of these activities is framed in the negative; a hobby is any activity other than those for which losses are allowed under Section 162 (ordinary and necessary business expenses) and Section 212 (investment expenses).
Generally, Sections 162 and 212 business and investment expenses can not only offset the income generated by those activities, but net losses over ...
If a taxpayer owes South Carolina taxes, the South Carolina Department of Revenue (SCDOR) will require payment of these taxes, including any related penalties and interest. SCDOR will consider payment plans for outstanding state taxes, however.
SC Form FS-102, Installment Agreement Request, should be submitted for this purpose. A nonrefundable fee of $45 and a 10% down payment is required. All tax returns during the period of the payment plan must be filed. Collection information statements using IRS forms (e.g. 433-A, Collection Information Statement for Wage Earners and ...
Internal Revenue Code Sec. 1411, passed by Congress in 2012, introduced a new tax on passive income that went into effect on Jan. 1, 2013, the tax on "net investment income" (NII).
The new tax was created to help pay for health care reforms that were enacted in 2010. The rate is 3.8% of the lower of net investment income or the amount of modified adjusted gross income (MAGI) over specific thresholds. Modified adjusted gross income is adjusted gross income increased by the foreign earned income exclusion (but also adjusted for certain deductions related to the foreign earned income). For ...
South Carolina offers a broad range of tax and financial incentives to encourage new and existing businesses to open or expand operations in the state. This is the first in a series of blogs which will review these lucrative incentives and how they function. This blog address the players in economic development in South Carolina, from the Department of Commerce to the county economic development alliances.
- Department of Commerce
The South Carolina Department of Commerce ("DOC") is overseen by Secretary of Commerce Bobby Hitt, who was appointed by Governor Nikki Haley. DOC is the ...
South Carolina offers many tax credits that can be used to reduce or even eliminate state income taxes and license fees. Examples of these tax credits include the new jobs credit, infrastructure credit, corporate headquarters credit, abandoned buildings credit, biomass resource credit, research credit, community development credit, venture capital credit, historic rehabilitation credit, and conservation easement credit (and many others).
A taxpayer will sometimes seek to claim more than one state tax credit at the same time, which raises the question of how the tax credits ...
The income of a multi-state business subject to tax in South Carolina is ordinarily determined by allocating certain income to South Carolina and apportioning the remainder of the business's income based on the ratio of South Carolina sales to gross sales everywhere. However, the law permits a taxpayer or the South Carolina Department of Revenue to use an alternative method when the ordinary allocation and apportionment rules do not fairly represent the extent of a taxpayer's business activities in South Carolina.
On December 23, 2014 the South Carolina Supreme Court issued an ...
On December 2, 2014, the South Carolina Department of Revenue issued S.C. Temporary Revenue Ruling No. 14-8 and No. 14-9 regarding the income and property tax treatment for married same-sex couples.Same-sex couples filing a federal income tax return with a married filing status must now file a South Carolina income tax return using the same married filing status.
In S.C. Temporary Revenue Ruling No. 14-8, the Department of Revenue instructs same-sex couples who are legally married under any state law to file their 2014 South Carolina income tax return as a married couple - either ...
Robert is a veteran tax return preparer of 20 years, who walks into his office on February 2, 2015 to begin a busy income tax filing season. Julie and Michelle stop by Robert's office and give their wage and income statements to Robert for the calendar year 2014. They tell Robert they were legally married in Massachusetts on July 4, 2013, but they are South Carolina residents now and wish to file both a federal and South Carolina income tax return as a married couple. Shortly thereafter, another couple, Mark and Brad, walk into Robert's office and state they were married in South Carolina on ...
In a recent private letter ruling, PLR 201405005, the IRS validated a succession plan implemented by a Subchapter S corporation to transition share ownership from retiring co-owners to certain key employees. An S corporation is a small business corporation which has made an election to be taxed under Subchapter S of the Internal Revenue Code and which, among other things, may not have more than one class of stock.
Specifically, the IRS concluded that profit on a redemption of the owners' shares by the company for notes will:
1. be taxed to them as capital gain reportable on the ...
On July 24, 2013 the South Carolina Supreme Court issued its opinion in the case of Centex International, Inc. v. South Carolina Department of Revenue, Opinion No. 27288. In a 3-2 decision, the Court found that a partnership did not qualify for the infrastructure tax credit and that its corporate owners could not claim the infrastructure tax credit. The partnership clearly incurred infrastructure expenses, but the Department of Revenue argued that only a corporate taxpayer was entitled to earn and claim the credit. The Court agreed.
The Court framed its analysis by reciting general ...
The IRS has long been aware of U.S. taxpayers living overseas who have not filed federal income tax returns or Reports of Foreign Bank and Financial Accounts ("FBARs"). Earlier this year, the IRS announced the reopening of its successful Offshore Voluntary Disclosure Program ("OVDP") allowing individuals with unreported foreign bank account income to come forward and report this income, and to pay the related tax, interest and certain reduced civil penalties, but without criminal prosecution. The IRS has now announced a new alternative compliance procedure designed to provide ...
The Court of Appeals for the First Circuit, in Kaufman v. Shulman, Docket No. 11-2017P-01A (1st Cir., July 19, 2012), reversed a Tax Court decision siding with the IRS which had disallowed a couple's conservation easement deduction. The Tax Court had disallowed the deduction because a provision in a subordination agreement with the couple's lender violated the Treasury Regulations' "extinguishment provision". The Court of Appeals reversed the Tax Court, finding that the Tax Court and IRS interpretation of this regulation was unreasonably restrictive and inconsistent with ...
Landowners may be allowed a federal income tax deduction for the contribution of a conservation easement restricting donated property. A qualified conservation contribution is a donation of a qualified real property interest to a qualified organization which is exclusively used for conservation purposes. The conservation easement must also be protected and the restrictions on the use of the property must be granted in perpetuity. The contribution must be made to governmental units, churches, schools, hospitals, or Section 501(c)(3) public charities and supporting ...
A landowner who donates a conservation easement to a qualifying organization can benefit from state tax incentives, in addition to the available federal income tax deduction. South Carolina provides an important transferable income tax credit for landowners who donate a conservation easement on property located in South Carolina. The income tax credit is equal to twenty-five percent of the amount of a charitable deduction resulting from the donation of a conservation easement.
The twenty-five percent credit is subject to several caps. First, the credit may not exceed $250 per ...
U.S. citizens that work or receive income from abroad are subject to U.S. income taxes on foreign income. The tax is applicable regardless of where U.S. citizens reside. U.S. taxpayers receiving foreign income must file an income tax return with the IRS reporting all foreign income and must pay the reported U.S. tax liability. U.S. taxpayers may be eligible for a partial foreign income exclusion as well as a housing cost exclusion. Foreign earned income is defined to include wages, salaries, or professional fees, and other amounts received as compensation for personal services ...