In Nevada today, an overview of state taxes reveals a pro-business scenario where a variety of individuals from the leaders of state government to CPAs are working to create an effective tax structure to serve the individuals, businesses and state of Nevada.
When it comes to dreading taxes, Nevadans have comparatively little reason to do so. Mike Verville works as a CPA and partner with Eide Bailly, a CPA and consulting firm offering a variety of tax services across industries ranging from construction and real estate to government, healthcare and nonprofits. He points out that while some factors such as a high tax rate for automobile registrations may weigh against us, “Overall, Nevada is very tax friendly.”
That benefit often impacts individuals across socio-economic backgrounds. The lack of a state income tax is particularly appealing for those with a higher income who will see money that they would lose to income tax in another state. “But if you’re in the median salary or the lower salary, we’re not too bad because you don’t pay sales tax on your groceries. You don’t pay any income tax. It’s kind of a mixed bag. It’s specific to each individual depending on where your income is and what you’ve got going on,” Verville says.
Anna Durst, CEO of the Nevada Society of Certified Public Accountants, outlines the role CPAs play working with businesses across Nevada. She explains, “As a state with no income tax, it might appear that CPAs have less work to do for their clients. However, Nevadans and their businesses operate in multiple states, and globally, which means state and global tax is still top of mind for many CPAs in the state.”
“There are regulations for cross-border practicing for CPAs as well as business so it can be a lot to navigate. Additionally, we are leaders in the gaming, hospitality, entertainment, mining and alternative energy industries, just to name a few,” continues Durst.
“The Nevada economy has become diversified over the past decade and CPAs have needed to keep up with those new industries. Technology has made global commerce possible for even the smallest of businesses which adds another layer of complication to the services CPAs provide.” Durst elaborates on the changing relationship between CPAs and their clients: “Businesses and individuals who work with CPAs have found that a CPA is a partner who they turn to for advice, guidance and planning. The relationship has moved away from transactional and is more of a continual consulting arrangement.”
Looking Ahead
With the 2023 legislative session complete and elections around the corner, Curt Anderson, founding partner of Las Vegas based CPA firm Fair, Anderson & Langerman, which recently merged with the national CPA firm BPM, points out the relative stability of the current tax regulations.
Curt says, “It’s been fairly static. We have continuing issues with the application of sales tax, the business commerce tax, things of that sort, but they haven’t really changed those a lot in the last few years to a point where there’s any major disruption for us or our clients. We’ll see what they do to us in the next session.”
While speculation about proposed legislation for the next tax session includes a tax on virtual sales, an issue that has presented itself repeatedly over the last years, and consumer data taxes, Shellie Hughes, executive director for the Nevada Department of Taxation, shares that nothing is certain until the session begins.
“The department will be monitoring all proposed legislation for any impacts to state revenue or taxation. At this time, there’s been no indication of proposed legislation, as that typically comes closer to the Legislative Session, and most proposals are confidential until that time,” Hughes says.
Taxes & Regulations
“People always think it’s just taxes, but a big part of it, too, is regulations, and sometimes the regulation is worse than the tax stuff,” says Brian Keller, a CPA and Chartered Global Management Accountant (CGMA) who serves as national practices managing partner with Rubin Brown.
He continues, “Nevada’s really been smart, I think intentionally smart, to be very business friendly. We have low regulation, we’ve got no state income tax and we want you to come here. We’ll help you. What do you need? We’ll roll out the red carpet.”
That red carpet is rolled out from the highest level. Hughes shares, “Governor Lombardo and his administration have been very intentional about restricting new and existing regulations that negatively impact businesses.” In Executive Order 2023—003, Governor Lombardo froze new regulations while also requiring a clean-up of current regulations.
Hughes continued, “In fact, most agencies, including the Department of Taxation, have either completed or are in the process of completing a regulatory review of all regulations within their respective jurisdictions, with the intention of serving businesses in the state.”
For her department, this means a variety of steps to ensure that current regulations are effective and efficient. She elaborated on the steps they are taking, “Taxation is holding regular workshops and public hearings on proposed regulations, including the repeal of many existing regulations, and it sends out a small business questionnaire with each notice of workshops to solicit feedback from businesses about any impacts a proposed regulatory change/repeal might have on businesses.”
One tax that will not be going anywhere is the sales tax. Hughes explained how “Nevada’s sales and use tax is the primary source of revenue for the state, ensuring the operations of essential programs for state and local government.” Though sales tax is higher than in many states, placing Nevada as the seventh highest state in the union, when combined with other factors including the lack of state income tax and our low levels of regulation, Nevada’s business appeal grows.
“In fact, Nevada is considered an extremely friendly state to attract business as it relates to our tax structure, including many incentives and opportunities through the Governor’s Office of Economic Development, in the form of tax credits and abatements to attract a diverse business economy,” Hughes explains.
IRS Hires and Their Impact
IRS hires due to the Inflation Reduction Act (IRA) of 2022 have begun, and many wonder how that will impact both businesses and CPAs. After IRA was introduced, the IRS announced plans to hire an additional 700 employees. In November and December of last year, the IRS hired 560 accountants. Both Anderson and Verville look forward to seeing an improvement in IRS efficiency due to increased numbers of agents to match the demand.
Currently, CPAs can call the IRS and find themselves on hold for long periods of time waiting to receive answers to questions regarding a client’s taxes. Verville suggests the problem is simple: “For customer service or to correct errors to fix things, they need more people to get that work done.”
Anderson agrees, “The more people they have that can actually help service our client needs, the better off we are.”
That being said, the process may be a bit bumpy. “The IRS is going to have the same problems my accounting industry has.” Anderson predicted. In his estimation, “The IRS is going to have to do like a number of CPA firms do: hire people who have less experience. They will need to train them and get them out in the field and let them start gaining experience and become better at that job. But, it’s going to be difficult for the IRS to find people with 20-25 years’ experience to come in and be auditors and do these things. They’re just not to be found. It’s a problem for them just like it is for us.” In a field with complex tax laws, hiring and training will take time.
Durst is hopeful, however, that these hires will be beneficial. She shares, “The IRS hires should significantly assist CPAs in their work. Contacting the IRS, even as a CPA, has been a challenge for quite a few years. Hiring and training qualified staff to work with CPAs has a domino effect. If a CPA contacts the IRS about an issue, and can resolve the issue quickly, then that CPA would not need to contact the IRS again for another client with the same issue because they already have the answer. Additionally, that CPA won’t have to make multiple attempts to get through to the IRS. We’re already seeing an increase in written responses, resolved calls, shorter wait times and fewer disconnected calls. As more agents are hired the better it will get.”
Worries about increased audits have also peppered the conversation. Verville explains that customer service won’t be the only increase, “Some of it will be increasing audits which, quite honestly, for tax professionals that are trying to do it right and be honest and aren’t trying to be shady, then it’s just the hassle of dealing with an audit, but it’s no big deal.” Extra work may be part of it, but in the long run it should help everyone be more efficient and effective at their jobs.
Keller suspects that, regardless of new hires, audits were likely to increase. He says, “The reality of it is: I think audits are going to go way up for everybody over time. It’s not so much the agents. When you look at AI and technology, the federal government typically is on the front end of all that stuff, and that would increase audits.”
Upcoming Changes – Federal and State
Change is coming on both a federal and state level.
“A major issue is Beneficial Ownership Reporting (BOI). FinCEN (Financial Crimes Enforcement Network) is cracking down on money laundering and there are BOI filing requirements that, as of today, impact millions of business owners. Most businesses are unaware of this requirement and the penalties for not filing can grow quickly. I recommend speaking with your CPA or your attorney to see the impact to your business,” Durst explains.
Durst continued describing Senate Bill 305 and its impact on employees and employers. “Another issue is Senate Bill 305 that passed in the 2023 legislative session. The bill requires covered Nevada employers to automatically enroll all covered employees in a retirement program per the bill’s specifications,” she elaborated.
Continuing, Durst pointed out two other big changes, “Finally, it is important that individuals and business are aware that certain tax cuts from the 2017 Tax Cuts and Jobs Act (TCJA) are set to expire, or “sunset” at the end of 2025. This will impact estate and gift taxes, income tax rates, deductions, and charitable giving. We do not know if these cuts will be extended at some point, but it is crucial that you create a plan with your CPA. Regulations on digital currency also continue to change so taxpayers need to communicate with their CPA if they own or invest in any digital currencies.”
Durst shared some tips, “CPAs have a variety of preferred ways to communicate. Some have portals, some have a linked calendar a client can use to schedule a meeting. Some prefer you to pick up the phone or send an email. Whatever the preference is, my biggest tip is to contact your CPA before you make a big decision, not after.”
“There is a lot your CPA can do for you before a commitment is made.” She continued, “After a transaction occurs, options can be limited. For many businesses, they should be working with the CPA multiple times a year or even on a continual basis. Your CPA is your trusted advisor and you should value that relationship.”
Regardless of the concern, Durst presents the bottom line: “Taxes and business matters can be difficult to understand for anyone. When in doubt seek professional guidance in advance. You’ll be happy you did.”
