Podcast: Play in new window | Download | Embed

Subscribe Apple Podcasts | Google Podcasts | RSS | Subscribe:

As millions of people now have a presence on the internet and receive income for that presence, it is increasingly important for them to enlist the services of a CPA or tax preparer that understands taxes for internet content providers. Failure to document income and expenses through official channels in a timely manner could result in serious consequences for internet content providers of any size.

What Is an Internet Content Provider?

Internet content providers are considered to be people or entities that provide content for the internet to generally either:

1. Help generate ad revenue for a specific content providing platform that they then get a percentage of revenue from
2. Establish subscription services that the content providing platform then gives them a percentage of revenue

Taxes for Internet Content Providers

Some internet content providers have the potential to make a lot of money on various platforms. For example, a person may be providing content regarding clothes such as taking pictures in clothes from certain designers. The clothing manufacturer may then figure out how many sales are attributable to a content provider’s website and then will pay the content provider money for that service. Depending on the rate of success, this could result in potentially significant income for an internet content provider.

Many of these people tend not to be traditional businesspeople who are intimately familiar with accounting and tax compliance. This is a mistake. Payments to an internet content provider are considered income and are taxable. In other words, it requires that these individuals keep detailed records of expenses and that they file annual tax returns. Failing to do so can create significant headaches and potentially serious consequences that could yield adverse effects for the individual themselves as well as their occupation as an internet content provider.

What Internet Content Providers Need to Know About Their Taxes

With the rise of a growing population of internet content providers, the Internal Revenue Service is taking notice. To ensure that these individuals do not fly under the radar and are not exempt from tax regulation, they are developing standards for auditing these individuals and platforms. Currently, the IRS is sending out 1099 forms to content providers to gather accurate information. Platforms and content providers are expected to comply with the criteria set forth by the IRS, such as:

• Filing tax returns in a timely manner
• Paying the appropriate amount of taxes

A Real World Example of Tax Issues for Internet Content Providers

Recently, OnlyFans creators were contacted by IRS criminal investigators. This platform is said to have a lot of different things, but much of their revenue comes from thousands and thousands of adult actors or content providers who have subscribers. As a result, the platform is making an impressive amount of money, which has attracted the attention of the Internal Revenue Service, which is now resulting in investigations and subpoenas for some of the top earning content providers.

The people being subpoenaed are then faced with having to figure out what to do. In general, some of the actions these individuals should consider taking are:

• Enlisting the help of a reputable and experienced lawyer. Criminal investigations typically require legal representation, especially when it comes to the protection of fifth and sixth amendment rights. Ultimately, they will most likely end up having to share at least some bank account information and tax return documentation. Even if the person had a CPA handle the tax returns, that information may still end up being scrutinized.
• Including all their income in documentation. This can require extensive legwork to gather all the information pertaining to the income an internet content provider has received.
• Filing tax returns. Ideally, the content provider should have already filed a tax return. However, if they haven’t, they will need a professional’s guidance on when to do so and how to handle it. If the tax returns are incorrect, they may need amending and professionals can provide guidance on how to do this.

While these actions can be helpful for those on the OnlyFans platform, they may also be useful for any internet content provider.

The above includes good warnings to those who are internet content providers. The IRS is getting more sophisticated about recognizing this population of earners and the income they are bringing in. The government agency is taking active steps to ensure that these individuals are documenting their income and tax returns in a proper way.

This can look like keeping track of the money a person earns and the expenses they incur as a result of providing internet content. Their income and expenses must be accounted for and in the right way. This is true for content providers of any size.

Internet content providers need to have professionals that know how to prepare tax returns, comply with tax laws, and protect them from adverse tax or legal consequences from their otherwise legitimate business.

If you are an internet content provider and have questions about documenting your income with the Internal Revenue Service or filing tax returns, it can be a good idea to reach out to both an attorney and professional tax preparer today.

Podcast: Play in new window | Download | Embed

Subscribe Apple Podcasts | Google Podcasts | RSS | Subscribe:

Taxes can be a complex topic, but even more so when it comes to what happens when there is a subpoena of tax records of a taxpayer and/or their certified public accountant by the Internal Revenue Service or another federal government agency.

It is a mistake for an individual or financial to assume that they must automatically comply with a subpoena for tax documents. There could be instances in which the subpoena could be considered unlawful, in which case once that determination is official, it would not require that an individual or tax preparer comply with it.

In order to protect themselves and their rights, both individuals and CPAs must be aware of what happens once a subpoena for tax records or documents issued and what steps should be taken in response.

What Happens When a CPA Receives a Subpoena of Tax Records

The CPA must respond to a lawful subpoena. However, the question becomes if the subpoena is deemed lawful or not. A taxpayer who is subject to a subpoena has the right to challenge it. This can be a difficult position for financial planners as they must protect the confidentiality of documents they have produced for a taxpayer, as well as the documents provided to them by the individual. Yet, they are required by law to respond to a lawful subpoena, with lawful being the keyword.
If a CPA receives a tax subpoena, it generally requires several actions including:

• The tax preparer should immediately enlist the help of a reputable lawyer who is familiar with tax law.
• If the law allows transparency in this specific situation, the CPA should make their taxpayer client aware that the records have been subpoenaed. This, in turn, gives the client notice so they can hire an attorney for themselves. The lawyer can then challenge the validity of the subpoena in question.

What Happens When an Individual Taxpayer Receives a Subpoena of Tax Records

While it is possible that a person’s CPA could receive a subpoena, it is equally plausible that an individual themselves could receive one. If an individual taxpayer receives a subpoena, the following steps should be taken:

• A taxpayer who receives a subpoena is required to respond to it.
• The person should hire an attorney for representation and to defend their fifth and sixth amendment rights.
• If a taxpayer does not already have a tax preparer, they should hire one to help analyze if the data being subpoenaed could be incriminating, contradict tax returns, or could pose other problems for the investigation itself or the individual. A professional financial planner can also better determine if the information being requested is something that is really needed, or if it is something the government would eventually receive anyway.
• The individual should ask their CPA if they should be fighting the subpoena or just providing the information that has been requested. Ultimately the tax preparer, should be able to help the taxpayer understand if the order will have any real effect on them or not.

A Real World Example of a Subpoena of Tax Records

When a federal government agency subpoenaed the tax records of the Donald Trump organization, the appointed CPA did not immediately turn over those documents to the government without question. They first fought the presumption that the subpoena was lawful by taking it all the way to the Supreme Court. The taxpayer, Trump, and his organization also fought the validity of the subpoena.

Ultimately, federal law says that the court makes the final ruling. In this particular case, the court ruled that at least some of the tax documents in question should be turned over to the government. That is in the process of being done now and then it will be reviewed by designated government entities.

This was not a situation where just because the subpoena of tax records was issued, automatic compliance by Trump or the CPA took place. The subpoena did not mean that tax documents should be automatically turned over without any consideration to whether the subpoena is indeed lawful. That said, the attorney and tax preparer were not able to ignore the subpoenas either.

With this example in mind, to best resolve a situation that involves a subpoena of tax documents from a government agency it requires solid assurance from professional financial planners and attorneys. This advice can provide valuable and accurate guidance as to what the next step should be.

Should an individual taxpayer or their CPA receive a subpoena of tax records, it is essential that they reach out to a reputable and qualified attorney for representation as soon as possible. This is necessary to best protect their rights and the privacy of their tax records.

Podcast: Play in new window | Download | Embed

Subscribe Apple Podcasts | Google Podcasts | RSS | Subscribe:

Straight from the files of real estate law, bankruptcy, and investment, we want to share an interesting personal story about a recent undertaking that blended all three of these areas. Our hope in sharing this story is that it will shed some light on the process for others aspiring to have similar endeavors. The process is not without risk, but if done right, the payoff can be big.

Finding the Property

Late last year, we were contacted by a bankruptcy lawyer who was representing a bank trying to foreclose on a specific piece of property where the borrower was in default. The borrower had gone through several bankruptcy tactics and was now delaying foreclosure. Our acquaintance was about to have the stay lifted so they could foreclose on behalf of her small out of town bank. The bank had asked the attorney to find someone who would buy the note and just take over the foreclosure and repossession process for the property.

Getting the Property

In the end, there was an arrangement put in place for a company we owned to buy the note from the bank and take over the bankruptcy process. Although the process was complicated and at times drawn out, we got the automatic stay in bankruptcy which then prevents foreclosures from occurring while someone is in bankruptcy. The automatic stay prevents foreclosures until such a time as the judge allows it. We went through the process, got the judge to approve it, and then received the right to foreclose.
Although the debtor did try to do several things to stop the foreclosure, they were unable to do so. We then got the order to lift the stay and then posted the property for foreclosure. We then conducted a foreclosure sale, where as the holder of the note, we were allowed to credit bids. This enabled us to bid up to the amount of the debt including:

• Unpaid interest
• Attorney’s fees
• Related costs

By that time, with the attorney’s fees, because of the bankruptcy and interest running at a default rate, the balance owed was enough that nobody else bid and we were able to bid and eventually became owners of the property.

Property Evictions

As new owners of the property, we had to go through the process of evicting the occupant. The next step was to hire eviction counsel, file the papers and serve them on the property. By having a process server tape the papers to the wall and also send letters to the debtor and the property, it then triggered a thirty-day clock where the occupant had thirty days to leave the property. Fortunately, the occupant called us on the thirtieth day and said they were turning over the property.
Had the occupants not turned over the property within the thirty-day time period, we would have had to go to court and either have them evicted or get a judgement saying the occupant had no right to be on the property. Then, if necessary, a constable would have gone out to the property and physically removed the occupant. Luckily it did not come to that.

Renovating and Selling the Property for Profit

The property was not horrible, but it was definitely not clean either, so we spent several days hauling out trash and then began painting and cleaning and getting ready to put in new floors so the property could go on the market soon.

The project became a family affair as my wife is a real estate agent and helped take on many of the responsibilities of improving the property and staging it in a way that makes it more marketable.

The property is now awaiting a few final touches and inspections before it goes on the market. The endeavor has been a mixture of bankruptcy, real estate law, real estate investment, and real estate marketing. It is an adventure that we are glad we signed on for because although we have helped with legalities of situations like this before, going through it personally has given us a firsthand perspective that will only add to us successfully representing similar cases in the future.