How To Make Sure You Don’t Pay More Than What You Owe To The IRS

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How To Make Sure You Don’t Pay More Than What You Owe To The IRS

I have not yet anyone who does not mind paying more to the IRS than they are legally obligated to.  In fact it is a basic right known enumerated in the Taxpayer Bill of Rights that taxpayers pay no more than the correct amount of tax owed. But if a taxpayer fails to file an income tax return and thus leaves it up to the IRS to determine the amount of tax owed, the IRS will almost always come up with a higher amount with a “substitute return” it created.

Why You Should File Your Past Due Return Now

Avoid IRS Creating A “Substitute Return”

If you fail to file a Federal individual income tax return, the IRS may file a substitute return for you. This return usually will not give you credit for basis in assets sold, deductions and exemptions you may be entitled to receive. Thus the tax bill you will receive will be much higher than if you had filed an income tax return you had prepared. If the IRS files a substitute return, it is still in your best interest to file your own tax return to take advantage of any exemptions, credits and deductions you are entitled to receive. The IRS will generally adjust your account to reflect the correct figures.

Whether you file a tax return or a substitute return is created, the IRS will eventually generate a tax bill, which, if unpaid, will trigger the collection process. This can include such actions as a levy on your wages or bank account or the filing of a notice of federal tax lien.

If you repeatedly do not file, you could be subject to additional enforcement measures, such as additional penalties and/or criminal prosecution.

Claim A Refund

You risk losing your refund if you don’t file your return. If you are due a refund for withholding or estimated taxes, you must file your return to claim it within two years of the return due date. The same rule applies to a right to claim tax credits such as the Earned Income Credit. The IRS will hold income tax refunds in cases where the IRS shows that one or more income tax returns are past due. The IRS will hold them until the IRS gets the past due return(s) or receives an acceptable reason for not filing a past due return.

Protect Social Security Benefits

If you are self-employed and do not file your federal income tax return, any self-employment income you earned will not be reported to the Social Security Administration and you will not receive credits toward Social Security retirement or disability benefits.

Avoid Issues Obtaining Loans

Loan approvals may be delayed if you don’t file your return. Copies of filed tax returns must be submitted to financial institutions, mortgage lenders/brokers, etc., whenever you want to buy or refinance a home, get a loan for a business, or apply for federal aid for higher education.

Avoid Loss Of Passport Renewal Or Eligibility Privileges

Under section 32101 of the Fixing America’s Surface Transportation Act (“FAST Act”), signed into law in December 2015, the IRS is required to notify the State Department of taxpayers the IRS has certified as owing a seriously delinquent tax debt (currently more than $52,000 and meeting certain other requirements under Internal Revenue Code § 7345(b)). Also see Notice 2018-1. The FAST Act also requires the State Department to deny their passport application or deny renewal of their passport. In some cases, the State Department may revoke their passport.

Already Filed Your Past Due Return?

It takes approximately six weeks for IRS to process an accurately completed past due tax return so if in the interim you receive a notice from IRS inquiring on a late-filed tax return it has yet to receive, you should send to IRS a copy of the past due return to the indicated address on that notice.

Tips In Dealing With A Tax Bill Received From IRS

Make sure you really owe the money

If you owe a lot more tax than you expected, find out why. Read your completed return carefully and look for errors. It’s easy to add the same income twice, or to forget an important deduction. Maybe the IRS does not apply all your prior payments. If you expected to qualify for a deduction or credit, and your tax return doesn’t show it, make sure you answered all the questions correctly. One missed question or checkbox can cause you to miss out on tax benefits you may be entitled to.

Another way to determine if something is amiss is to compare this year’s return to your tax return from last year. If your tax situation has not changed drastically, but your tax bill has, find out why.

Just because you received a letter from the IRS that you owe money, don’t automatically assume the IRS is correct. They make mistakes, too.

Minimize penalties and interest

Large tax bills are worse when you pay penalties and interest on top of the original amount owed. You can minimize penalties and interest in three ways:

Exceptions to underpayment of tax penalties – If you underpaid your taxes this year, but you owed considerably less last year, you generally don’t pay a penalty for underpayment of tax if you paid or had withheld at least as much as you owed last year, and you pay by the due date this year. By looking at last year’s tax liability and other tax information, it can be determined if the safe harbor rule reduces your penalties and interest. You may also be able to reduce your penalties and interest using the annualized income method if you received more of your income in the latter part of the year.

Ask for an abatement of penalties – The IRS may reduce or remove penalties and interest on the penalties if a taxpayer writes a letter explaining the situation. But notice that the interest on the tax cannot be abated. In order to succeed, you must show “reasonable cause” which may be met where you had an unusual tax event, you made an honest mistake, or you or your spouse had a serious illness.

Pay as quickly as possible – If you owe tax that may be subject to penalties and interest, don’t wait until April 15th or if on extension October 15th to file your return. Send an estimated tax payment or file early and pay as much tax as you can.

See if you qualify for an Offer In Compromise or alternatively ask for an installment plan

If you can’t pay the tax by the time it is due, don’t avoid the bill. It will only get worse. The IRS must allow you to make payments on your overdue taxes if you owe $50,000 or less and you can show that you cannot pay the amount you owe now. In that situation you may qualify to pay off the tax in as long as six years. Of course, you must also agree to comply with the tax laws, and you or your spouse must not have had an installment agreement with the IRS in the past five years.

Because an installment plan does not allow for any discount of the amount owed and the balance will continue to accrue penalties and interest, serious consideration should be given to an Offer In Compromise (OIC).

What Should You Do?

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), the 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. If you are involved in cannabis, check out what our cannabis tax attorney can do for you. Also, if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

The Five Ways That IRS Selects Tax Returns For Examination

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The Five Ways That IRS Selects Tax Returns For Examination

I have yet to meet anyone who looks forward to having their tax return be selected for an audit by IRS so you should know the five main ways that the IRS selects returns for examination.

  1. Potential participants in abusive tax avoidance transactions — Some returns are selected based on information obtained by the IRS through efforts to identify promoters and participants of abusive tax avoidance  Examples include information received from “John Doe” summonses issued to foreign and domestic banks, credit card companies, businesses and participant lists from promoters ordered by the courts to be turned over to the IRS.
  2. Computer Scoring— Some returns are selected for examination on the basis of computer scoring.  Computer programs give each return numeric “scores”. The Discriminant Function System (“DIF”) score rates the potential for change, based on past IRS experience with similar returns. The Unreported Income DIF (“UIDIF”) score rates the return for the potential of unreported income. IRS personnel screen the highest-scoring returns, selecting some for audit and identifying the items on these returns that are most likely to need review.
  3. Related Examinations— Returns may be selected for audit when they involve issues or transactions with other taxpayers, such as business partners or investors, whose returns were selected for examination. In examinations that include undisclosed foreign bank accounts, the IRS will look for family relatives who may have the same involvement in foreign accounts and also failed to make the proper disclosures.
  4. Information Matching— Some returns are examined because payer reports, such as Forms W-2 from employers or Form 1099 interest statements from banks or Form 1099-K statements from credit card companies, do not match the income reported on the tax return. Even foreign banks who have U.S. account holders are reporting information to the IRS which the IRS is matching to tax returns.
  5. Targeted Industries – When the IRS believes that a specific industry has a high expectation of non-compliance with the tax laws, returns for businesses in that industry may be selected for audit. The cannabis industry seems to be in the center of this as this industry is subject to very unfavorable tax law that denies the deduction of many expenses and is widely known to deal in cash which could lead to unreported income.

Information Matching Most Common Reason Why A Return Is Selected For Audit

When a tax return’s information does not match data reported to the Internal Revenue Service by employers, banks and other third parties, the IRS will send a letter to the taxpayer. The letter is called an IRS Notice CP2000, and it gives detailed information about issues the IRS identified and provides steps taxpayers should take to resolve those issues.

This is not a formal audit notification, but a notice to see if the taxpayer agrees or disagrees with the proposed tax changes. Because this verification process and notice generation is done by IRS computers without the need for an agent to actually work the case, these IRS notices are quite common.

Taxpayers should respond to the CP2000, usually within 30 days from the date printed on the notice.

Consequences Of Failing To Respond To IRS Or If Your Response Is Inadequate

If a timely response to the CP2000 is not made or if the IRS cannot accept the additional information provided, a second IRS notice is generated. That follow-up notice is called an IRS Notice CP3219A or “Statutory Notice of Deficiency”. This notice gives detailed information about why the IRS proposes a tax change and how the agency determined the change. The notice tells taxpayers about their right to challenge the decision in Tax Court by filing a Petition with the Tax Court no later than 90 days from the date of the Statutory Notice of Deficiency.

If a taxpayer timely files a Petition, the additional liability remains “proposed” and cannot be sent to collection enforcement by IRS. Instead the taxpayer will have the opportunity to show that the proposed changes are wrong and if agreement is not reached, it will be the Tax Court judge that will have the ultimate say in this matter.

If a taxpayer does not file a Petition, then the proposed changes become final, a tax bill will be generated by the IRS and the IRS can proceed with collection enforcement.

How Does One Find Out If The IRS Does Select Your Tax Return For Examination?

This is where one must be careful because there are scammers out there who are calling people saying they are the IRS and threatening them with arrest and deportation unless they pay right away. If you are selected for an audit by the IRS, the initial contact will always be in the form of a letter sent by the assigned agent under official IRS letterhead.

An official letter from the IRS will give you the contact information of the agent and what IRS office the agent reports to. The letter will also tell you how the examination is to be conducted – this can be by mail, or through an in-person interview and review of the taxpayer’s records at the agent’s office or outside the agent’s office such as the taxpayer’s business. Finally, the letter will tell you which years are being audited and what records will be needed. Taxpayers may act on their own behalf or have a tax professional represent or accompany them.

What Should You Do?

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), the Los Angeles 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. If you are involved in cannabis, check out what a cannabis tax attorney can do for you.  Also, if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

What To Do If Your Economic Impact Payment Is Wrong

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I think the amount of my Economic Impact Payment is incorrect.  What can I do?

On March 27, 2020 President Trump signed the $2 trillion Stimulus Bill formally known as the Coronavirus Aid, Relief and Economic Security [CARES] Act (the “CARES Act”) to provide assistance to workplaces and employees. The CARES Act provides many benefits intended to deliver cash into the hands of individuals and businesses, as well as many other tax provisions.  One of the most publicized provisions is the immediate cash payments by the Federal government to qualifying taxpayers.

Who is eligible for the economic impact payment?

To get cash assistance promptly delivered to individual taxpayers, qualifying taxpayers will receive one-time cash payments of $1,200 for individual taxpayers or if married, $2,400 for married couples.  An additional $500 may be paid for each qualifying child.

These amounts are subject to reduction if the individual’s Adjusted Gross Income (AGI) exceeds $75,000 for an individual taxpayer; $112,500 for head of household; or $150,000 for a married couple.

Nonresident alien individuals and a person who is the dependent of another are ineligible to receive the payment.

For filers with income above those amounts, the payment amount is reduced by $5 for each $100 above the $75,000/$150,000 thresholds. Single filers with income exceeding $99,000 and $198,000 for joint filers with no children are not eligible.

So if your economic impact payment is too low, how do you claim the missing funds?

The Treasury Department has reported that over 130 million Americans have received their economic impact payment.  While many have received the correct payment amount, some have reported receiving payments that were too low. One of the most common cases appears to be parents who did not receive $500 payments for each qualifying dependent child, despite filing a 2018 or 2019 tax return claiming children.

So if your economic impact payment was too low, how do you claim the missing funds?  Question #19 of the Frequently Asked Questions section on the IRS website provides the following answer:

“If you did not receive the full amount to which you believe you are entitled, you will be able to claim the additional amount when you file your 2020 tax return.  This is particularly important for individuals who may be entitled to the additional $500 per qualifying child dependent payments.”

In short, you’ll have to wait until at least the end of January 2021 to claim the missing amount as a tax credit, when you file your 2020 taxes.

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 2020, taxpayers who expect to owe for 2019 should have their 2019 income tax returns done now so that the 2019 liability can be rolled over into any proposal and the requirement to make estimated tax payments will now start for 2020.

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.

The take away from this – use the Federal government’s downtime to your advantage to prepare for the future.

Click here for COVID-19 Tax Relief measures instituted by the IRS in “The IRS People First Initiative” that can benefit you. 

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.

IRS Recalling Agents Back To Work

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IRS Recalling Agents Back To Work

On April 24, 2020 the IRS issued an email to its employees that was shared with certain members of the House Ways and Means Committee.  The IRS email was released to the public by Chairman Richard Neal (D-Mass.) and Rep. John Lewis (D-Ga.).  The email directs “certain employees in mission-critical functions” to report to IRS offices starting Monday, April 27, 2020.

The IRS shuttered all of its processing and taxpayer assistance centers weeks ago protect its workforce from exposure to COVID-19.  While this measure slowed down the IRS, the IRS did not completely stop functioning as many agents continued their jobs by teleworking.

IRS Coronavirus Tax Relief 

The IRS has established a special section focused on steps to help taxpayers, businesses and others affected by the coronavirus and as information becomes available, the IRS will be updating this special page on its website. You can also check out the KahnTaxLaw Coronavirus Resource Center.

President Donald Trump declared the coronavirus pandemic a national emergency. Therefore, under Sec. 7508A, the declaration of an emergency under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, P.L. 100-707, the IRS is allowed to delay certain tax filing and payment deadlines.

IRS Extends The 2019 Tax Season To July 15, 2020

The IRS extended the due date for Federal income tax payments and Federal income tax return filings from April 15, 2020, to July 15, 2020.

Taxpayers do not need to file any additional forms or call the IRS to qualify for this automatic federal tax filing and payment relief. Taxpayers who need additional time to file beyond the July 15 deadline, can request a filing extension by filing Form 4868 for individuals and Form 7004 for corporations.

But if you are due a refund you should file as soon as possible. The IRS states that most tax refunds are still being issued within 21 days.

IRS Commissioner Chuck Rettig’s Announcement Of “The IRS People First Initiative”

On March 25, 2020 the IRS issued a press release  announcing a sweeping series of steps to assist taxpayers by providing relief on a variety of issues ranging from easing payment guidelines to postponing compliance actions in what it calls “The IRS People First Initiative”.

These new changes include issues ranging from postponing certain payments related to Installment Agreements and Offers in Compromise to collection and limiting certain enforcement actions. The IRS will be temporarily modifying the following activities as soon as possible; the projected start date will be April 1, 2020 and the effort will initially run through July 15, 2020. During this period, to the maximum extent possible, the IRS will avoid in-person contacts.

Highlights of the key actions in the IRS People First Initiative include:

Relief For Existing Installment Agreements –For taxpayers under an existing Installment Agreement, payments due between April 1, 2020 and July 15, 2020 are suspended. Taxpayers who are currently unable to comply with the terms of an Installment Payment Agreement, including a Direct Deposit Installment Agreement, may suspend payments during this period if they prefer. Furthermore, the IRS will not default any Installment Agreements during this period. By law, interest will continue to accrue on any unpaid balances.

Preservation Of Offers in Compromise (OIC) – The IRS is taking several steps to assist taxpayers in various stages of the OIC process:

  • Pending OIC applications– The IRS will allow taxpayers until July 15, 2020 to provide requested additional information to support a pending OIC. In addition, the IRS will not close any pending OIC request before July 15, 2020, without the taxpayer’s consent.
  • OIC Payments– Taxpayers have the option of suspending all payments on accepted OICs until July 15, 2020, although by law interest will continue to accrue on any unpaid balances.
  • Delinquent Return Filings– The IRS will not default an OIC for those taxpayers who are delinquent in filing their tax return for tax year However, taxpayers should file any delinquent 2018 return (and their 2019 return) on or before July 15, 2020.

Limited Suspension Of Field Collection Activities – Liens and levies (including any seizures of a personal residence) initiated by field revenue officers will be suspended through July 15, 2020. However, field revenue officers will continue to pursue high-income non-filers and perform other similar activities where warranted.

Suspension Of New Automated Liens and Levies – New automatic, systemic liens and levies will be suspended during through July 15, 2020.

Suspension Of Passport Certifications to the State Department – IRS will suspend new certifications to the Department of State for taxpayers who are “seriously delinquent” through July 15, 2020.  Certification prevents taxpayers from receiving or renewing passports.

Suspension Of Forwarding New Accounts To Private Debt Collection – New delinquent accounts will not be forwarded by the IRS to private collection agencies to work through July 15, 2020.

Limited Suspension Of New Field, Office and Correspondence Audits – Through July 15, 2020, the IRS will generally not start new field, office and correspondence examinations. We will continue to work refund claims where possible, without in-person contact. However, the IRS may start new examinations where deemed necessary to protect the government’s interest in preserving the applicable statute of limitations.

Suspension Of In-Person Meetings – In-person meetings regarding current field, office and correspondence examinations will be suspended through July 15, 2020; however, these examinations can continue remotely, where possible.

Earned Income Tax Credit and Wage Verification Reviews – Taxpayers have until July 15, 2020, to respond to the IRS to verify that they qualify for the Earned Income Tax Credit or to verify their income. Until July 15, 2020, the IRS will not deny these credits for a failure to provide requested information.

Independent Office of Appeals – Appeals employees will continue to work their cases. Although Appeals is not currently holding in-person conferences with taxpayers, conferences may be held over the telephone or by video-conference.

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 2020, taxpayers who expect to owe for 2019 should have their 2019 income tax returns done now so that the 2019 liability can be rolled over into any proposal and the requirement to make estimated tax payments will now start for 2020.

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.

The take away from this – use the Federal government’s downtime 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 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.

Still Waiting For Your IRS Economic Impact Payment?

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Still Waiting For Your IRS Economic Impact Payment?

As the IRS closed its web-based portal for non-filers and taxpayers for whom the IRS does not have your Direct Deposit Information, taxpayers with a filing requirement must file a tax return to get an Economic Impact Payment.

On March 27, 2020 President Trump signed the $2 trillion Stimulus Bill formally known as the Coronavirus Aid, Relief and Economic Security [CARES] Act (the “CARES Act”) to provide assistance to workplaces and employees. The CARES Act provides many benefits intended to deliver cash into the hands of individuals and businesses, as well as many other tax provisions.  One of the most publicized provisions is the immediate cash payments by the Federal government to qualifying taxpayers.

Who is eligible for the economic impact payment?

To get cash assistance promptly delivered to individual taxpayers, qualifying taxpayers will receive one-time cash payments of $1,200 for individual taxpayers or if married, $2,400 for married couples.  An additional $500 may be paid for each qualifying child.

These amounts are subject to reduction if the individual’s Adjusted Gross Income (AGI) exceeds $75,000 for an individual taxpayer; $112,500 for head of household; or $150,000 for a married couple.

Nonresident alien individuals and a person who is the dependent of another are ineligible to receive the payment.

For filers with income above those amounts, the payment amount is reduced by $5 for each $100 above the $75,000/$150,000 thresholds. Single filers with income exceeding $99,000 and $198,000 for joint filers with no children are not eligible.

How will the IRS know where to send my payment?

The vast majority of people do not need to take any action. The IRS will calculate and automatically send the economic impact payment to those eligible.

The cash payments will be based on the most recent tax information available to the IRS looking at a taxpayer’s 2019 tax return filed and if it has not yet been filed, then the taxpayer’s 2018 tax return filed.

The economic impact payment will be deposited directly into the same banking account reflected on the return filed.

So if you haven’t filed taxes yet for one of those years, now is a good time.

I need to file a tax return. How long are the economic impact payments available?

For those concerned about visiting a tax professional in person to get help with a tax return, these economic impact payments will be available throughout the rest of 2020.

What happens when I file a 2020 tax return next year? 

Keep in mind that if your 2020 tax return will reflect an AGI higher than the above applicable threshold, you should expect to pay back at least some or perhaps all of the cash payments you received under the CARES Act.

Beware Of New IRS Scam!

You get a call from someone claiming to be working for the IRS claiming:

“We need your personal information in order for you to claim the coronavirus stimulus money.”

This appears to be an identity theft scheme to obtain recipients’ personal and financial information so the scammers can provide the IRS with their banking information to get your economic impact payment deposited into their account.

In reality, the IRS WILL NOT CALL YOU! Federal aid will either be deposited via account information the IRS already has from your tax filings or they will send you a check.

Where can I get more information?

The IRS has established a special section focused on steps to help taxpayers, businesses and others affected by the coronavirus and as information becomes available, the IRS will be updating this special page on its website.  You can also check out the KahnTaxLaw Coronavirus Resource Center.

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 2020, taxpayers who expect to owe for 2019 should have their 2019 income tax returns done now so that the 2019 liability can be rolled over into any proposal and the requirement to make estimated tax payments will now start for 2020.

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.

The take away from this – use the Federal government’s downtime to your advantage to prepare for the future.

Click here for COVID-19 Tax Relief measures instituted by the IRS in “The IRS People First Initiative” that can benefit you.

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. 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.

IRS Responding To COVID-19 With “The IRS People First Initiative” For Examination And Collection Tax Relief

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IRS Responding To COVID-19 With “The IRS People First Initiative” For Examination And Collection Tax Relief 

IRS Coronavirus Tax Relief 

The IRS has established a special section focused on steps to help taxpayers, businesses and others affected by the coronavirus and as information becomes available, the IRS will be updating this special page on its website.

President Donald Trump declared the coronavirus pandemic a national emergency. Therefore, under Sec. 7508A, the declaration of an emergency under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, P.L. 100-707, the IRS is allowed to delay certain tax filing and payment deadlines.

IRS And Treasury Department Guidance For The 2019 Tax Season

On March 18, 2020 the Treasury Department and the IRS issued the first formal guidance.  The Treasury Department and IRS are extending the due date for Federal income tax payments and Federal income tax return filings due April 15, 2020, to July 15, 2020, for payments due of up to $10 million for corporations and up to $1 million (now it is unlimited) for individuals – regardless of filing status – and other unincorporated entities. Associated interest, additions to tax, and penalties for late payment will also be suspended until July 15, 2020.

Click here for the press release issued by the Treasury Department.

Click here for Notice 2020-17 issued by the IRS.

Click here for the March 21, 2020 press release issued by the IRS.

This relief is available solely with respect to:

  • Federal income tax payments (including payments of tax on self-employment income) due on April 15, 2020, in respect of an affected taxpayer’s 2019 taxable year, and
  • Federal estimated income tax payments (including payments of tax on self-employment income) due on April 15, 2020, for an affected taxpayer’s 2020 taxable year.

Taxpayers do not need to file any additional forms or call the IRS to qualify for this automatic federal tax filing and payment relief. Taxpayers who need additional time to file beyond the July 15 deadline, can request a filing extension by filing Form 4868 for individuals and Form 7004 for corporations.

But if you are due a refund you should file as soon as possible. The IRS states that most tax refunds are still being issued within 21 days.

IRS Commissioner Chuck Rettig’s Announcement Of “The IRS People First Initiative”

On March 25, 2020 the IRS issued a press release  announcing a sweeping series of steps to assist taxpayers by providing relief on a variety of issues ranging from easing payment guidelines to postponing compliance actions in what it calls “The IRS People First Initiative”.

These new changes include issues ranging from postponing certain payments related to Installment Agreements and Offers in Compromise to collection and limiting certain enforcement actions. The IRS will be temporarily modifying the following activities as soon as possible; the projected start date will be April 1, 2020 and the effort will initially run through July 15, 2020. During this period, to the maximum extent possible, the IRS will avoid in-person contacts.

Highlights of the key actions in the IRS People First Initiative include:

Relief For Existing Installment Agreements –For taxpayers under an existing Installment Agreement, payments due between April 1, 2020 and July 15, 2020 are suspended. Taxpayers who are currently unable to comply with the terms of an Installment Payment Agreement, including a Direct Deposit Installment Agreement, may suspend payments during this period if they prefer. Furthermore, the IRS will not default any Installment Agreements during this period. By law, interest will continue to accrue on any unpaid balances.

Preservation Of Offers in Compromise (OIC) – The IRS is taking several steps to assist taxpayers in various stages of the OIC process:

  • Pending OIC applications – The IRS will allow taxpayers until July 15, 2020 to provide requested additional information to support a pending OIC. In addition, the IRS will not close any pending OIC request before July 15, 2020, without the taxpayer’s consent.
  • OIC Payments – Taxpayers have the option of suspending all payments on accepted OICs until July 15, 2020, although by law interest will continue to accrue on any unpaid balances.
  • Delinquent Return Filings – The IRS will not default an OIC for those taxpayers who are delinquent in filing their tax return for tax year 2018. However, taxpayers should file any delinquent 2018 return (and their 2019 return) on or before July 15, 2020.

Limited Suspension Of Field Collection Activities – Liens and levies (including any seizures of a personal residence) initiated by field revenue officers will be suspended through July 15, 2020. However, field revenue officers will continue to pursue high-income non-filers and perform other similar activities where warranted.

Suspension Of New Automated Liens and Levies – New automatic, systemic liens and levies will be suspended during through July 15, 2020.

Suspension Of Passport Certifications to the State Department – IRS will suspend new certifications to the Department of State for taxpayers who are “seriously delinquent” through July 15, 2020.  Certification prevents taxpayers from receiving or renewing passports.

Suspension Of Forwarding New Accounts To Private Debt Collection – New delinquent accounts will not be forwarded by the IRS to private collection agencies to work through July 15, 2020.

Limited Suspension Of New Field, Office and Correspondence Audits – Through July 15, 2020, the IRS will generally not start new field, office and correspondence examinations. We will continue to work refund claims where possible, without in-person contact. However, the IRS may start new examinations where deemed necessary to protect the government’s interest in preserving the applicable statute of limitations.

Suspension Of In-Person Meetings – In-person meetings regarding current field, office and correspondence examinations will be suspended through July 15, 2020; however, these examinations can continue remotely, where possible.

Earned Income Tax Credit and Wage Verification Reviews – Taxpayers have until July 15, 2020, to respond to the IRS to verify that they qualify for the Earned Income Tax Credit or to verify their income. Until July 15, 2020, the IRS will not deny these credits for a failure to provide requested information.

Independent Office of Appeals – Appeals employees will continue to work their cases. Although Appeals is not currently holding in-person conferences with taxpayers, conferences may be held over the telephone or by video-conference.

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 2020, taxpayers who expect to owe for 2019 should have their 2019 income tax returns done now so that the 2019 liability can be rolled over into any proposal and the requirement to make estimated tax payments will now start for 2020.

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.

The take away from this – use the Federal government’s downtime 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), 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. 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.

Federal & State Tax Agencies Responding To COVID-19 With Tax Relief – The Families First Coronavirus Response Act

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Federal & State Tax Agencies Responding To COVID-19 With Tax Relief – The Families First Coronavirus Response Act

IRS Coronavirus Tax Relief

The IRS has established a special section focused on steps to help taxpayers, businesses and others affected by the coronavirus and as information becomes available, the IRS will be updating this special page on its website.

President Donald Trump declared the coronavirus pandemic a national emergency. Therefore, under Sec. 7508A, the declaration of an emergency under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, P.L. 100-707, the IRS is allowed to delay certain tax filing and payment deadlines.

IRS And Treasury Department Initial Guidance

On March 18, 2020 the Treasury Department and the IRS issued the first formal guidance.  The Treasury Department and IRS are extending the due date for Federal income tax payments due April 15, 2020, to July 15, 2020, for payments due of up to $10 million for corporations and up to $1 million for individuals – regardless of filing status – and other unincorporated entities. Associated interest, additions to tax, and penalties for late payment will also be suspended until July 15, 2020.

Click here for the press release issued by the Treasury Department.

Click here for Notice 2020-17 issued by the IRS.

This relief is available solely with respect to:

  • Federal income tax payments (including payments of tax on self-employment income) due on April 15, 2020, in respect of an affected taxpayer’s 2019 taxable year, and
  • Federal estimated income tax payments (including payments of tax on self-employment income) due on April 15, 2020, for an affected taxpayer’s 2020 taxable year.

No extension is provided in this relief for the payment or deposit of any other type of Federal tax.  This did not however extend the April 15th filing deadline – until now …

Treasury Secretary Steve Mnuchin’s Announcement

On March 20, 2020 Treasury Secretary Steve Mnuchin tweeted “At @realDonaldTrump’s direction, we are moving Tax Day from April 15 to July 15. All taxpayers and businesses will have this additional time to file and make payments without interest or penalties.”

As a result of the postponement of the due date for making Federal income tax payments up to the applicable postponed payment amount from April 15, 2020, to July 15, 2020, the period beginning on April 15, 2020, and ending on July 15, 2020, will be disregarded in the calculation of any interest, penalty, or addition to tax for failure to pay the Federal income taxes postponed by this relief. Interest, penalties, and additions to tax with respect to such postponed Federal income tax payments will begin to accrue on July 16, 2020. In addition, interest, penalties and additions to tax will accrue, without any suspension or deferral, on the amount of any Federal income tax payments in excess of the applicable postponed payment amount due but not paid by an affected taxpayer on April 15, 2020.

The Families First Coronavirus Response Act, H.R. 6201

On March 18, 2020, President Donald Trump signed into law The Families First Coronavirus Response Act (the “Act”), H.R. 6201.  This is the first stimulus package offered by the Federal government which contains, among its many provisions, several tax credits for employers who provide paid sick leave or family or medical leave for their employees who miss work for various coronavirus-related reasons. For now, let’s focus on its tax credit provisions.

Payroll tax credit for required paid family leave – the Act provides an employer payroll tax credit that equals 100% of the qualified family leave wages paid by the employer.  The credit is generally available for up to $200 in wages for each day an employee receives qualified family leave wages. A maximum of $10,000 in wages per employee would be eligible for the credit. Eligible self-employed individuals would be eligible for a refundable credit against income tax for qualified family leave equivalent amounts.

Payroll tax credit for required paid sick leave – the Act provides an employer payroll tax credit that equals 100% of the qualified sick leave wages paid by the employer.  The credit is generally available for up to $511 in wages (for workers who are quarantined or self-quarantined or who have COVID-19) and wages of up to $200 for other workers for each day an employee receives qualified sick leave pay. The credit would be available for up to 10 days per calendar quarter.

What employers need to know about these tax credits

The Emergency Family and Medical Leave Expansion Act requires employers with fewer than 500 employees to provide public health emergency leave under the Family and Medical Leave Act (FMLA), P.L. 103-3, when an employee is unable to work or telework due to a need for leave to care for a son or daughter under age 18 because the school or place of care has been closed, or the child care provider is unavailable, due to a public health emergency related to COVID-19. (Employers with fewer than 50 employees can be exempted from the requirement).

The credit is available for eligible wages or sick leave wages paid during a period that begins on a date starting on a date within 15 days of enactment (April 2, 2020) and through December 31, 2020. The credit would apply against the employer portion of Sec. 3111(a) old age, survivors, and disability insurance (OASDI) taxes or Sec. 3221(a) Tier 1 Railroad Retirement Act excise taxes.

To prevent double benefits, employers’ gross income will be increased by the amount of the credit (meaning the credit is not taken into account for purposes of determining any amount allowable as a payroll tax deduction, deduction for qualified sick leave wages, or deduction for health plan expenses), and no credit will be allowed for wages for which a Sec. 45S family and medical leave credit is claimed.

The credit would not apply to the U.S. government, the government of any state or any subdivision of a state, or any agencies or instrumentalities of the foregoing. Employers can elect not to apply the new provision for any calendar quarter.

California Coronavirus Tax Relief

The California Franchise Tax Board (“FTB”) on March 13, 2020 announced special tax relief for California taxpayers affected by the COVID-19 pandemic. Affected taxpayers are granted an extension to file 2019 California tax returns and make certain payments until July 15, 2020 (as further extended by FTB), in line with Governor Newsom’s March 12 Executive Order.

“During this public health emergency, every Californian should be free to focus on their health and wellbeing,” said State Controller Betty T. Yee, who serves as chair of FTB. “Having extra time to file their taxes helps allows people to do this, as the experts work to control the spread of coronavirus.”

This relief includes moving the various tax filing and payment deadlines that occur on March 15, 2020, through July 15, 2020, to July 15, 2020. This includes:

  • Partnerships and LLCs who are taxed as partnerships whose tax returns are due on March 15 now have a 120-day extension to file and pay by July 15.
  • Individual filers whose tax returns are due on April 15 now have a 90-day extension to file and pay by July 15.
  • Quarterly estimated tax payments due on April 15 now have a 90-day extension to pay by July 15.
  • Quarterly estimated tax payments due on June 15 now have a 30-day extension to pay by July 15.

Taxpayers claiming the special COVID-19 relief should write the name of the state of emergency (for example, COVID-19) in black ink at the top of the tax return to alert FTB of the special extension period. If taxpayers are e-filing, they should follow the software instructions to enter disaster information.

The FTB will also waive interest and any late filing or late payment penalties that would otherwise apply.

Other States

The American Institute Of Certified Public Accounts has put out a comprehensive list of what tax relief is being offered at the State level.

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 2020, taxpayers who expect to owe for 2019 should have their 2019 income tax returns done now so that the 2019 liability can be rolled over into any proposal and the requirement to make estimated tax payments will now start for 2020.

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 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), the Inland Empire (Ontario and Palm Springs) 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.

 

Federal & State Tax Agencies Responding To COVID-19 With Tax Relief – Tax Day Officially Changed To July 15th

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Federal & State Tax Agencies Responding To COVID-19 With Tax Relief – Tax Day Officially Changed To July 15th

IRS Coronavirus Tax Relief

The IRS has established a special section focused on steps to help taxpayers, businesses and others affected by the coronavirus and as information becomes available, the IRS will be updating this special page on its website.

President Donald Trump declared the coronavirus pandemic a national emergency. Therefore, under Sec. 7508A, the declaration of an emergency under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, P.L. 100-707, the IRS is allowed to delay certain tax filing and payment deadlines.

IRS And Treasury Department Initial Guidance

On March 18, 2020 the Treasury Department and the IRS issued the first formal guidance.  The Treasury Department and IRS are extending the due date for Federal income tax payments due April 15, 2020, to July 15, 2020, for payments due of up to $10 million for corporations and up to $1 million for individuals – regardless of filing status – and other unincorporated entities. Associated interest, additions to tax, and penalties for late payment will also be suspended until July 15, 2020.

Click here for the press release issued by the Treasury Department.

Click here for Notice 2020-17 issued by the IRS.

This relief is available solely with respect to:

  • Federal income tax payments (including payments of tax on self-employment income) due on April 15, 2020, in respect of an affected taxpayer’s 2019 taxable year, and
  • Federal estimated income tax payments (including payments of tax on self-employment income) due on April 15, 2020, for an affected taxpayer’s 2020 taxable year.

No extension is provided in this relief for the payment or deposit of any other type of Federal tax.  This did not however extend the April 15th filing deadline – until now …

Treasury Secretary Steve Mnuchin’s Announcement

On March 20, 2020 Treasury Secretary Steve Mnuchin tweeted “At @realDonaldTrump’s direction, we are moving Tax Day from April 15 to July 15. All taxpayers and businesses will have this additional time to file and make payments without interest or penalties.”

As a result of the postponement of the due date for making Federal income tax payments up to the applicable postponed payment amount from April 15, 2020, to July 15, 2020, the period beginning on April 15, 2020, and ending on July 15, 2020, will be disregarded in the calculation of any interest, penalty, or addition to tax for failure to pay the Federal income taxes postponed by this relief. Interest, penalties, and additions to tax with respect to such postponed Federal income tax payments will begin to accrue on July 16, 2020. In addition, interest, penalties and additions to tax will accrue, without any suspension or deferral, on the amount of any Federal income tax payments in excess of the applicable postponed payment amount due but not paid by an affected taxpayer on April 15, 2020.

California Coronavirus Tax Relief

The California Franchise Tax Board (“FTB”) on March 13, 2020 announced special tax relief for California taxpayers affected by the COVID-19 pandemic. Affected taxpayers are granted an extension to file 2019 California tax returns and make certain payments until July 15, 2020 (as further extended by FTB), in line with Governor Newsom’s March 12 Executive Order.

“During this public health emergency, every Californian should be free to focus on their health and wellbeing,” said State Controller Betty T. Yee, who serves as chair of FTB. “Having extra time to file their taxes helps allows people to do this, as the experts work to control the spread of coronavirus.”

This relief includes moving the various tax filing and payment deadlines that occur on March 15, 2020, through July 15, 2020, to July 15, 2020. This includes:

  • Partnerships and LLCs who are taxed as partnerships whose tax returns are due on March 15 now have a 120-day extension to file and pay by July 15.
  • Individual filers whose tax returns are due on April 15 now have a 90-day extension to file and pay by July 15.
  • Quarterly estimated tax payments due on April 15 now have a 90-day extension to pay by July 15.
  • Quarterly estimated tax payments due on June 15 now have a 30-day extension to pay by July 15.

Taxpayers claiming the special COVID-19 relief should write the name of the state of emergency (for example, COVID-19) in black ink at the top of the tax return to alert FTB of the special extension period. If taxpayers are e-filing, they should follow the software instructions to enter disaster information.

The FTB will also waive interest and any late filing or late payment penalties that would otherwise apply.

Other States

The American Institute Of Certified Public Accounts has put out a comprehensive list of what tax relief is being offered at the State level.

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 2020, taxpayers who expect to owe for 2019 should have their 2019 income tax returns done now so that the 2019 liability can be rolled over into any proposal and the requirement to make estimated tax payments will now start for 2020.

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 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 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.

IRS Responding To COVID-19 With Tax Relief – Tax Day Officially Changed To July 15th

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IRS Responding To COVID-19 With Tax Relief – Tax Day Officially Changed To July 15th

IRS Coronavirus Tax Relief

The IRS has established a special section focused on steps to help taxpayers, businesses and others affected by the coronavirus and as information becomes available, the IRS will be updating this special page on its website.

President Donald Trump declared the coronavirus pandemic a national emergency. Therefore, under Sec. 7508A, the declaration of an emergency under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, P.L. 100-707, the IRS is allowed to delay certain tax filing and payment deadlines.

IRS And Treasury Department Initial Guidance

On March 18, 2020 the Treasury Department and the IRS issued the first formal guidance.  The Treasury Department and IRS are extending the due date for Federal income tax payments due April 15, 2020, to July 15, 2020, for payments due of up to $10 million for corporations and up to $1 million for individuals – regardless of filing status – and other unincorporated entities. Associated interest, additions to tax, and penalties for late payment will also be suspended until July 15, 2020.

Click here for the press release issued by the Treasury Department.

Click here for Notice 2020-17 issued by the IRS.

This relief is available solely with respect to:

  • Federal income tax payments (including payments of tax on self-employment income) due on April 15, 2020, in respect of an affected taxpayer’s 2019 taxable year, and
  • Federal estimated income tax payments (including payments of tax on self-employment income) due on April 15, 2020, for an affected taxpayer’s 2020 taxable year.

No extension is provided in this relief for the payment or deposit of any other type of Federal tax.  This did not however extend the April 15th filing deadline – until now …

Treasury Secretary Steve Mnuchin’s Announcement

On March 20, 2020 Treasury Secretary Steve Mnuchin tweeted “At @realDonaldTrump’s direction, we are moving Tax Day from April 15 to July 15. All taxpayers and businesses will have this additional time to file and make payments without interest or penalties.”

Subsequently on March 21, 2020 the IRS issued a press release that that the federal income tax filing due date is automatically extended from April 15, 2020, to July 15, 2020.

Taxpayers can also defer federal income tax payments due on April 15, 2020, to July 15, 2020, without penalties and interest, regardless of the amount owed. This deferment applies to all taxpayers, including individuals, trusts and estates, corporations and other non-corporate tax filers as well as those who pay self-employment tax.

Taxpayers do not need to file any additional forms or call the IRS to qualify for this automatic federal tax filing and payment relief. Individual taxpayers who need additional time to file beyond the July 15 deadline, can request a filing extension by filing Form 4868 for individuals and Form 7004 for corporations.

As a result of the postponement of the due date for making Federal income tax payments up to the applicable postponed payment amount from April 15, 2020, to July 15, 2020, the period beginning on April 15, 2020, and ending on July 15, 2020, will be disregarded in the calculation of any interest, penalty, or addition to tax for failure to pay the Federal income taxes postponed by this relief. Interest, penalties, and additions to tax with respect to such postponed Federal income tax payments will begin to accrue on July 16, 2020. In addition, interest, penalties and additions to tax will accrue, without any suspension or deferral, on the amount of any Federal income tax payments in excess of the applicable postponed payment amount due but not paid by an affected taxpayer on April 15, 2020.

But if you are due a refund you should file as soon as possible. The IRS states that most tax refunds are still being issued within 21 days.

California Coronavirus Tax Relief

The California Franchise Tax Board (“FTB”) on March 13, 2020 announced special tax relief for California taxpayers affected by the COVID-19 pandemic. Affected taxpayers are granted an extension to file 2019 California tax returns and make certain payments until July 15, 2020 (as further extended by FTB), in line with Governor Newsom’s March 12 Executive Order.

“During this public health emergency, every Californian should be free to focus on their health and wellbeing,” said State Controller Betty T. Yee, who serves as chair of FTB. “Having extra time to file their taxes helps allows people to do this, as the experts work to control the spread of coronavirus.”

This relief includes moving the various tax filing and payment deadlines that occur on March 15, 2020, through July 15, 2020, to July 15, 2020. This includes:

  • Partnerships and LLCs who are taxed as partnerships whose tax returns are due on March 15 now have a 120-day extension to file and pay by July 15.
  • Individual filers whose tax returns are due on April 15 now have a 90-day extension to file and pay by July 15.
  • Quarterly estimated tax payments due on April 15 now have a 90-day extension to pay by July 15.
  • Quarterly estimated tax payments due on June 15 now have a 30-day extension to pay by July 15.

Taxpayers claiming the special COVID-19 relief should write the name of the state of emergency (for example, COVID-19) in black ink at the top of the tax return to alert FTB of the special extension period. If taxpayers are e-filing, they should follow the software instructions to enter disaster information.

The FTB will also waive interest and any late filing or late payment penalties that would otherwise apply.

Other States

The American Institute Of Certified Public Accounts has put out a comprehensive list of what tax relief is being offered at the State level.

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 2020, taxpayers who expect to owe for 2019 should have their 2019 income tax returns done now so that the 2019 liability can be rolled over into any proposal and the requirement to make estimated tax payments will now start for 2020.

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 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), 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. 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.

Federal & State Tax Agencies Responding To COVID-19 With Tax Relief – IRS And Treasury Department Issues Initial Guidance

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Federal & State Tax Agencies Responding To COVID-19 With Tax Relief – IRS And Treasury Department Issues Initial Guidance

IRS Coronavirus Tax Relief

The IRS has established a special section focused on steps to help taxpayers, businesses and others affected by the coronavirus and as information becomes available, the IRS will be updating this special page on its website.

President Donald Trump declared the coronavirus pandemic a national emergency. Therefore, under Sec. 7508A, the declaration of an emergency under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, P.L. 100-707, the IRS is allowed to delay certain tax filing and payment deadlines.

IRS And Treasury Department Initial Guidance

On March 18, 2020 the Treasury Department and the IRS issued the first formal guidance.  The Treasury Department and IRS are extending the due date for Federal income tax payments due April 15, 2020, to July 15, 2020, for payments due of up to $10 million for corporations and up to $1 million for individuals – regardless of filing status – and other unincorporated entities. Associated interest, additions to tax, and penalties for late payment will also be suspended until July 15, 2020.

Click here for the press release issued by the Treasury Department.

Click here for Notice 2020-17 issued by the IRS.

This relief is available solely with respect to:

  • Federal income tax payments (including payments of tax on self-employment income) due on April 15, 2020, in respect of an affected taxpayer’s 2019 taxable year, and
  • Federal estimated income tax payments (including payments of tax on self-employment income) due on April 15, 2020, for an affected taxpayer’s 2020 taxable year.

No extension is provided in this relief for the payment or deposit of any other type of Federal tax, or for the filing of any tax return or information return.

As a result of the postponement of the due date for making Federal income tax payments up to the applicable postponed payment amount from April 15, 2020, to July 15, 2020, the period beginning on April 15, 2020, and ending on July 15, 2020, will be disregarded in the calculation of any interest, penalty, or addition to tax for failure to pay the Federal income taxes postponed by this relief. Interest, penalties, and additions to tax with respect to such postponed Federal income tax payments will begin to accrue on July 16, 2020. In addition, interest, penalties and additions to tax will accrue, without any suspension or deferral, on the amount of any Federal income tax payments in excess of the applicable postponed payment amount due but not paid by an affected taxpayer on April 15, 2020.

Again, we emphasize that this relief to allow a delay of payment does not impact the April 15, 2020 filing deadline for your tax return.  If additional time to file is needed, you would need to apply for an automatic six-month extension using Form 4868 for individuals and Form 7004 for corporations.  It also does not impact the 2nd quarter 2020 individual estimated tax payment due June 15, 2020.

California Coronavirus Tax Relief

The California Franchise Tax Board (“FTB”) on March 13, 2020 announced special tax relief for California taxpayers affected by the COVID-19 pandemic. Affected taxpayers are granted an extension to file 2019 California tax returns and make certain payments until June 15, 2020, in line with Governor Newsom’s March 12 Executive Order.

“During this public health emergency, every Californian should be free to focus on their health and wellbeing,” said State Controller Betty T. Yee, who serves as chair of FTB. “Having extra time to file their taxes helps allows people to do this, as the experts work to control the spread of coronavirus.”

This relief includes moving the various tax filing and payment deadlines that occur on March 15, 2020, through June 15, 2020, to June 15, 2020. This includes:

  • Partnerships and LLCs who are taxed as partnerships whose tax returns are due on March 15 now have a 90-day extension to file and pay by June 15.
  • Individual filers whose tax returns are due on April 15 now have a 60-day extension to file and pay by June 15.
  • Quarterly estimated tax payments due on April 15 now have a 60-day extension to pay by June 15.

The FTB’s June 15 extended due date may be pushed back even further if the Internal Revenue Service grants a longer relief period.

Taxpayers claiming the special COVID-19 relief should write the name of the state of emergency (for example, COVID-19) in black ink at the top of the tax return to alert FTB of the special extension period. If taxpayers are e-filing, they should follow the software instructions to enter disaster information.

The FTB will also waive interest and any late filing or late payment penalties that would otherwise apply.

Other States

The American Institute Of Certified Public Accounts has put out a comprehensive list of what tax relief is being offered at the State level.

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 2020, taxpayers who expect to owe for 2019 should have their 2019 income tax returns done now so that the 2019 liability can be rolled over into any proposal and the requirement to make estimated tax payments will now start for 2020.

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 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), Metropolitan Los Angeles (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. 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.