Amervim Bonano – Page 2

Juan Soto in New York Mets Uniform, Signing his contract

Tax Implications for MLB Players: California, New York, and the Juan Soto Phenomenon

Leave a Comment / Tax Tips, Taxes / By Amervim Bonano

In the world of Major League Baseball (MLB), the geographical location of a player can significantly affect their earnings, not just in terms of salary but in how much of that salary they get to keep after taxes. This post will delve into the tax implications for baseball players, particularly focusing on how contracts in California and New York compare with those in other states, spotlighting the recent record-breaking deal of Juan Soto with the New York Mets. The Tax Landscape for MLB Players Professional athletes, including baseball players, are subject to what’s colloquially known as the “jock tax.” This tax mandates that athletes pay income tax in every state where they perform, based on the proportion of their income earned in that state. Here’s how it impacts players: Why Higher Salaries in California and New York? Despite the high tax rates: Juan Soto’s Case – A Tax and Contract Analysis Juan Soto’s recent contract with the New York Mets sets a new benchmark at $765 million over 15 years, the largest in MLB history: Contrasting Contracts Across States The interplay between where an MLB player signs, the structure of their contract, and state tax laws is complex. Players in California and New York might command higher salaries due to market size and team revenue, but they also face higher taxes. However, strategic contract structuring, like in Juan Soto’s case, can mitigate some of these costs. For teams and players, understanding and navigating these tax implications is crucial in the negotiation and signing of contracts, making the financial aspect of baseball as much a game of numbers as the sport itself.

Navigating the IRS Audit Maze: 15 Red Flags to Watch Out For

Leave a Comment / Compliance, Tax Tips, Taxes / By Amervim Bonano

Filing your taxes is a meticulous process, one where precision not only ensures compliance but also minimizes the risk of an audit. The Internal Revenue Service (IRS) employs various methods to select returns for examination, often focusing on inconsistencies or unusual patterns that could suggest discrepancies or errors. Here’s a detailed look at 15 common red flags that might increase your chances of an IRS audit: 1. Excessive or Unusual Deductions If your deductions seem disproportionately large compared to your income, the IRS might take a closer look. This includes deductions for business expenses, medical expenses, or charitable contributions that don’t align with your reported income or lack sufficient documentation. 2. Large Business Expenses for Schedule C New businesses or those showing minimal profit might raise eyebrows if they claim substantial expenses. The IRS often scrutinizes Schedule C (Profit or Loss from Business) for potential overstatements. 3. High Home Office Deductions The home office deduction is complex due to its specific requirements for space usage and business purpose. Overclaiming this deduction without proper substantiation can lead to scrutiny. 4. Round Numbers Submitting tax figures in round numbers can imply estimation rather than precise calculation. This is particularly true for income, expenses, or deductions where exact amounts are expected. 5. Mismatch Between Reported Income and Lifestyle In today’s digital age, the IRS might compare your lifestyle (visible through social media or financial transactions) with your tax filings. A significant mismatch could invite questions. 6. Failure to Report All Income Every income from 1099s, W-2s, or any third-party reported income must be declared. Omissions here are a clear red flag. 7. Cash Transactions Reporting a high volume of cash income without corresponding bank records or receipts can be suspicious, especially in businesses where cash transactions are common. 8. Lack of Documentation for Charitable Contributions Charitable deductions require substantiation, particularly for large amounts. Lack of receipts or acknowledgment can lead to an audit. 9. Unusual Investments on Schedules B or D If your investment strategies result in losses or gains that don’t follow market trends, or if they’re unusually large, the IRS might investigate. 10. Schedule E Discrepancies Losses from rental properties or other passive activities need to be backed by evidence of active management or operation. Significant losses here without income might prompt review. 11. Claiming Losses from Passive Activities Losses from activities where you’re not materially participating can be flagged if they seem to be used to offset income from other sources. 12. Foreign Accounts or Income With global financial transparency increasing, failing to report foreign income or accounts (FBAR) can result in an IRS audit. 13. Self-Employment Tax Issues Mismatches in the income reported for self-employment taxes versus your income tax can indicate discrepancies in reporting. 14. Substantial Travel or Entertainment Expenses Business-related travel and entertainment expenses should be well-documented. Large or frequent claims without justification can be problematic. 15. Frequent Filing of Amendments While amending returns to correct errors is advisable, doing so frequently might suggest initial carelessness or an attempt to adjust income post-filing. Ensuring Compliance While these red flags do not guarantee an audit, they do increase the likelihood of your return being examined. Here are some tips to stay on the safer side: Navigating tax season can be daunting, but understanding these red flags can help you prepare a return that’s thorough and less likely to pique the interest of the IRS for the wrong reasons. Remember, an audit isn’t always about wrongdoing; sometimes, it’s just about ensuring compliance with tax laws. However, with careful preparation, you can minimize your chances of being audited.

DIY Audit: A Guide to Keeping Your Act 20 and Act 60 Compliance on Track

Leave a Comment / Uncategorized / By Amervim Bonano

If you’re benefiting from Puerto Rico’s Act 20 or Act 60 tax incentives, staying on top of compliance is crucial. Missed deadlines or overlooked requirements can lead to penalties, loss of tax benefits, or even revocation of your grant. Here’s a step-by-step guide to conducting a DIY compliance audit to help you manage Act 20 and Act 60 obligations effectively. Step 1: Verify Your Filing Deadlines To maintain compliance under Act 20 or Act 60, it’s essential to track all filing deadlines, including forms, reports, and declarations. Below is a detailed list of due dates, extensions, and notes to keep you on track: Additional Note: Estimated tax payments are due on the 15th day of the 4th, 6th, 9th, and 12th months of the taxable year. Step 2: Ensure Residency Compliance For individuals receiving Act 20 or Act 60 benefits, maintaining bona fide Puerto Rico residency is crucial. Ensure you meet the following requirements: Potential Risks: Step 3: Check for Business Expansion or Model Changes If your business has expanded, changed its operations, or moved locations, confirm that the new activities are aligned with your original Act 20 or Act 60 decree. If your business model or services no longer match the original decree criteria, a re-evaluation or amendment may be necessary. Also, if your business address has changed, be sure to update it with all relevant agencies, including the IRS, Hacienda, Puerto Rico State Department, Department of Labor, and FINCEN (for the BOI report). This keeps your records accurate and prevents unnecessary compliance issues. Step 4: Prepare for Possible Audits or Compliance Checks Regular audits and compliance checks by the Puerto Rican Department of Treasury or the Department of Economic Development and Commerce (DDEC) are part of the Act 20 and Act 60 oversight. Be prepared to provide: Step 5: Understand the Consequences of Non-Compliance Failure to meet the requirements of Act 20 or Act 60 can lead to serious consequences, such as: Final Thoughts Conducting a DIY audit of your Act 20 or Act 60 compliance is an effective way to stay organized and protect the benefits you have worked hard to achieve. This list can serve as an annual compliance review, helping you confirm that you’re on track with filings, residency requirements, and any operational changes. For additional guidance or support with complex requirements, consulting a professional familiar with Act 20 and Act 60 compliance can provide added peace of mind. For further assistance or information, please contact us at [email protected] or 787-473-8985. Disclaimer:The information provided is for informational purposes only and should not be considered legal or tax advice. Consult with a qualified attorney or tax advisor to discuss your specific situation.

Fuentes de Ingresos Exentas en Puerto Rico: Guía Completa para Aprovechar las Exenciones

Leave a Comment / Uncategorized / By Amervim Bonano

En Puerto Rico, ciertos tipos de ingresos están exentos de impuestos, lo que puede reducir significativamente la carga fiscal de los contribuyentes. Aquí exploramos las principales fuentes de ingresos exentas, los porcentajes de exención aplicables, y los requisitos necesarios para calificar. ¡Sigue leyendo para descubrir cómo puedes beneficiarte! 1. Cuota de Ajuste por Costo de Vida para Empleados del Gobierno de EE. UU. en Puerto Rico 2. Subsidio Federal para Planes de Medicamentos Recetados 3. Ingresos de Corporaciones Especiales Propiedad de Trabajadores 4. Compensación por Desempleo 5. Exención para Servicios Militares Activos en Zonas de Combate 6. Ingresos Devengados en la Serie del Caribe de Béisbol 7. Ingreso por Operaciones de Aseguradores Internacionales 8. Ingresos para Investigación en Instituciones Educativas Conclusión Estas exenciones fiscales están diseñadas para aliviar la carga tributaria de ciertos grupos de contribuyentes y fomentar actividades importantes en Puerto Rico, como la investigación, el empleo de trabajadores y el apoyo a programas sociales. Es recomendable que los contribuyentes consulten con un asesor fiscal para asegurarse de cumplir con todos los requisitos y aprovechar al máximo los beneficios disponibles. Con este conocimiento, puedes reducir tu carga fiscal y, al mismo tiempo, contribuir al desarrollo económico de Puerto Rico. Para asistencia o información adicional, por favor contáctanos en [email protected] (mailto:[email protected]) o al 787-473-8985. Aviso Legal: La información proporcionada es solo para fines informativos y no debe ser considerada como asesoramiento legal o fiscal. Consulta con un abogado o asesor fiscal calificado para discutir tu situación específica.

Understanding Puerto Rico’s Taxpayer Bill of Rights: What Every Taxpayer Should Know

Leave a Comment / Taxes / By Amervim Bonano

Navigating tax obligations can be complex and sometimes overwhelming. To ensure that all taxpayers in Puerto Rico are treated fairly and with respect, the Department of Hacienda (Puerto Rico’s Treasury Department) has established a Taxpayer Bill of Rights. This document outlines both the rights and protections for taxpayers and the obligations of Hacienda towards them. Here’s a breakdown of key points from the Taxpayer Bill of Rights. Key Taxpayer Rights Every taxpayer in Puerto Rico is entitled to specific protections and considerations when interacting with Hacienda. These rights are designed to foster transparency, fairness, and respectful treatment: Hacienda’s Responsibilities Toward Taxpayers Alongside taxpayer rights, Hacienda has specific obligations to ensure that taxpayer interactions are handled professionally and with respect. Hacienda’s responsibilities include: Important Procedures for Tax Disputes and Adjustments The Taxpayer Bill of Rights also defines key procedures for addressing tax disputes or adjustments, ensuring that taxpayers have a clear path for resolution: The Taxpayer Bill of Rights is a valuable resource for any taxpayer in Puerto Rico, providing assurance that Hacienda will treat them fairly and respectfully. By understanding these rights and Hacienda’s obligations, taxpayers can navigate their tax responsibilities with greater confidence. or further assistance or information, please contact us at [email protected] or 787-473-8985. Disclaimer:The information provided is for informational purposes only and should not be considered legal or tax advice. Consult with a qualified attorney or tax advisor to discuss your specific situation. Resource: https://hacienda.pr.gov/sites/default/files/publicaciones/carta_derechos_al_contribuyente.pdf

How Non-Residents Can Request a Refund of Withheld Taxes on Property Sales in Puerto Rico

Leave a Comment / Uncategorized / By Amervim Bonano

Selling property in Puerto Rico as a non-resident can come with some unique tax obligations. One of the most significant is the withholding tax applied to sales of real estate or shares located in Puerto Rico. However, if you meet certain requirements, you may be eligible to request a refund of that withheld tax. Here’s a guide to understand when this applies, the benefits, and the steps for non-residents looking to reclaim withheld taxes. Understanding Puerto Rico’s Withholding Tax for Non-Residents When a non-resident sells property in Puerto Rico, the buyer is typically required to withhold a portion of the sale price as tax. This amount can vary: This withheld amount is then deposited with the Puerto Rico Department of Treasury as a tax on the seller’s potential profit from the sale. However, not every sale results in a profit, and some sellers may have already paid the relevant taxes on the gain. This is where the refund application comes in. Do You Qualify for a Refund? A non-resident seller may qualify for a refund if: Benefits of Applying for a Refund If you meet the criteria, applying for a refund can help you recover the amount withheld during the sale, provided you submit adequate documentation to support your claim. How to Apply: Required Documentation Applying for a refund requires thorough documentation, so it’s essential to organize these key items: Additional Considerations If the property was acquired through inheritance or donation, or if permanent improvements were made, additional documentation may be required. For example: Filing the Application The completed application, along with the required documentation, should be submitted to the Puerto Rico Department of Treasury by the 15th of the month following the sale date. Late submissions may result in the application being filed away without review, so timeliness is crucial. Conclusion Navigating Puerto Rico’s withholding tax refund process can be complex, especially for non-residents selling property on the island. However, with careful preparation and a clear understanding of the required documents, non-resident sellers can recover withheld taxes and maximize their returns on Puerto Rican property investments. For more insights or questions about the withholding tax refund process, feel free to reach out in the comments below! For further assistance or information, please contact us at [email protected] or 787-473-8985. Disclaimer:The information provided is for informational purposes only and should not be considered legal or tax advice. Consult with a qualified attorney or tax advisor to discuss your specific situation.

Latest Benefits of Act 60 for Investors in Puerto Rico: What You Need to Know

Leave a Comment / Compliance, FAQ, Relocation, Tax Incentives, Tax Tips, Taxes / By Amervim Bonano

Are you considering leveraging the lucrative tax incentives offered under Puerto Rico’s Act 60? If so, you’re on the path to potentially significant tax savings, but navigating this terrain requires careful planning and thorough understanding. Here’s a comprehensive guide based on the latest drafts from our office: 1. Real Property Investment: – Primary Residence: Act 60 mandates investors to purchase real property in Puerto Rico as a primary residence within two years of grant approval. This investment can be made individually, with a spouse, or via an entity solely controlled by you or you and your spouse. 2. Understanding Tax Exemptions: – Start Date: Your tax exemptions on interest, dividends, and certain capital gains kick in from January 1st of the year you submit your application. Remember, these exemptions do not apply retroactively to previous years. 3. Strategic Capital Gains Taxation: – 5% Fixed Rate: If you’ve held assets like stocks or cryptocurrencies before moving, sell them after 10 years of Puerto Rican residency but before 2036, and you’ll benefit from a mere 5% tax on gains. – 100% Exemption: Gains on assets acquired post-residency are completely tax-free if realized before January 1, 2036, offering a substantial incentive for new investments. 4. Compliance is Key: – Non-Compliance: Not adhering to the stipulations of Act 60 can not only lead to penalties but also the revocation of your grant. This could mean retroactive tax liabilities from the date of breach or conviction for serious offenses. 5. Ethical Obligations: – Anticorruption Compliance: Adherence to Puerto Rico’s Anticorruption Code is non-negotiable. Ethical misconduct or legal convictions can dismantle your tax benefits retroactively. 6. Annual Commitments: – Reporting: Ensure you file your annual report by November 15 each year. Missing this could jeopardize your grant. – Charitable Contributions: Starting from the second year, an annual donation of $10,000 to certified Puerto Rican nonprofits is required, with at least half supporting child poverty eradication. Implications for Investors: – Global Ethical Conduct: Your actions worldwide could impact your Act 60 benefits. Maintain global standards of legality and morality. – Social Investment: Your financial commitments under Act 60 directly contribute to community welfare, particularly in combating child poverty. – Tax Planning: Craft a timeline for investment, residency, and asset realization to make the most of these tax advantages. Act 60 presents a unique opportunity for investors looking to optimize their tax situation while contributing positively to Puerto Rico’s economy. However, the key to benefiting from Act 60 lies in meticulous compliance, strategic financial planning, and an understanding that these benefits come with social responsibilities. For those ready to embark on this journey, ensure you’re well-informed and prepared to meet all requirements to enjoy the full spectrum of advantages that Act 60 offers. Should you need further guidance or have specific questions, professional advice tailored to your circumstances is indispensable. For further assistance or information, please contact us at [email protected] or 787-473-8985. Disclaimer:The information provided is for informational purposes only and should not be considered legal or tax advice. Consult with a qualified attorney or tax advisor to discuss your specific situation.

Debunking the Myth: Can You Really Save on Taxes by Paying Yourself?

Leave a Comment / Compliance, Deductions, Doing Business, Tax Tips, Taxes / By Amervim Bonano

In the world of business ownership, tax strategies can be complex and sometimes misleading, especially when it comes to the advice shared by social media influencers. One popular claim is that you can save money on taxes by paying yourself as a business owner. But is this really true? Let’s dive into the details to clear up any confusion and ensure you understand the facts. The Misleading Advice You may have come across advice suggesting that paying yourself as a business owner allows you to claim a business tax deduction. While this sounds appealing, it’s not entirely accurate. The idea has been promoted by some social media influencers, but it doesn’t tell the whole story. Understanding W2 Income and Sole Proprietorships The IRS defines W2 income as wages or salaries paid by another entity for services rendered by an employee. If you’re a sole proprietor, your income doesn’t fall under this category. Instead, the money you make is reported on your individual tax return (Form 1040) and taxed just like regular income. In other words, as a sole proprietor, paying yourself doesn’t create a tax deduction because the income is already considered part of your personal earnings. How It Works for S-Corporations The situation changes when you own an S-corporation. In this case, any money your company pays you is considered W2 income because, in the eyes of the IRS, everyone in the S-corporation is an employee, including you. When you pay yourself through the S-corporation, it’s considered a business tax deduction for the company itself. You can claim this deduction on Form 1120-S, the tax form for your S-corporation. However, it’s important to note that this doesn’t reduce your personal tax liability. The Tax Filing Process Explained To illustrate, let’s consider an example: Suppose your S-corporation earns $100,000 in a year. You decide to pay yourself $50,000 for your services. The S-corporation can deduct this $50,000 as a business expense on Form 1120-S. However, when you file your individual tax return (Form 1040), you’ll still need to report the full $100,000 as income. This means that despite the business deduction, your overall tax liability remains the same on your personal return, minus any personal tax credits or deductions you might be eligible for. The Real Takeaway While the idea of getting a tax deduction for paying yourself sounds enticing, it’s not as straightforward as it seems. The deduction applies to the S-corporation, not to your personal income. That said, using an S-corporation can still offer benefits, such as saving money on Social Security and Medicare taxes. Understanding the nuances of tax strategies is essential for making informed decisions as a business owner. Before implementing any tax-saving strategies, it’s always wise to consult with a tax professional to ensure you’re on the right track. For further assistance or information, please contact us at [email protected] or 787-473-8985. Disclaimer:The information provided is for informational purposes only and should not be considered legal or tax advice. Consult with a qualified attorney or tax advisor to discuss your specific situation.

How Much Should You Pay Yourself as a Business Owner of an Entity?

Leave a Comment / Compliance, Deductions, Tax Tips, Taxes / By Amervim Bonano

As a business owner, you invest a lot of time and effort into making your business successful. But how do you determine how much to pay yourself for all the work you do? This is an important question, especially if you own an entity, where you have the flexibility to decide your own compensation. In this article, we’ll explore the key considerations in determining how much you should pay yourself, balancing your salary with tax-saving strategies. Understanding Entity Payments When you own an entity, your business profits can be divided into two types of payments: Why Finding the Right Balance Matters The IRS closely monitors how entity owners pay themselves because it wants to ensure that everyone is paying their fair share of FICA taxes. If you try to minimize your salary and maximize distributions to avoid these taxes, you could face penalties. On the other hand, if you allocate too much of your income to reasonable compensation, you’ll end up paying more in taxes than necessary, missing out on potential tax savings. The key is to find a middle ground that satisfies IRS requirements while also optimizing your tax position. How to Determine Your Reasonable Compensation Determining reasonable compensation isn’t a one-size-fits-all situation. Here are some factors to consider: Many people suggest a 50/50 split between reasonable compensation and distribution, but this rule of thumb doesn’t apply universally. Every entity is different, and what works for one business might not work for another. Get Expert Advice Determining the right balance between salary and distributions requires careful consideration of your specific situation. Consulting with an expert familiar with entity tax strategies can help ensure that you’re paying yourself fairly while maximizing your tax savings. For further assistance or information, please contact us at [email protected] or 787-473-8985. Disclaimer:The information provided is for informational purposes only and should not be considered legal or tax advice. Consult with a qualified attorney or tax advisor to discuss your specific situation.

8 Tax Myths Busted

Leave a Comment / Uncategorized / By Amervim Bonano

“Filing taxes is voluntary”: This statement is misleading. While it is true that the IRS does not have the authority to force you to file a tax return, the tax code itself is mandatory. If you meet the income thresholds, you are required to file a tax return. Failure to file can result in penalties and interest charges. “Your tax preparer is liable for your taxes”: This statement is false. While tax preparers can be held liable for errors or fraud on your tax return, they are not responsible for the taxes you owe. The taxpayer is ultimately responsible for the accuracy of their tax return and the payment of any taxes owed. “Students do not need to file taxes”: This statement is misleading. Whether or not a student needs to file a tax return depends on their income and other factors. If a student has earned income, they may need to file a tax return, even if they are still in school. “You can choose your filing status”: This statement is false. Your filing status is determined by your marital status and other factors. You cannot simply choose your filing status. “Remote employees can take home office deductions”: This statement is misleading. While it is true that remote employees may be eligible for home office deductions, there are specific requirements that must be met. The home office must be used exclusively for business purposes and must be the primary place of business. “Gifts are considered taxable income”: This statement is false. Gifts are generally not considered taxable income to the recipient. However, if the gift is given in exchange for services or if it is a large gift from an employer, it may be taxable. “Cash and Crypto are Not taxable”: This statement is false. Cash and cryptocurrency are both taxable. Income from cash transactions and cryptocurrency transactions is subject to tax. “Filing an extension means you have longer to pay taxes”: This statement is false. Filing an extension only extends the deadline for filing your tax return, not the deadline for paying your taxes. If you owe taxes, you must still pay them by the original deadline or you may be subject to penalties and interest charges.