Non-U.S. Directors and Possible Tax Implications for Businesses

When non-U.S. resident directors attend board meetings in the U.S., they can find that their limited attendance may have unanticipated tax ramifications for the business and themselves. The Internal Revenue Service considers any directors’ fees paid to non-U.S. citizens who routinely serve on boards for U.S. based businesses as subject to a 30% withholding, and may require tax reporting on annual federal returns. The Internal Revenue Code (IRC) provides limited alternatives for non-U.S. citizens to have U.S.-sourced compensation exempt from U.S. income tax. For non-U.S. directors, one clause—the de minimis exception of Sec. 861(a)(3)—could be applicable. These directors will frequently have to rely on an income tax treaties between the U.S. and their home country for possible relief, however, given the history and restrictions of this exception.

The de minimis exception of Sec. 861(a)(3) of the U.S. Internal Revenue Code is designed to address specific situations where non-U.S. citizens’ compensation could be treated as foreign-sourced income, which would exempt that income from U.S. federal income tax withholding and possibly reduce U.S. tax liability. Restrictions apply as the following conditions must be met to qualify for such this exception: the non-U.S. resident cannot be in the U.S. for more than 90-days during the tax year, the total compensation for services cannot exceed $3,000 in aggregate and the compensation must be paid by a foreign employer or office maintained in a foreign country or U.S. possession.

The biggest takeaway regarding the de minimis exception of Sec. 861(a)(3) is to note that any compensation that exceeds $3,000, the entire amount could be considered U.S. income and subject to tax withholding. This is the main reason why most non-U.S. citizens rely on income tax treaties with their home country to find tax relief. Additionally, if a U.S. state does not adhere to the federal treatment of a specific foreign income tax treaty, the applicability of the treaty may be limited based on which U.S. state the non-U.S. resident director provides services in.

For a modern non-U.S. resident board member whose meeting fees and retainers frequently surpass $50,000 in a tax year, the de minimis exception is of limited utility due to the natural rate of inflation from the beginning of the twentieth century to the new century. Contact a reliable financial advisor, CPA and/or local tax attorney for more guidance on this exception.

If you have any questions regarding your individual or businesses’ state and/or federal tax return(s)/tax liabilities or received a notice from the IRS, FTB, EDD, CDTFA or any other regulatory agency, please call or email Wilson Tax Law Group, APLC, to setup a consultation with our firm.

Wilson Tax Law Group, APLC is a boutique Orange County tax controversy law firm that specializes in representation of individuals and businesses before federal and state tax authorities with audits, appeals, FBAR, offshore compliance, litigation and criminal defense.  Firm founder, Joseph P. Wilson, is a former Federal tax prosecutor and trial attorney for the IRS and California Franchise Tax Board.  Wilson Tax Law Group, APLC, is comprised of former IRS litigators & Special Agents, and Assistant US Attorneys from the US Attorney’s Office, Central District of California, Tax Division, which at the time handled both civil tax lawsuits and criminal tax prosecutions on behalf of the United States of America.

For further information, or to arrange a consultation please contact: Wilson Tax Law Group, APLC

Tel: (949) 397-2292 (Newport Beach Office) 

Tel: (714) 463-4430 (Yorba Linda Office)

Disclaimer: This blog post is for informational purposes only and does not constitute legal, tax or financial advice. Please consult with a qualified attorney, accountant or financial advisor for specific guidance related to your circumstances.

 

Summer Activities and Next Year’s Tax Return

As we head into the summer season, it is critical to consider which activities may qualify for a deduction and which may affect your personal or business tax return for the next year. Ahead of tax season, the Internal Revenue Service encourages taxpayers to consider a few common summer-based activities that could have an impact on your return and how much you will or will not owe before tax season begins.

If you or a loved one are planning a wedding, there are a few things to keep in mind which include reporting any name changes to the Social Security Administration and Employer, as your social security number must match your name used when filing your tax return. Secondarily, you must notify the Internal Revenue Service when your home address has changed. Additionally, your tax withholding and filing status may change the tax bracket which can be updated by revising your Federal W-4 form and State Tax Withholding Form (if you are subject to income tax) and submitting to your employer before the end of the tax year.

If you or a loved one is planning to send a child or children to summer day camp, the costs associated may qualify for a tax deduction on your next tax return. Overnight summer camps do not qualify). However, summer day camp can include babysitter or daycare fees, preschool fees, etc. Read more about what qualifies as a Child and Dependent Care Credit as parents or guardians may elect for this tax credit if they have earned income during the tax year and the child or children are under thirteen years of age.

If you or a loved one has a side job, work part-time, or have a seasonal position, there might be tax implications regardless of how much income was earned or if no federal income tax is owed. It is critical to file a tax return anyway and early to avoid any potential, unforeseen tax penalties. This will also ensure that any possible and qualifying tax refunds are processed timely.

If you or a loved one has filed a tax extension, it is crucial that you submit your tax return as soon as you can, while you can continue to recall every detail of that particular tax year. Extensions generally run from April to October, depending on your circumstances, so stay the course and cross this task off your list before the final quarter of the year.

Lastly, don’t forget to have fun this summer without worrying too much about your taxes. Leave the worries to your local  tax attorney. We're here to help.

If you have any questions regarding your individual or businesses’ state and/or federal tax return(s) or received a notice from the IRS, FTB, EDD, CDTFA or any other regulatory agency, please call or email Wilson Tax Law Group, APLC, to setup a consultation with our firm.

Wilson Tax Law Group, APLC is a boutique Orange County tax controversy law firm that specializes in representation of individuals and businesses before federal and state tax authorities with audits, appeals, FBAR, offshore compliance, litigation and criminal defense.  Firm founder, Joseph P. Wilson, is a former Federal tax prosecutor and trial attorney for the IRS and California Franchise Tax Board.  Wilson Tax Law Group, APLC, is comprised of former IRS litigators & Special Agents, and Assistant US Attorneys from the US Attorney’s Office, Central District of California, Tax Division, which at the time handled both civil tax lawsuits and criminal tax prosecutions on behalf of the United States of America.

For further information, or to arrange a consultation please contact: Wilson Tax Law Group, APLC

Tel: (949) 397-2292 (Newport Beach Office) 

Tel: (714) 463-4430 (Yorba Linda Office)

Disclaimer: This blog post is for informational purposes only and does not constitute legal, tax or financial advice. Please consult with a qualified attorney, accountant or financial advisor for specific guidance related to your circumstances.

 

CA Pass-Through Entity (PTE) Elective Tax Payments Due June 16th

For eligible and qualifying pass-through entities (PTEs), this is your friendly reminder that the deadline for submitting your elective initial tax payment is rapidly approaching and must be submitted to the FTB by June 16, 2025, at the latest. This pertains to taxable years beginning January 1, 2021 and before January 1, 2026. PTE elective tax payments can be paid using the FTB’s Web Pay application or by locating the Pass-Through Entity PTE elective tax Payment Voucher. and mailing with check payment to FTB. As a reminder, tax payments and tax filings have separate deadlines which more information these FTB deadlines can be found on the FTB website.

Qualifying PTE’s include entities that are taxed as a partnership or S corporation and generally do not include publicly traded partnerships or entities that are permitted or required to be in a combined reporting group. For Qualified taxpayers, you could receive a credit for your share of the entity level tax which may reduce your state personal income tax if filing in the state of California. This means that qualified taxpayers can choose to pay 9.3% tax on income and be eligible to receive a credit for the same amount on their personal income tax returns. The FTB defines a qualified taxpayer as a partner, member, or shareholder of an electing qualified entity as individual, trust, estate, or fiduciary that is liable for personal income tax in California.  This also includes a disregarded single member LLC that is liable for California personal income tax and owned by an individual, trust, estate, or fiduciary.

We recommend consulting with a reliable financial advisor, CPA and/or local tax attorney to find out if your California business(es) may qualify for PTE tax and benefits.

If you have any questions regarding your individual or businesses’ state and/or federal tax return(s) or received a notice from the IRS, FTB, EDD, CDTFA or any other regulatory agency, please call or email Wilson Tax Law Group, APLC, to setup a consultation with our firm.

Wilson Tax Law Group, APLC is a boutique Orange County tax controversy law firm that specializes in representation of individuals and businesses before federal and state tax authorities with audits, appeals, FBAR, offshore compliance, litigation and criminal defense.  Firm founder, Joseph P. Wilson, is a former Federal tax prosecutor and trial attorney for the IRS and California Franchise Tax Board.  Wilson Tax Law Group, APLC, is comprised of former IRS litigators & Special Agents, and Assistant US Attorneys from the US Attorney’s Office, Central District of California, Tax Division, which at the time handled both civil tax lawsuits and criminal tax prosecutions on behalf of the United States of America.

For further information, or to arrange a consultation please contact: Wilson Tax Law Group, APLC

Tel: (949) 397-2292 (Newport Beach Office) 

Tel: (714) 463-4430 (Yorba Linda Office)

Disclaimer: This blog post is for informational purposes only and does not constitute legal, tax or financial advice. Please consult with a qualified attorney, accountant or financial advisor for specific guidance related to your circumstances.

 

Treasury Inspector General Report Provides Updates on IRS Workforce Reduction Efforts

As a follow up to our earlier post back in March, the IRS began reducing the size of its workforce in February 2025, through the termination of probationary employees and deferred resignation programs. In a newly released report published on May 2, 2025, the Treasury Inspector General for Tax Administration gave an update on the IRS’s progress in the reduction of its workforce which includes additional voluntary separation programs announced in early April 2025, across multiple offices and job categories, and identifying the top six business divisions most impacted by these changes, among other changes associated with these efforts. The report can be found here.

Of the top six business divisions most impacted, the Human Capital Office, Information Technology, Large Business and International, Small Business/Self Employed, and Tax Exempt and Government Entities and Taxpayer Services. Of the top six job categories most impacted, Contact Representatives, IT Management, Miscellaneous Clerical and Assistants, Revenue Agents, Revenue Officers and Tax Examiners. Since February 2025, the IRS workforce reductions amount to approximately 103,000 IRS employee separations across all business divisions and job categories.

The importance of monitoring these IRS employee separations is that these changes could present opportunities to innovate and streamline taxpayer services provided by the Federal Government, while also reimagining how the IRS can best meet the diverse needs of taxpayers across the U.S. It could be the expansion of more modernized services through virtual assistance, user-friendly online tools for filing and tracking returns which we have previously included in earlier blogs, or long-term solutions to improve accessibility and convenience for taxpayers. Additionally, it could lead to broad audits and a greater emphasis on fairness and efficiency, helping to ensure that the U.S. tax system remains equitable.

Please reach out to our firm if you need legal tax assistance. Until then, we will continue to closely monitor these drastic changes and report on any new information as it becomes available.

If you have any questions regarding your individual or businesses’ state and/or federal tax return(s) or received a notice from the IRS, FTB, EDD, CDTFA or any other regulatory agency, please call or email Wilson Tax Law Group, APLC, to setup a consultation with our firm.

Wilson Tax Law Group, APLC is a boutique Orange County tax controversy law firm that specializes in representation of individuals and businesses before federal and state tax authorities with audits, appeals, FBAR, offshore compliance, litigation and criminal defense.  Firm founder, Joseph P. Wilson, is a former Federal tax prosecutor and trial attorney for the IRS and California Franchise Tax Board.  Wilson Tax Law Group, APLC, is comprised of former IRS litigators & Special Agents, and Assistant US Attorneys from the US Attorney’s Office, Central District of California, Tax Division, which at the time handled both civil tax lawsuits and criminal tax prosecutions on behalf of the United States of America.

For further information, or to arrange a consultation please contact: Wilson Tax Law Group, APLC

Tel: (949) 397-2292 (Newport Beach Office) 

Tel: (714) 463-4430 (Yorba Linda Office)

Disclaimer: This blog post is for informational purposes only and does not constitute legal, tax or financial advice. Please consult with a qualified attorney, accountant or financial advisor for specific guidance related to your circumstances.

 

Tangible Personal Property – What CA Businesses Need to Know

Businesses must pay taxes on their tangible personal property (TPP), which includes their supplies, fixtures, machinery, and equipment, in addition to their real property, which includes land and buildings, in most of the U.S. Although, many small businesses owe very little, the costs of compliance can be high. For a negligible loss of revenue, U.S. businesses can remove these compliance expenses by qualifying for a de minimis or other possible exemption. California businesses, located in Orange County, may qualify for a low-value ordinance exemption which increased to $10,000 and does not include real property or business inventory based on those limitations listed on the OC Assessor’s website. Los Angeles County businesses should refer to the LA County Assessor website to determine if they are required to file a Business Property Statement (Form 571-L) annually and if any exemption(s) will apply. Please refer to the local county and city in which your California business is located to find more information.

Managing TPP is difficult because, rather than getting a tax bill from the IRS, Californian business owners (taxpayer) are responsible for figuring out their tax liability every year. Due to the complexity of tax reporting and tax liabilities, any errors could negatively lead to a possible FTB audit, County Reassessment Notice or CDTFA collection action if appropriate legal and financial advice is not obtained from a reliable expert or local tax attorney, at the time of calculation. Additionally, California Business Owners (taxpayers) should know that corporate directors, officers, members, managers, partners, or any other people with control or supervision of the filing and payment of taxes may be held personally liable for any unpaid sales and use taxes, TPP, interest, and penalties. FTB, OC Tax Collector, and CDTFA offer free online tax calculators to help California Business Owners (taxpayers) calculate their tax liability based on filing status and income for the current tax year and tax table. You may also have access to previous tax year calculators and tax tables, subject to availability on these respective state websites. LA County Assessor website offers various tax resources for business owners as well.

If you have any questions regarding your individual or businesses’ state and/or federal tax return(s) or received a notice from the IRS, FTB, EDD, CDTFA or any other regulatory agency, please call or email Wilson Tax Law Group, APLC, to setup a consultation with our firm.

Wilson Tax Law Group, APLC is a boutique Orange County tax controversy law firm that specializes in representation of individuals and businesses before federal and state tax authorities with audits, appeals, FBAR, offshore compliance, litigation and criminal defense.  Firm founder, Joseph P. Wilson, is a former Federal tax prosecutor and trial attorney for the IRS and California Franchise Tax Board.  Wilson Tax Law Group, APLC, is comprised of former IRS litigators & Special Agents, and Assistant US Attorneys from the US Attorney’s Office, Central District of California, Tax Division, which at the time handled both civil tax lawsuits and criminal tax prosecutions on behalf of the United States of America.

For further information, or to arrange a consultation please contact: Wilson Tax Law Group, APLC

Tel: (949) 397-2292 (Newport Beach Office) 

Tel: (714) 463-4430 (Yorba Linda Office)

Disclaimer: This blog post is for informational purposes only and does not constitute legal, tax or financial advice. Please consult with a qualified attorney, accountant or financial advisor for specific guidance related to your circumstances.

Are You Aware of New Reporting Rules for Digital Assets?

With a tiered approach to compliance, the Internal Revenue Service has broadened reporting requirements and compliance for digital assets to match their complexity as currency continues to permeate the financial sector. This means that regulations could be subject to change more frequently as different aspects of reporting requirements are identified and businesses adapt their internal systems and processes to meet these new requirements before unleashing more complex cost basis tracking and reporting.

Some examples of such changes may likely include the introduction of the “1099-DA” form, special rules for qualifying stablecoins and specified NFT’s, backup withholding requirements, multiple broker rule clarification, expanded definitions, new documentation requirements and cost basis tracking and reporting. Refer to the FAQ's on Virtual Currency Transactions and Reporting Crypto on the IRS website for more information on these items.

This signifies a significant change in taxation, and for businesses to remain ahead of these changes, they must have adequate planning, resources, and a strong compliance infrastructure. To reduce any blind spots and improve your business's ability to take advantage of opportunities in this new digital era, seek guidance from your local tax attorney regarding any federal, state, or foreign tax matters.

If you have any questions regarding your state and/or federal tax return(s) or received a notice from the IRS, FTB, EDD or any other regulatory agency, please call or email Wilson Tax Law Group, APLC, to setup a consultation with our firm.

Wilson Tax Law Group, APLC is a boutique Orange County tax controversy law firm that specializes in representation of individuals and businesses before federal and state tax authorities with audits, appeals, FBAR, offshore compliance, litigation and criminal defense.  Firm founder, Joseph P. Wilson, is a former Federal tax prosecutor and trial attorney for the IRS and California Franchise Tax Board.  Wilson Tax Law Group, APLC, is comprised of former IRS litigators & Special Agents, and Assistant US Attorneys from the US Attorney’s Office, Central District of California, Tax Division, which at the time handled both civil tax lawsuits and criminal tax prosecutions on behalf of the United States of America.

For further information, or to arrange a consultation please contact: Wilson Tax Law Group, APLC

Tel: (949) 397-2292 (Newport Beach Office) 

Tel: (714) 463-4430 (Yorba Linda Office)

Disclaimer: This blog post is for informational purposes only and does not constitute legal, tax or financial advice. Please consult with a qualified attorney, accountant or financial advisor for specific guidance related to your circumstances.

 

Plan for Your Tax Withholdings Ahead of Next Year’s Filing Deadline

To minimize your tax liabilities, it is important to remember to check on your tax withholdings often and regularly to avoid unexpected issues when filing your tax returns. The Internal Revenue Service recently released a free online tool for taxpayers to utilize in managing their taxes when receiving income. The Tax Withholding Estimator can help determine if taxpayers need to submit an updated W-4 Form and/or Employee’s Withholding Certificate with their employer to voluntarily adjust how much taxes are deducted from paychecks throughout the tax year. This tool should be used at least once a year and could include every quarter if taxpayer income fluctuates often throughout the year as a W-4 employee. Self-employed taxpayers could also find value in using the Tax Withholding Estimator in determining how much tax should be deducted from earnings and placed aside ahead of tax filing season.

To determine an effective tax withholding estimate, it is important to gather the following documents: all income statements for yourself and spouse (if filing jointly), any data as it relates to earnings, and your most recently filed income tax return. If you are considered a taxpayer with a complex tax situation, please refer to Publication 505, Tax Withholding and Estimated Tax, for more information and instructions that may not be explained by using the tax withholding estimator.

If you have any questions regarding your state and/or federal tax return(s) or received a notice from the IRS, FTB, EDD or any other regulatory agency, please call or email Wilson Tax Law Group, APLC, to setup a consultation with our firm.

Wilson Tax Law Group, APLC is a boutique Orange County tax controversy law firm that specializes in representation of individuals and businesses before federal and state tax authorities with audits, appeals, FBAR, offshore compliance, litigation and criminal defense.  Firm founder, Joseph P. Wilson, is a former Federal tax prosecutor and trial attorney for the IRS and California Franchise Tax Board.  Wilson Tax Law Group, APLC, is comprised of former IRS litigators & Special Agents, and Assistant US Attorneys from the US Attorney’s Office, Central District of California, Tax Division, which at the time handled both civil tax lawsuits and criminal tax prosecutions on behalf of the United States of America.

For further information, or to arrange a consultation please contact: Wilson Tax Law Group, APLC

Tel: (949) 397-2292 (Newport Beach Office) 

Tel: (714) 463-4430 (Yorba Linda Office)

Disclaimer: This blog post is for informational purposes only and does not constitute legal, tax or financial advice. Please consult with a qualified attorney, accountant or financial advisor for specific guidance related to your circumstances.