Wednesday, December 21, 2011

If you don't file a tax return when required, you are asking for trouble

DE routinely reconstructs tax returns for residents who are extremely delinquent and who have ignored repeated requests to file returns. They can use the income amounts reported to them by payees; bank statements, credit card statements, cancelled checks, customer bills and cash receipts; other methods (such as income earned in other years) to estimate income and the related taxes and these assessments are binding. The courts found it legal for them to disregard adjustments proposed  by the taxpayer after the assessments were made based on reconstruction. If the taxpayers had their own numbers, they should have filed a return to begin with. The state really ought to charge them fees for the accounting work as well!

Non-DE resident employed in DE

Non-DE resident employed in DE must pay DE tax for work performed on site in DE and when working from home (in PA) for this same DE employer. The case hinged on the fact that she was working from home solely for her convenience and not for the convenience of her employer. It was 33 days - hardly seems worth the fight!

NJ passes national guard/reservist employment credit

This provides a corporation business tax and gross (personal) income tax credit to taxpayers who employ members of the National Guard or members of a reserve component of the Armed Forces who have received orders for mobilization to active duty service. The credit would be equal to 20% of the salary and wages paid by the taxpayer during the privilege period or tax year up to $2,000 for each qualified employee.
Hopefully DE will copy this idea! license nexus?!!!

As if income tax and sales tax nexus were not enough! A business not located in VA other than having an employee at a client's place of business year round may be required to obtain a business license. Certainly other nexus will follow!

NJ New S/U Pub for Investigation/Security industry

This applies to: detective agencies and private investigators; and fingerprint, polygraph, missing person tracing, and skip tracing services; bodyguard and personal protection, guard dog, guard, patrol, and security services; armored car services; and security systems services, including security, burglar, and fire alarm installation, repair, and monitoring services.

PA offering ex-offender hiring credit

Philadelphia Re-Entry Employment Program for Ex-Offenders credit (PREP credit)

Owning a large limited interest of a NJ co may not be enough for nexus

The fact that the major asset and revenue source of a DE company was a limited interest in a NJ company did not mean that the DE company owed the NJ corporate business tax. The 2 companies had some common board members but otherwise were not at all integrated or unitary. Even though the court ruled in favor of the taxpayer in this case it is worth keeping in mind that this might not be the best structural set-up because who wants to wind up in NJ tax court? **shudder**

Leased Labor & Tax Credits

In the case of leased labor, NJ has proclaimed that tax credits incentivizing employers to hire from various groups belong to the company actually utilizing the labor of the individual and not to the staffing service, even though the W-2 will be issued by the leasing company.

States winning on 'click-through' nexus

States continue to expand the definition of nexus so as to collect the tax without a physical presence. One area of focus is sellers who ship products into their states without collecting tax. Legislation has passed in some states which makes the use of an in state affiliate directing sales to an out of state remote sellers' website a nexus-creating activity for the out of state seller. This affiliate nexus is often referred to as "click-through-nexus." 16 states have introduced legislation requiring remote sellers to inform the purchaser of their responsibility to self report the tax and/or to provide the state a customer list of purchases shipped into their state.

Many retailers (in states with sales tax) would support legislation requiring the collection of sales tax because they face an uphill battle when the competition does not have to charge sales tax. Failure to monitor the situation closely could put businesses in a non-compliant position.


On May 11, 2011, Delaware Governor Jack Markell signed into law legislation Senate Bill 30 allowing same-sex civil unions and fully recognizing same-sex relationships. The bill provides that parties to a civil union are to enjoy the same rights, protections and obligations that exist for married persons such as hospital visitation rights, property and last will and testament transfers, the ability to live together in nursing homes, joint adoption, and other legal issues. Also under the bill, Delaware recognizes legal relationships that same-sex couples enter into in another jurisdiction – whether it is a civil union or marriage – and treat the relationship as a civil union.

Our understanding is that the DE individual tax return form for 2012 will include civil union as a filing status - similar to NJ. Since same-sex couples will not be able to file a joint federal return they may find that tax preparation fees go up! In most software, these returns are prepared simultaneously and there is no way to draw from 2 different federal returns for one state return.

For a copy of Delaware Senate Bill 30, please click on the link provided below.$file/legis.html?open