GreenTrader Weblog

Taxes are an important part of the immigration debate

 

Taxes are an important part of the immigration debate, but overlooked by the media commentators to date.

Assessing and collecting taxes on illegal immigrants can help reconcile the immigration debate in a number of ways.

Illegal immigrants will emerge from the underground economy and become taxpayers like legal Americans and contribute their fair share towards government services which they surely use like schools, hospitals and more.

The U.S. and state governments will raise needed revenues to help reduce budget deficits. Governments are not winning voters in the short-term, as you must be a citizen to vote. 

Unfortunately, companies will incur higher wage costs by adding payroll and income tax withholding to the mix. Immigrants will still probably accept lower wages and companies will be happy to have these needed workers. 

U.S. resident and citizen employees will enjoy a more level playing field, as they are burdened with payroll and income tax withholding too.  Now illegal immigrant workers will also pay payroll and income taxes.

Taxes can certainly level the playing field on many accounts. 

Not addressing a solution for the ever growing illegal worker pool in the U.S. hurts everyone; the government, employees and employers.

Consumers must share some responsibility here. If you demand low prices with an emerging market purchase dividend, then understand why companies outsource and import from emerging markets. If you engage an illegal worker and pay cash to get a better deal, you are directly involved.

Can you deport 11 million illegal immigrant workers without great cost and disruption? Immigrants built this country and you should thank them for your savings on purchases attributable to their low costs; it’s a tax refund of sorts.

Illegal immigration is a tough issue to solve and bringing taxes into the mix should help deal with the issue.

Proprietary Trading Firms are under scrutiny

PROPRIETARY TRADING FIRMS – SPECIAL NOTE ON REGULATORY DEVELOPMENTS

This industry involves very active trading in equities and, sometimes, equity derivatives, using the firm’s capital.

There are three principal structures:
(1) all of the traders are employees of the firm and receive IRS Form W-2 (wages);
(2) all of the traders are independent contractors and receive IRS Form 1099 (usually, income for trading services) and
(3) all of the traders are members of the firm and receive a Schedule K-1 (share of partnership income).

In all cases the traders sign lengthy detailed agreements in which the trader agrees that he or she is not a “customer” of the trading firm (but, rather, an employee, independent contractor, or member, depending upon the structure used). In certain cases the trader must place funds in a type of surety account, in effect, to ensure that when they trade the firm’s capital they do not act recklessly, because their account can be depleted. In some cases, the trader agrees to be liable for trading losses incurred by the firm arising from the trader’s activities, above the amount placed in the surety-type account.

We have been advised that the National Association of Securities Dealers (NASD) is investigating proprietary trading firms, on a case by case basis, regarding the proper characterization of traders as traders or “customers.” The NASD reviews were sparked by the actions of some former proprietary traders of Refco, Inc. These traders argued that they were customers of Refco, Inc., not traders, because when Refco, Inc. entered bankruptcy, they would have a better position in the bankruptcy court. In addition, as customers they could claim SIPC insurance for brokerage accounts. Given the extremely confused and slow-moving nature of the Refco proceedings, it could be a very long time, if ever, before the customer vs. trader issue at Refco is settled.

While we wait for the wheels of justice to grind on, proprietary trading firms and traders would be well-advised to review very carefully the structure of the firm, the rights and liabilities of members, and regulatory developments. It is a fact of life in this industry that proprietary trading is viewed with disfavor, even downright suspicion, in some quarters. Monitoring developments, therefore, is a must for all concerned.

Even before the Refco, Inc. bankruptcy, we alerted the prop trading industry to this same concern. Click here to follow our prop trading industry news.

Visit our Proprietary Trader Web site section to learn how we can help you.

 

Thanks, Robert A. Green CPA & CEO

California LLC Gross Receipts Protective Claims Must Be Filed April 17

On March 3, 2006, a California Superior Court ruled that the state's LLC fee was unconstitutional. [(Northwest Energetic Services LLC v.

California

Franchise Tax Board, CGC-05-437721 (SF Sup.

Ct.

Mar. 3, 2006)].

CPAs who prepared tax returns for California LLCs that paid a gross receipts fee should prepare a protective claim for refund before the statute of limitations expires. Claims can be made for all open years. The "oldest" year will generally be 2001, and the deadline for unextended 2001 LLC tax returns is April 17, 2006.

-----------------------------------------------------------------------------------------------

Our position to date was that the CA LLC user fee applied to a trader's net trading income (proceeds less cost basis, but before expenses)  and not gross proceeds on sales of financial instruments.

Now the news is even better and you can file a claim for a refund on any LLC user fees paid.

Most of our CA trader clients are organized as husband wife general partnerships and the LLC user fee did not apply to them.

The $800 minimum tax still applies to LLCs, but not general partnerships.

If you have questions or need help with a refund claim, consider our help. We have a top notch CPA in CA ready to help you.

Note that the April 17, 2006 refund claim deadline is for tax year 2001, as refund claims are allowed for 3 years only. You have another year for 2002 and more time for later years.

Thanks,
Robert A. Green, CPA & CEO