How To Know When You May Be A Target In An IRS Criminal Investigation

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How To Know When You May Be A Target In An IRS Criminal Investigation

A simple mistake, oversight, or your accountant’s malpractice may trigger an IRS criminal investigation. Specifically, unreported income, mismatch of information on a tax return versus third-party reporting information, a false statement, the use of an impermissible accounting or banking service, or declaring too many deductions are things that could initiate an audit, which could then rise to the level of an IRS criminal investigation.

The IRS is the world’s most powerful collection agency, with tremendous resources, and its Criminal Investigation Division (CID) is ruthless. CID conducts criminal investigations regarding alleged violations of the Internal Revenue Code, the Bank Secrecy Act and various money laundering statutes. The findings of these investigations are referred to the Department of Justice (DOJ) for recommended prosecution.

A criminal investigation differs from an audit. With an audit, the IRS attempts to determine whether you have calculated your tax liability correctly. With a criminal investigation, the IRS seeks to mount a case against you (the “target”) so that the DOJ can prosecute you and hold you out as an example to others as to what will happen if you cheat the government.

The IRS Criminal Investigation Process

The IRS criminal investigation process is serious business. CID is composed of federal agents (called “Special Agents”), who are highly trained financial investigators that carry a gun and wear a badge. Unlike your typical police department, CID conducts a very thorough investigation which may last years while they interview a target’s family, friends, co-workers, employees, and business associates, and bankers, among others, to acquire evidence as to the extent of the tax evasion or tax fraud that may have occurred by the target.

When the Special Agents come to interview a target’s family, friends, co-workers, employees, and business associates, and bankers, etc., they likely consider you to be a “witness” and they are merely looking for information that would be useful in their investigation of the target.  Seems not concerning, but if your actions or position helped the target commit an alleged tax crime or it turns out that you as a witness have your own tax exposure, you now could be designated as an additional target by the Special Agents.

Special agents analyze information to determine if criminal tax fraud or some other financial crime may have occurred. Relevant information is evaluated. This preliminary process is called a “primary investigation”. The special agent’s front line supervisor reviews the preliminary information and makes the determination to approve or decline the further development of the information. If the supervisor approves, approval is obtained from the head of the office, the special agent in charge, to initiate a “subject criminal investigation”.

After all the evidence is gathered and analyzed, if the special agent and his or her supervisor determine that the evidence is sufficient to support the recommendation of prosecution, the agent proceeds with the preparation of a written report detailing the findings of violation of the law and recommending prosecution.  The report is then forwarded to DOJ who if the case is accepted will initiate criminal prosecution to ultimately get a conviction.

A criminal tax violation conviction results in severe consequences, and in addition to monstrous fines, including the cost of prosecution and jail time.  Each count can result in five years in jail and it could spell financial, personal and social ruin. Compounding the situation is that often a taxpayer will not know when he is subject to an IRS criminal investigation until it is in its late stages at which time they surely have made incriminating admissions if they were not represented by competent counsel.

 Signs that You May Be A Target in an IRS Criminal Investigation –

(1) An IRS Revenue Officer abruptly stops pursuing you after he has been requesting you to pay your IRS tax debt, and now does not return your calls. The agent might be getting ready to refer your case to the CID to investigate previous or current tax evasion or crimes you may have committed within the collection process. (i.e., making false statements, hiding income or assets).

(2) An IRS Revenue agent has been auditing you and now disappears for days or even weeks at a time. After a case is referred to the CID, both the Collection and Examination Divisions put things on “pause” because they do not want to jeopardize a successful criminal prosecution. CID is incredibly resourceful and tactful. To better position yourself against them, it is best to obtain an experienced IRS tax attorney as early as possible where criminal tax exposure is apparent in your fact pattern (like where you know you cheated on the return that is under audit). This is true even if your case is only at the civil investigation stage.

(3) Your bank informs you that your records have been summoned by the CID or subpoenaed by the U.S. Attorney’s Office.

(4) Your accountant is contacted by Special Agents, or has been subpoenaed to appear before a grand jury and told to bring your tax records. Unfortunately, the “accountant-client privilege” simply does not protect you in a criminal case and any statements made to your accountant can be used against you in a criminal investigation, either through the “discovery” process leading to trial or where the accountant is called as a witness during criminal tax trial.

What Should You Do?

Whether and when to answer questions from the IRS, or whether to stand on your 5th Amendment rights, are questions that only a tax fraud lawyer can help you answer. Your financial well being, as well as your personal freedom may depend on the right answers. If you or your accountant even suspects that you might be subject to a criminal or civil tax fraud penalty, you should seek help immediately.

The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles (including Long Beach and Ontario) and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income. You can also check out the KahnTaxLaw Coronavirus Resource Center.  Also if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

Can Cannabis Help Reduce Complications Following Spinal Fusion Surgery?

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According to a report published by The Iowa Orthopedic Journal, a study conducted by a team of orthopedic specialists affiliated with the State University of New York (SUNY) Downstate Health Sciences University in Brooklyn found that patients with a history of cannabis use are less likely than non-users to experience adverse medical outcomes following thoracolumbar spinal fusion (TLF) surgery.

The study sought to compare 90-day complication, 90-day readmission, as well as 2-year revision rates between baseline cannabis users and non-users following TLF surgery for adult spinal deformity (ASD).

The New York Statewide Planning and Research Cooperative System (SPARCS) database was queried between January 2009 and September 2013 to identify all patients who underwent TLF for ASD. Inclusion criteria were age ≥18 years and either minimum 90-day (for complications and readmissions) or 2-year (for revisions) follow-up surveillance. Cohorts were created and propensity score-matched based on presence or absence of isolated baseline cannabis use. Baseline demographics, hospital-related parameters, 90-day complications and readmissions, and two-year revisions were retrieved. Multivariate binary stepwise logistic regression identified independent outcome predictors.

704 patients were identified (n=352 each), with comparable age, sex, race, primary insurance, Charlson/Deyo scores, surgical approach, and levels fused between cohorts (all, p>0.05). Cannabis users (versus non-users) incurred lower 90-day overall and medical complication rates (2.4% vs. 4.8%, p=0.013; 2.0% vs. 4.1%, p=0.018). Cohorts had otherwise comparable complication, revision, and readmission rates (p>0.05). Baseline cannabis use was associated with a lower risk of 90-day medical complications (OR=0.47, p=0.005). Isolated baseline cannabis use was not associated with 90-day surgical complications and readmissions, or two-year revisions.

Compared to non-users, cannabis consumers experienced significantly lower rates of medical complications during the 90-day period immediately after surgery. Those with a history of cannabis use were no more likely than non-users to seek post-operative readmissions.

The report stated: “Compared to patients with ASD who underwent TLF without baseline cannabis use, patients with isolated baseline cannabis use were found to have no increase in odds of incurring 90-day surgical complications or readmissions or revisions two years postoperatively, though reduced odds of experiencing 90-day medical complications were observed.”

Developments like this contradict the basis of classification of cannabis under Federal law which makes cannabis illegal.

The Anti-Federal U.S. Climate

The Federal Controlled Substances Act (“CSA”) 21 U.S.C. § 812 classifies marijuana as a Schedule 1 substance with a high potential for abuse, no currently accepted medical use in treatment, and lack of accepted safety for use under medical supervision. Although you can still face federal criminal charges for using, growing, or selling weed in a manner that is completely lawful under California law, the federal authorities in the past have pulled back from targeting individuals and businesses engaged in medical marijuana activities. This pull back came from Department of Justice (“DOJ”) Safe Harbor Guidelines issued in 2013 under what is known as the “Cole Memo”.

The Cole Memo included eight factors for prosecutors to look at in deciding whether to charge a medical marijuana business with violating the Federal law:

  • Does the business allow minors to gain access to marijuana?
  • Is revenue from the business funding criminal activities or gangs?
  • Is the marijuana being diverted to other states?
  • Is the legitimate medical marijuana business being used as a cover or pretext for the traffic of other drugs or other criminal enterprises?
  • Are violence or firearms being used in the cultivation and distribution of marijuana?
  • Does the business contribute to drugged driving or other adverse public health issues?
  • Is marijuana being grown on public lands or in a way that jeopardizes the environment or public safety?
  • Is marijuana being used on federal property?

Since 2013, these guidelines provided a level of certainty to the marijuana industry as to what point could you be crossing the line with the Federal government.  But on January 4, 2018, then Attorney General Jeff Sessions revoked the Cole Memo.  Now U.S. Attorneys in the local offices throughout the country retain broad prosecutorial discretion as to whether to prosecute cannabis businesses under federal law even though the state that these businesses operate in have legalized some form of marijuana.

Joyce-Blumenauer Amendment (previously referred to as the Rohrabacher-Farr Amendment)

The medical use of cannabis is legal (with a doctor’s recommendation) in 37 states and Washington DC. Those 37 states being Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Illinois, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, Utah, Vermont, Virginia, Washington and West Virginia.

The medical use of cannabis is also legal in the territories of the Northern Mariana Islands, Guam and Puerto Rico

Six tribal nations also legalized cannabis use – those 6 tribes being the Flandreau Santee Sioux Tribe (South Dakota), Oglala Lakota Sioux Tribe (South Dakota), Suquamish Tribe (Washington state), Squaxin Island Tribe (Washington state), Eastern Band of Cherokee Indians (North Carolina) and St. Regis Mohawk Tribe (New York).

Building on the DOJ’s issuance of the Cole Memo, in 2014 the House passed an amendment to the yearly federal appropriations bill that effectively shields medical marijuana businesses from federal prosecution. Proposed by Representatives Rohrabacher and Farr, the amendment forbids federal agencies to spend money on investigating and prosecuting medical marijuana-related activities in states where such activities are legal.

The amendment states that:

NONE OF THE FUNDS MADE AVAILABLE UNDER THIS ACT TO THE DEPARTMENT OF JUSTICE MAY BE USED, WITH RESPECT TO ANY OF THE STATES OF ALABAMA, ALASKA, ARIZONA, ARKANSAS, CALIFORNIA, COLORADO, CONNECTICUT, DELAWARE, FLORIDA, GEORGIA, HAWAII, ILLINOIS, INDIANA, IOWA, KENTUCKY, LOUISIANA, MAINE, MARYLAND, MASSACHUSETTS, MICHIGAN, MINNESOTA, MISSISSIPPI, MISSOURI, MONTANA, NEVADA, NEW HAMPSHIRE, NEW JERSEY, NEW MEXICO, NEW YORK, NORTH CAROLINA, NORTH DAKOTA, OHIO, OKLAHOMA, OREGON, PENNSYLVANIA, RHODE ISLAND, SOUTH CAROLINA, TENNESSEE, TEXAS, UTAH, VERMONT, VIRGINIA, WASHINGTON, WEST VIRGINIA, WISCONSIN, AND WYOMING, OR WITH RESPECT TO THE DISTRICT OF COLUMBIA, GUAM, OR PUERTO RICO, TO PREVENT ANY OF THEM FROM IMPLEMENTING THEIR OWN LAWS THAT AUTHORIZE THE USE, DISTRIBUTION, POSSESSION, OR CULTIVATION OF MEDICAL MARIJUANA.

This action by the House is not impacted by the change of position by the DOJ. However, unless this amendment gets included in each succeeding federal appropriations bill, the protection from Federal prosecution of medical marijuana businesses will no longer be in place.  Fortunately, Congress has included this amendment but yet has changed any of the tax or banking laws that pose challenges to the cannabis industry.

Clearly, to avail yourself of the protections of the amendment, you must be on the medical cannabis side and you must be in complete compliance with your State’s medical cannabis laws and regulations. You may not be covered under the amendment if you are involved in the recreational cannabis side even if legal in the State you are operating.

What Should You Do?

Given the illegal status of cannabis under Federal law you need to protect yourself and your marijuana business from all challenges created by the U.S. government.  Although cannabis is legal in California, that is not enough to protect you. Be proactive and engage an experienced Cannabis Tax Attorney in your area. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County, Inland Empire (Ontario and Palm Springs) and other California locations protect you and maximize your net profits.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

Can You Go To Jail For Not Filing Tax Returns? Beware this can happen to you.

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Can You Go To Jail For Not Filing Tax Returns? Beware this can happen to you.

A man who did not file tax returns for 8 year in a row pleaded guilty before a Federal District Court Judge to evading his income taxes and now must serve 57 months in jail.

As reported by the Department Of Justice in a press release, from 2009 through 2016 Daryl Brown received taxable income, but did not file tax returns reporting his income or pay the taxes he owed.  To evade his taxes, Mr. Brown opened bank accounts and lines of credit in nominee names and used credit and debit cards from those accounts to pay for personal expenses.  He also bought money orders with cash, directed others to buy money orders for him, and structured his purchase of money orders–sometimes from several locations on the same day–to avoid triggering reporting requirements that would have flagged his activity to the IRS.  Court documents showed Mr. Brown’s conduct caused a tax loss of more than $250,000 to the IRS.

The Department Of Justice in a follow-up press release reported that on June 7, 2021 U.S. District Judge Timothy S. Black in the Southern District of Ohio sentenced Mr. Brown to 57 months in prison for tax evasion and ordered him to serve 3 years of supervised release and pay restitution to the IRS in the amount of $377,240.

An Opportunity To “Get Back Into The System” And Be Compliant.

Our tax system relies on initial voluntary compliance where taxpayers each year file a tax return; however, there are millions of Americans who fail to file a tax return and what’s worse is that these failures are not limited to just one year. Taxpayers who either have never filed a tax return or those who were once compliant but stopped filing a tax return for a period of time, face the same penalties.  Additionally, if the IRS chooses to pursue criminal prosecution and proves that the failure was willful, a taxpayer can be sentenced to prison.  So it is important to engage a tax attorney to come up with a plan to mitigate criminal exposure and establish an arrangement or settlement on the resulting tax liabilities.

An Opportunity For Taxpayers Who Owe The IRS.

As a prerequisite to any proposal (including but not limited to, an Offer In Compromise, payment plan or being put into “uncollectible status”) to the IRS, you must be in current compliance. That means if you have any outstanding income tax returns, they must be completed and submitted to IRS.

Also, if you are required to make estimated tax payments, you must be current in making those payments. Since we are in summer of 2022, taxpayers who expect to owe for 2021 should have their 2021 income tax returns as soon as possible so that the 2021 liability can be rolled over into any proposal.  Unfortunately, your obligation to make estimated tax payments for 2022 cannot be included in your proposal and the IRS will require as a prerequisite that you are current on these payments (1st quarter 2022 was due April 17, 2022 and 2nd quarter was due June 15, 2022).

Remember that COVID-19 does not alter the tax laws, so all taxpayers should continue to meet their tax obligations as normal. Individuals and businesses should keep filing their tax returns and making payments and deposits with the IRS, as they are required to do.

Also, the IRS will continue to take steps where necessary to protect all applicable statutes of limitations. In instances where statute expirations might be jeopardized during this period and a taxpayer is not agreeing to extend such, the IRS will issue Notices of Deficiency and pursue other similar actions to protect the interests of the government in preserving such statute.

What Should You Do?

You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes. If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles (including Long Beach and Ontario) and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income. You can also check out the KahnTaxLaw Coronavirus Resource Center.  Also if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

U.S. Supreme Court To Weigh In On How FBAR Penalties Are Calculated

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U.S. Supreme Court To Weigh In On How FBAR Penalties Are Calculated

In recent years the IRS has made the Report of Foreign Bank and Financial Accounts (FBAR) penalty enforcement a top priority and this is alarming the taxpayers worldwide. Even in the course of every routine domestic IRS audit, IRS agents are looking for undisclosed foreign bank accounts. This action had led to two inconsistent ways of calculating the penalties for which the U.S. Supreme Court will take up to determine which one should be followed.

The FBAR Penalty

The Bank Secrecy Act (BSA) requires that a Form FinCEN 114 (formerly Form TDF 90-22.1), Report of Foreign Bank and Financial Accounts (FBAR), be filed if the aggregate balances of such foreign accounts exceed $10,000 at any time during the year. This form is used as part of the IRS’s enforcement initiative against abusive offshore transactions and attempts by U.S. persons to avoid taxes by hiding money offshore.

The penalties for FBAR noncompliance are stiffer than the civil tax penalties ordinarily imposed for delinquent taxes. A taxpayer who non-willfully fails to timely file an FBAR can be assessed a penalty of at least $10,000 per year of non-compliance. The IRS has taken the position that this non-willful penalty is assessed on an account-by-account basis. For example, a person whose failure to file an FBAR form is non-willful and has three accounts totaling $50,000 could potentially be assessed the maximum $10,000 penalty for each account, for a total of $30,000 per year, while a person with one account with a balance of $300,000 would pay only one $10,000 penalty per year.

Split By Federal Courts On How To Calculate The FBAR Penalty

The 9th Circuit applied the FBAR penalty on a per form basis and not on the number of foreign accounts a person controls. Thus, if there was 5 years of delinquent FBAR’s, the FBAR penalty would be $10,000 per year or $50,000 total regardless of how many accounts or how much was in the accounts. United States v. Boyd, 991 F.3d 1077 (9th Cir. 2021).

The 5th Circuit applied the FBAR penalty on the number of foreign accounts a person controls.  Thus if there were 5 accounts in each year over 5 years of delinquent FBAR’s, the FBAR penalty would be $250,000. United States v. Bittner, 19 F.4th 734 (5th Cir. 2021) held that the non-willful FBAR penalty applies per account rather than per form.  The Fifth Circuit’s ruling in Bittner’s case reversed a lower court’s conclusion on how the non-willful penalty applies, increasing Bittner’s penalties to $2.72 million from $50,000.

Bittner appealed the ruling to the U.S. Supreme Court by filing a Writ Of Certiorari and the Supreme Court has agreed to hear this matter.  We will keep you informed of new developments.

What You Must Know About IRS FBAR Penalty Negotiations

  1. The penalties for noncompliance in FBAR enforcement are staggering.

FBAR penalties can be unfair as the penalties are based on the account size and not on how much tax you avoided. This is a stark contrast to other IRS penalties which are based on how much additional tax is owed.  Given this difference you will always have a bigger risk and more to lose when dealing with FBAR penalties.

  1. The two types of FBAR penalties.

The “get off gently FBAR penalty” – If the IRS feels that you made an innocent mistake and “not willfully” ignored to file your FBAR, your “get off gently penalty” will be $10,000 per overseas account per year not reported. To illustrate, if you have five foreign accounts that you failed to report on your FBAR in each of five years, the IRS can penalize you $50,000 per form (as supported by the Bittner and Kaufman cases) or $250,000 if imposed by account regardless of whether you even have that amount sitting in your foreign accounts.

The “disastrous FBAR penalty” – If the IRS can show that you “intentionally” avoided filing your FBAR’s, your minimum “disastrous FBAR penalty” will be 50% of your account value.   Additionally, the IRS may also press for criminal charges and if convicted of a willful violation, this can also lead to jail time. The “disastrous FBAR penalty” can also be assessed multiple times thus wiping out your entire savings.

Under both willful and non-willful penalties “the violation flows from the failure to file a timely and accurate FBAR”.

  1. The taxpayer’s burden of proving “reasonable cause”

You are obligated to pay the penalty the IRS deems necessary. The IRS can assume the “disastrous FBAR penalty” and they are not required to prove willfulness. It will be the taxpayer that bears the heavy burden of proving that the taxpayer’s failure to comply was due to reasonable cause and not from “willful neglect”.

  1. Your appeal option.

Having exhausted all administrative remedies within the IRS first, you can then appeal the proposed FBAR penalties to a Federal District Court but for that court to have jurisdiction you must pay the assessments in full and then sue the IRS in a district court for refund. Since coming up with the money may be impossible for most taxpayers, consider hiring an experienced tax attorney to make the most of the IRS appeals process and perhaps avoid the need for litigation.  Keep in mind that in the appeals process, you do not have to pay any FBAR penalty until the end. Second, you can be successful if IRS remedies itself thus making court filings unnecessary. And third, even if the administrative remedies do not yield you success, your tax attorney can attempt to negotiate with the IRS to lower your FBAR penalties without going for a trial.

  1. The Voluntary Disclosure Route.

The streamlined filing compliance procedures are available to taxpayers certifying that their failure to report foreign financial assets and pay all tax due in respect of those assets did not result from willful conduct on their part. The streamlined procedures are designed to provide to taxpayers in such situations (1) a streamlined procedure for filing amended or delinquent returns and (2) terms for resolving their tax and penalty obligations.

Taxpayers will be required to certify that the failure to report all income, pay all tax, and submit all required information returns, including FBARs (FinCEN Form 114, previously Form TD F 90-22.1), was due to non-willful conduct.

If the IRS has initiated a civil examination of a taxpayer’s returns for any taxable year, regardless of whether the examination relates to undisclosed foreign financial assets, the taxpayer will not be eligible to use the streamlined procedures. Similarly, a taxpayer under criminal investigation by IRS Criminal Investigation is also ineligible to use the streamlined procedures.

Taxpayers eligible to use the streamlined procedures who have previously filed delinquent or amended returns in an attempt to address U.S. tax and information reporting obligations with respect to foreign financial assets (so-called “quiet disclosures”) may still use the streamlined procedures.

What Should You Do?

If you have never reported your foreign investments on your U.S. Tax Returns, you should seriously consider making a voluntary disclosure to the IRS. Once the IRS contacts you, you cannot get into this program and would be subject to the maximum penalties (civil and criminal) under the tax law. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), San Diego County (Carlsbad) and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income. Also if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

New Mileage Rates Announced By IRS For Balance Of 2022

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New Mileage Rates Announced By IRS For Balance Of 2022

In recognition of recent gasoline price increases, the IRS announced an increase in the optional standard mileage rate for the final 6 months of 2022.

For the final 6 months of 2022, the standard mileage rate for business travel will be 62.5 cents per mile, up 4 cents from the rate effective at the start of the year. The new rate for deductible medical or moving expenses (available for active-duty members of the military) will be 22 cents for the remainder of 2022, up 4 cents from the rate effective at the start of 2022. These new rates become effective July 1, 2022. The 14 cents per mile rate for charitable organizations remains unchanged as it is set by statute.

Taxpayers may use the optional standard mileage rates to calculate the deductible costs of operating an automobile for business and certain other purposes instead of relying on actual costs which require substantiation beyond maintaining a mileage log.

Midyear increases in the optional mileage rates are rare, the last time the IRS made such an increase was in 2011.

Limitation Of Deducting Business Mileage

Before the 2017 Tax Cuts And Jobs Act was enacted into law, many taxpayers relied on the IRS’ annual publication of the mileage rates to be used for business travel. For many taxpayers this was a significant tax deduction but the 2017 Tax Cuts And Jobs Act changes that.

Why fewer taxpayers will be itemizing in 2022:

Increase Of Standard Deduction – $12,950 for single filers; $19,400 for heads of household; and $25,900 for joint filers.

Limit On Deduction For State And Local Taxes – A taxpayer may claim an itemized deduction of only up to $10,000 ($5,000 for a married taxpayer filing a separate return) in (i) personal state and local property taxes, and (ii) state and local income taxes (or sales taxes in lieu of income taxes).  Taxes paid or accrued in carrying on a trade or business are not subject to this limitation.

Limit On Deduction Of Mortgage Interest – For mortgages incurred after December 31, 2017, taxpayers may deduct interest on up to $750,000 of principal (mortgages existing before January 1, 2018 are still subject to the pre-existing law’s $1 million limit). But for all taxpayers there is no longer a deduction for interest paid on home equity loans.

Elimination Of Miscellaneous Itemized Deductions And Deduction For Moving Expenses – A taxpayer can no longer deduct miscellaneous itemized deductions which include unreimbursed employee expenses and tax preparation costs.  Also the deduction for moving expenses is gone.

But for those who can benefit from deducting costs of operating an automobile for business, charitable, medical or moving purposes, here are the rates for 2022:

2022 Tax Year Mileage Rates:

Purpose Rates 1/1 through 6/30/22 Rates 7/1 through 12/31/22
Business 58.5 62.5
Medical/Moving 18 22
Charitable 14 14

 

Time Limits For Keeping Your Tax Records

Even though your current income tax return is processed by the IRS and a refund is issued, that does not mean the IRS can later question or audit the tax return,  In fact the Statute Of Limitations allows the IRS three years to go back and audit your tax return.  That is why it’s a good idea to keep copies of your prior-year tax returns and supporting backup documentation for at least three years. In the case of backing of any deductible mileage, you will need to retain your travel log showing the distance traveled, who you visited and the purpose of the visit.

What Should You Do?

You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes. If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Metropolitan Los Angeles (Long Beach) and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income.  Also if you are involved in cannabis, check out what our cannabis tax attorneys can do for you.   And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

Be Prepared – All Taxpayers Should Plan Ahead For Natural Disasters.

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Be Prepared – All Taxpayers Should Plan Ahead For Natural Disasters.

Floods, wildfires, hurricanes, tornados and other natural disasters happen quickly and often with little warning.  No one can prevent these disasters from happening, but people can prepare for them.

IRS Tax Relief Details

The IRS usually announces tax relief to any area designated by the Federal Emergency Management Agency (FEMA), as qualifying for individual assistance. The current list of eligible localities is always available on the disaster relief page on IRS.gov.

In each declaration the IRS will postpone certain deadlines for taxpayers who reside or have a business in the disaster area. As a result, affected individuals and businesses will have additional time to file returns and pay any taxes that were originally due during a disaster period. This relief typically extends also to businesses and includes payroll tax deposits.

Always check the declaration for areas covered, taxes covered and the extended date.

Tax-related Events That Often Happen After A Disaster:

The IRS gives taxpayers more time to file and pay. Taxpayers whose address of record is in an area qualifying for IRS disaster tax relief will automatically receive extra time from the IRS to file returns and pay taxes. The IRS’s disaster assistance page provides disaster updates and links to resources. Information is usually available on the IRS Twitter account as well. Taxpayers can also call the agency’s disaster line at 866-532-5227 with questions.

Taxpayers can qualify for a casualty loss tax deduction. People who have damaged or lost property due to a federally declared disaster may qualify to claim a casualty loss deduction. They can claim this on their current or prior-year tax return. This may result in a larger refund.

Taxpayers can apply for a disaster loan or grant. The Small Business Administration offers financial help to business owners, homeowners, and renters. This help is for those in a federally declared disaster area. To qualify, a taxpayer must have filed all required tax returns.

Taxpayers who relocate need to submit a change of address. After a disaster, people might need to temporarily relocate. Those who move should notify the IRS of their new address by submitting Form 8822, Change of Address.

Importance To Preserve Records

Keep in mind that the IRS has up to three years to select a tax return for audit. The FTB has up to four years to select a tax return for audit. In some cases this period is extended to six years. When a taxpayer is selected for audit, the taxpayer has the burden of proof to show that expenses claimed are properly deductible. Having the evidence handy and organized makes meeting this burden of proof much easier.

Essential Records to Have for a Tax Audit

If you are getting ready for a tax audit, one of the most important things to do is gather and organize your tax records and receipts. There’s a good chance that you have a large amount of documents and receipts in your possession. No matter how organized you are, it can be a daunting task to collect the right pieces and make sure that you have them organized and handy for the audit conference.

We have seen many tax audits that hinge on whether or not the taxpayer can provide proper documentation for their previous tax filings. A tax lawyer in Orange County or elsewhere can make sure that the documentation is complete and proper.  By submitting this to your tax attorney in advance of the audit, your tax attorney can review your documentation and determine if there are any gaps that need to be addressed before starting the dialogue with the IRS agent.

So what are the most essential tax records to have ahead of your audit? Here are a few must-have items:

  • Any W-2 forms from the previous year. This can include documents from full-time and part-time work, large casino and lottery winnings and more.
  • Form 1098 records from your bank or lender on mortgage interest paid from the previous year.
  • Records of any miscellaneous money you earned and reported to the IRS including work done as an independent contractor or freelancer, interest from savings accounts and stock dividends.
  • Written letters from charities confirming your monetary donations from the previous year.
  • Receipts for business expenses you claimed.
  • Mileage Logs for business use of vehicle.
  • Entertainment and Travel Logs for business

Develop And Implement Your Backup Plan

Do not wait for the next disaster to come for then it may be too late to retrieve your important records for a tax audit or for that matter any legal or business matter. And if you do get selected for audit and do not have all the records to support what was claimed on your tax returns, you should contact an experienced tax attorney who can argue the application of your facts and circumstances to pursue the least possible changes in an audit.

The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles Metropolitan Area (including Long Beach and Ontario) and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income. And if you are involved in cannabis, check out what our cannabis tax attorneys can do for you.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

If You Can’t Beat Them Then Join Them – Rhode Island Legalizes Adult-use Marijuana

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On May 25, 2022 Rhode Island officially became the 19th state in the U.S. to legalize adult-use marijuana when Democratic Governor Dan McKee signed into law a bill passed by state lawmakers the day before.  Existing medical cannabis operators will be able to obtain hybrid adult-use licenses on December 1, 2022 so recreational sales are expected to begin then.  Rhode Island’s program features limited licensing but also sets aside 25% of new retail licenses for social equity applicants and another 25% for worker-owned cooperatives.  Up to 33 new retail licenses will be allowed in Rhode Island.  Rhode Island already has more than 60 medical cannabis cultivators. Those in good standing will be able to grow for the adult-use market.  Otherwise, the legislation imposes a two-year moratorium on new cultivation licenses.  Marijuana products will be taxed at 10% in addition to the state tax rate of 7%, plus an additional 3% local tax.  In addition the new law provides for the automatic expungement of any prior conviction for possession of cannabis that will be decriminalized. The expungements will occur by July 1, 2024, with an expedited process offered for anyone who wants to have their record expunged sooner.

The Growing Trend In Legalizing Cannabis.

Medical marijuana is legal in 37 states.

The medical use of cannabis is legal (with a doctor’s recommendation) in 37 states and Washington DC. Those 37 states being Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Illinois, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, Utah, Vermont, Virginia, Washington and West Virginia. The medical use of cannabis is also legal in the territories of the Northern Mariana Islands, Guam and Puerto Rico.

Recreational marijuana is legal in 19 states.

Nineteen states and Washington DC, have legalized marijuana for recreational use — no doctor’s letter required — for adults over the age of 21. Those 19 states being Alaska, Arizona, California, Colorado, Connecticut, Illinois, Maine, Massachusetts, Michigan, Montana, Nevada, New Jersey, New Mexico, New York, Oregon, Rhode Island, Vermont, Virginia and Washington and the territories of the Northern Mariana Islands and Guam.

Recreational marijuana is legal in 6 tribal nations.

Six Tribal nations have legalized marijuana for recreational use.  Those 6 tribes being the Flandreau Santee Sioux Tribe (South Dakota), Oglala Lakota Sioux Tribe (South Dakota), Suquamish Tribe (Washington state), Squaxin Island Tribe (Washington state), Eastern Band of Cherokee Indians (North Carolina) and St. Regis Mohawk Tribe (New York).

Conflict With Federal Law.

Under Federal law (Controlled Substances Act 21 U.S.C. 801) marijuana is designated as a Schedule I controlled substance due to the historical belief that it has a high potential for abuse, no currently accepted medical use in treatment, and lack of accepted safety for use under medical supervision.

Higher Taxes Still Remain

While the developments listed above are favorable for cannabis business, it still remains to be seen whether the Federal government will respond favorably and when favorable changes will be made to the Internal Revenue Code which treats businesses in the marijuana industry differently resulting in such business paying at least 3-times as much in taxes as ordinary businesses.

Generally, businesses can deduct ordinary and necessary business expenses under I.R.C. §162. This includes wages, rent, supplies, etc. However, in 1982 Congress added I.R.C. §280E. Under §280E, taxpayers cannot deduct any amount for a trade or business where the trade or business consists of trafficking in controlled substances…which is prohibited by Federal law. Marijuana, including medical marijuana, is a controlled substance. What this means is that dispensaries and other businesses trafficking in marijuana have to report all of their income and cannot deduct rent, wages, and other expenses, making their marginal tax rate substantially higher than most other businesses.

Reporting Of Cash Payments Still Remain

The Bank Secrecy Act of 1970 (“BSA”) requires financial institutions in the United States to assist U.S. government agencies to detect and prevent money laundering. Specifically, the act requires financial institutions to keep records of cash purchases of negotiable instruments, and file reports of cash purchases of these negotiable instruments of more than $10,000 (daily aggregate amount), and to report suspicious activity that might signify money laundering, tax evasion, or other criminal activities. The BSA requires any business receiving one or more related cash payments totaling more than $10,000 to file IRS Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business.

The minimum penalty for failing to file EACH Form 8300 is $25,000 if the failure is due to an intentional or willful disregard of the cash reporting requirements. Penalties may also be imposed for causing, or attempting to cause, a trade or business to fail to file a required report; for causing, or attempting to cause, a trade or business to file a required report containing a material omission or misstatement of fact; or for structuring, or attempting to structure, transactions to avoid the reporting requirements. These violations may also be subject to criminal prosecution which, upon conviction, may result in imprisonment of up to 5 years or fines of up to $250,000 for individuals and $500,000 for corporations or both.

Marijuana-related businesses operate in an environment of cash transactions as many banks remain reluctant to do business with many in the marijuana industry. Like any cash-based business the IRS scrutinizes the amount of gross receipts to report and it is harder to prove to the IRS expenses paid in cash. So it is of most importance that the proper facilities and procedures be set up to maintain an adequate system of books and records.

How Do You Know Which Cannabis Tax Attorney Is Best For You?

Given that cannabis is still illegal under existing Federal law you need to protect yourself and your marijuana business from all challenges created by the U.S. government.  While cannabis is legal in California, that is not enough to protect you.  It’s coming down that the biggest risk is TAXES.  So it is best to be proactive and engage an experienced cannabis tax attorney in your area who is highly skilled in the different legal and tax issues that cannabis businesses face.  Let the cannabis tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), the Inland Empire (Ontario and Palm Springs) and other California locations protect you and maximize your net profits.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

California Decreasing Cannabis Taxes Starting July 1, 2022

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Every six months the California Department Of Tax And Fee Administration (CDTFA) which oversees the reporting and collection of taxes for the California cannabis industry re-determines the cannabis markup rate.  This rate is the markup between the wholesale cost and the retail selling price and is based on statewide market data. For the period commencing July 1, 2022, and ending December 31, 2022, the markup rate will be 75% (down from 80%).

Cannabis Excise Tax

The 15% cannabis excise tax is based on the average market price of the cannabis or cannabis products sold in a retail sale. The mark-up rate is used when calculating the average market price to determine the cannabis excise tax due in an arm’s length transaction. In an arm’s length transaction, the average market price is the retailer’s wholesale cost of the cannabis or cannabis products plus, the mark-up rate determined by the CDTFA. In a non-arm’s length transaction, the average market price is the cannabis retailer’s gross receipts from the retail sale of the cannabis or cannabis products.

Cannabis Cultivation Tax

As required by the Cannabis Tax Law, effective January 1, 2020, the cultivation tax rates reflect an adjustment for inflation. The adjusted rates for each category shown below will be reflected on the monthly and quarterly cannabis tax returns beginning January 1, 2020.

Cannabis Category 2022 Rate 2020 Rate
Flower per dry-weight ounce $10.08 $9.65
Leaves per dry-weight ounce $3.00 $2.87
Fresh cannabis plant per ounce $1.41 $1.35

 

  • The 2022 rates apply to cannabis that a cultivator sells or transfers to a manufacturer or distributor on or after January 1, 2022.
  • All fresh cannabis plants must be weighed within two hours of harvesting.

If you are a cannabis retailer, you are required to collect the cannabis excise tax from your customers on each retail sale of cannabis or cannabis products starting January 1, 2018, and pay the excise tax to a distributor. Distributors are liable for paying the cannabis taxes to the CDTFA.

Invoice Requirements

Retailers are required to provide purchasers with a receipt or other similar document that includes the following statement – “The cannabis excise taxes are included in the total amount of this invoice.”

Recordkeeping

Every sale or transport of cannabis or cannabis products must be recorded on an invoice or receipt. Cannabis licensees are required to keep invoices for a minimum of seven years.

Distributors (or in some cases manufacturers) are responsible for collecting the cannabis cultivation and excise taxes, and the invoices they provide must include, among other specified requirements, the amount of tax collected.

Retailers, cultivators, and manufacturers must keep these invoices as verification that the appropriate tax was paid.

How This Impacts The Black Market

Legal California cannabis businesses have been complaining about taxes, which in parts of the state are among the highest in the nation. Many believe that these taxes on compliant cannabis operators while still mandating compliance with State and local regulations will widen the price disparity gap between cannabis products sold in the black market vs. cannabis products sold in the legal market. But with the State stepping up its enforcement efforts to uncover and prosecute illegal cannabis operators, the State is hoping to eliminate this discrepancy by eradicating non-compliant operators.

What Should You Do?

Start your cannabis business on the right track.  Protect yourself and your investment by engaging the cannabis tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles County and other California locations. We can come up with tax solutions and strategies and protect you and your business and to maximize your net profits. Also, if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

Advantages To Filing A 2021 Tax Return – Getting Money Due To You

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Advantages To Filing A 2021 Tax Return – Getting Money Due To You

Most people with gross income of $12,550 or more must file a federal tax return. Some people with a lower income are not required to file. However, these individuals should still consider filing for a refund of federal income tax withheld. They may also be eligible for certain tax credits, like the earned income tax credit, the recovery rebate credit and others.

Generally, the 2021 Federal individual income tax return was due April 18, 2022; however, if you timely filed an extension no later than April 18th, your filing deadline is now October 17, 2022.

Here are five things to consider when determining whether to file a 2021 tax return, including possibly being eligible for an Economic Impact Payment:

  1. Tax withheld or paid–
  • Did your employer withhold federal income tax from your pay in 2021?
  • Did you make estimated tax payments?
  • Did you get a refund last year, and have it applied to your 2021 tax?

If you answered “yes” to any of these questions, you may be owed a refund. To receive the refund, you must file a 2021 tax return.

  1. Earned income tax credit– This is a tax credit for low- to moderate-income wage earners. It is a refundable tax credit, and the amount depends on the taxpayer’s income and number of children. The credit doesn’t just reduce the amount of tax owed but could also result in a refund. However, once again, to claim the EITC, you must file a return.
  1. Child tax credit– Taxpayers can claim this credit if they have a qualifying child under the age of 17 and meet other qualifications. The maximum amount per qualifying child is $2,000. Up to $1,400 of that amount can be refundable for each qualifying child. So, like the EITC, the Child Tax Credit can give a taxpayer a refund even if they owe no tax.

Taxpayers with dependents who don’t qualify for the child tax credit may be able to claim the credit for other dependents. The maximum credit amount is $500 for each dependent who meets certain conditions.

  1. American opportunity or lifetime earning credits – Two credits can help taxpayers paying higher education costs for themselves, a spouse or dependent. Even if the taxpayer doesn’t owe any taxes, they may still qualify. You need to complete Form 8863, Education Credits and file it with the tax return.

If you do not qualify for the either of these credits, you may benefit from taking the Tuition and Fees Deduction on your tax return.

  1. Economic Impact Payment– Anyone who is eligible for an Economic Impact Payment but did not get the payments or did not get the full amount, must file a tax return to claim the recovery rebate credit even if they aren’t normally required to file.  Families and individuals in the following circumstances, among others, may not have received the full amount of their third-round Economic Impact Payment because their circumstances in 2021 were different than they were in 2020.

These families and individuals may be eligible to receive more money by claiming the 2021 Recovery Rebate Credit on their 2021 income tax return:

  • Parents of a child born in 2021 who claim the child as a dependent on their 2021 income tax return may be eligible to receive a 2021 Recovery Rebate Credit of up to $1,400 for this child. All eligible parents of qualifying children born or welcomed through adoption or foster care in 2021 are also encouraged to claim the child tax credit — worth up to $3,600 per child born in 2021 — on their 2021 income tax return.
  • Families who added a dependent – such as a parent, a nephew or niece, or a grandchild – on their 2021 income tax return who was not listed as a dependent on their 2020 income tax return may be eligible to receive a 2021 Recovery Rebate Credit of up to $1,400 for this dependent.
  • Single filers who had incomes above $80,000 in 2020 but less than this amount in 2021; married couples who filed a joint return and had incomes above $160,000 in 2020 but less than this amount in 2021; and head of household filers who had incomes above $120,000 in 2020 but less than this amount in 2021 may be eligible for a 2021 Recovery Rebate Credit of up to $1,400 per person.
  • Single filers who had incomes between $75,000 and $80,000 in 2020 but had lower incomes in 2021; married couples who filed a joint return and had incomes between $150,000 and $160,000 in 2020 but had lower incomes in 2021; and head of household filers who had incomes between $112,500 and $120,000 in 2020 but had lower incomes in 2021 may be eligible for a 2021 Recovery Rebate Credit.

Individuals must claim the 2021 Recovery Rebate Credit on their 2021 income tax return in order to get this money; the IRS will not automatically calculate the 2021 Recovery Rebate Credit.

Getting Late Filing Penalties Abated

Filing timely is very important because the late-filing and late-payment penalties and interest on unpaid taxes add up quickly. However, in some cases, a taxpayer filing after the deadline may qualify for penalty relief. For those charged a penalty, they may contact the IRS by calling the number on their notice and explain why they couldn’t file and pay on time.

Taxpayers who have a history of filing and paying on time often qualify for administrative penalty relief. A taxpayer usually qualifies if they have filed and paid timely for the past three years and meet other requirements.

An Opportunity For Taxpayers Who Owe The IRS

Do not think that if you owe the IRS your tax problem will disappear because of the measures being considered by the government. Instead you should be utilizing this valuable time to get yourself prepared so that when activity in this nation regains momentum, you are ready to make the best offer or proposal to take control of your outstanding tax debts.

As a prerequisite to any proposal to the IRS, you must be in current compliance. That means if you have any outstanding income tax returns, they must be completed and submitted to IRS.

Also, if you are required to make estimated tax payments, you must be current in making those payments. Fortunately, as we are now in 2022, taxpayers who expect to owe for 2021 should have their 2021 income tax returns done now so that the 2021 liability can be rolled over into any proposal and the requirement to make estimated tax payments will now start for 2022.

Remember that COVID-19 does not alter the tax laws, so all taxpayers should continue to meet their tax obligations as normal. Individuals and businesses should keep filing their tax returns and making payments and deposits with the IRS, as they are required to do.

The take away from this – use the Federal government’s downtime and continued uncertainty with COVID-19 to your advantage to prepare for the future.

What Should You Do?

You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes. If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), San Francisco Bay Area (including San Jose and Walnut Creek) and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income. Also if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

Including A Tax Plan With Your Summer 2022 Wedding Planning Checklist

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Including A Tax Plan With Your Summer 2022 Wedding Planning Checklist

With all the planning and preparation that goes into a wedding, taxes may not be high on your summer wedding checklist but along with the cake and gift registry, the first tax return as a married couple should be included on your checklist.

Here are some simple steps that can make filing your first tax return as newlyweds less stressful:

  • Name change. The names and Social Security numbers on your tax return must match your Social Security Administration records. If you change your name, report it to the SSA. To do that, file Form SS-5, Application for a Social Security Card. You can get the form on SSA.gov, by calling 800-772-1213 or from your local SSA office.
  • Change tax withholding. A change in your marital status means you must give your employer a new Form W-4, Employee’s Withholding Allowance Certificate. If you and your spouse both work, your combined incomes may move you into a higher tax bracket or you may be affected by the Additional Medicare Tax. Use the IRS Withholding Calculator tool at IRS.gov to help you complete a new Form W-4.
  • Changes in circumstances. If you or your spouse purchased a Health Insurance Marketplace plan and receive advance payments of the premium tax credit in 2021, it is important that you report changes in circumstances, such as changes in your income or family size, to your Health Insurance Marketplace when they happen. You should also notify the Marketplace when you move out of the area covered by your current Marketplace plan. Advance credit payments are paid directly to your insurance company on your behalf to lower the out-of-pocket cost you pay for your health insurance premiums. Reporting changes now will help you get the proper type and amount of financial assistance so you can avoid getting too much or too little in advance, which may affect your refund or balance due when you file your tax return.
  • Address change. Let the IRS know if your address changes. To do that, send the IRS Form 8822, Change of Address. You should also notify the U.S. Postal Service. You can ask them online at USPS.com to forward your mail. You may also report the change at your local post office. You should also notify your Health Insurance Marketplace when you move out of the area covered by your current health care plan.
  • Tax filing status. If you’re married as of December 31, that’s your marital status for the whole year for tax purposes. You and your spouse can choose to file your federal income tax return either jointly or separately each year. While filing jointly is usually more beneficial, it’s best to figure the tax both ways to find out which status results in the lowest tax.
  • Update estate plan documents. Now that your circumstances are changing, it is prudent to have your Will, Powers Of Attorney and Living Will updated. You should also consider if you do not have one already, setting up a Revocable Trust.  Likewise, if you already have a Trust, that should be updated too.

Can you get a Tax Write-Off for your wedding?

Generally you cannot write-off a wedding but there are ways that newlyweds can spend for their weeding that can actually save money when it’s time to pay taxes at the end of the year.

While tax write-offs are usually the last thing a bride and groom think about when planning a wedding, when it comes to saving taxes you may want to consider these tips:

The Attire. Brides often wear their wedding dress only once. And while some opt to keep them for whatever reason, others have no idea how to discard them. For a tax write-off, consider donating the wedding gown to a nonprofit organization like Goodwill, MakingMemories.org or CinderellaProject.net. These organizations will take your dress and issue you a donation receipt for your good efforts. While you’re at it, consider donating the bridesmaids dresses, flower girl dress, ring bearer’s outfit and any nonperishable decorations.

The Venue. Believe it or not, some wedding venues are tax deductible. Choose a ceremony or reception venue located at a museum, public-owned park or even a historic house or building of some sort. These places are usually owned by nonprofit organizations who use the money they receive for upkeep purposes only. Speak with the head of the venue sight to make sure that it is a nonprofit organization and what portion of the cost you pay is in excess of the deemed value of the rental of the space (only the excess amount could be deductible as a charitable contribution).

Wedding Favors and Gifts. Charity donations can make thoughtful wedding gifts and favors. They also save you money during tax season. So instead of purchasing a trinket that your guests or attendants may discard later, opt for a donation to your favorite charity on behalf of all those who are a part of your wedding.

Wedding Flowers and Foods. You can also get a tax write-off for items that have a short life, such as leftover food and all those floral centerpieces. After the wedding is over, ask a friend or family member to bring the items to a local nursing home, homeless shelter or somewhere similar. You will get a tax deduction for the cost of the remaining food and flowers and you’ll put a few smiles on faces.

Documenting. Whether you have your taxes done by a professional accountant or take care of them yourself, it’s important to document each of these wedding tax write-offs. Keep all your receipts for any purchases you make and request a donation sheet (signed by the organization) that states how much you donated, what you donated and when. Save all your contracts for any wedding venues and, if possible, request that the venue organizer provide you with receipts for each of your payments.

Reporting Charitable Contributions. To claim charitable deductions, you must itemize them on Schedule A of Form 1040. The IRS will need any and all receipts and statements that support the fees, expenses and donations that you claim. If your total noncash contributions exceed $500, you must also fill out Form 8283, Noncash Charitable Contributions, and attach it to your tax return. If you donate a single item worth more than $5,000, you must add Form 8283, Section B, and obtain an appraisal.

It’s risky business to take a tax write-off for your wedding but if it is done right it should be respected by the IRS.

Make Sure Your Future Spouse Has No Tax Problems.

You surely would not want to be exposed to the past tax problems of your future spouse … so ask him or her the following:

  • Do you have any outstanding liabilities with any Federal or State tax agency which are not subject to payment plan?
  • Do you have any unfiled tax returns?
  • Are there any tax liens which have not been released for any past tax liabilities that have been paid in full?
  • If you are self-employed or you have financial control or authority over a business, is that business delinquent with its payroll tax deposits?

If he or she answers “yes” to any of these questions, being married to that person could have adverse tax-related consequences to you.

Don’t Take The Chance And Lose Everything You Have Worked For.

Protect yourself. If you are selected for an audit or your future spouse has past tax issues, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income. And if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.