Fail To Pay In Enough Tax Withholding And Estimated Tax Payments For 2018? Relief May Be Available To You.
Fail To Pay In Enough Tax Withholding And Estimated Tax Payments For 2018? Relief May Be Available To You.
The IRS announced additional expanded penalty relief to taxpayers whose 2018 federal income tax withholding and estimated tax payments fell short of their total tax liability for the year.
At first on January 16, 2019 the IRS announced that the threshold for this relief was pre-paying and amount equal to 85% of your prior year’s tax to avoid a penalty (the law provides that you must have paid in an amount equal to 90% of your prior year’s tax). But not the IRS has lowered that threshold even further to an amount equal to 80% of your prior year’s tax to avoid a penalty.
This means that the IRS is now waiving the estimated tax penalty for any taxpayer who paid at least 80% of their total tax liability during the year through federal income tax withholding, quarterly estimated tax payments or a combination of the two.
Taxpayers who have already filed for tax year 2018 but qualify for this expanded relief may claim a refund by filing Form 843, Claim for Refund and Request for Abatement and include the statement “80% Waiver of estimated tax penalty” on Line 7. This form cannot be filed electronically.
The IRS figures that this expanded relief will help many taxpayers who owe tax when they file, including taxpayers who did not properly adjust their withholding and estimated tax payments to reflect an array of changes under the Tax Cuts and Jobs Act of 2017 (TCJA).
How Does The Penalty For Not Paying In Enough Apply?
Because the U.S. tax system is a “pay-as-you-go” system, taxpayers are required, by law, to pay most of their tax obligation during the year, rather than at the end of the year. This can be done by either having tax withheld from paychecks or pension payments, or by making estimated tax payments.
Usually, a penalty applies at tax filing if too little is paid during the year. This penalty is an interest-based amount approximately equivalent to the federal interest on the amount not paid in a timely manner.
Normally, the penalty would not apply for 2018 if tax payments during the year met one of the following tests:
- The person’s tax payments were at least 90% of the tax liability for 2018 or
- The person’s tax payments were at least 100% of the prior year’s tax liability, in this case from 2017. However, the 100% threshold is increased to 110% if a taxpayer’s adjusted gross income is more than $150,000, or $75,000 if married and filing a separate return.
For waiver purposes only, today’s relief lowers the 90% threshold to 80%. This means that a taxpayer will not owe a penalty if they paid at least 80% of their total 2018 tax liability. If the taxpayer paid less than 80%, then they are not eligible for the waiver and the penalty will be calculated as it normally would be, using the 90% threshold.
Importance To Preserve Records
Keep in mind that the IRS has up to three years to select a tax return for audit. The California Franchise Tax Board has up to four years to select a California State Income 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 activities.
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. If you are involved in cannabis, check out what our cannabis tax attorney can do for you.
Are You Effected By The Alabama Tornadoes And Severe Storms? IRS Is Providing You With Tax Relief And Extending Upcoming Tax Deadlines.
Are You Effected By The Alabama Tornadoes And Severe Storms? IRS Is Providing You With Tax Relief And Extending Upcoming Tax Deadlines.
The IRS announced on March 7, 2019 that victims of the tornadoes and severe storms that took place March 3, 2019 in Alabama may qualify for tax relief. Individuals who reside or have a business in Lee County have until July 31, 2019, to file certain individual and business tax returns and make certain tax payments.
IRS Tax Relief Details
The IRS is offering this 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.
The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area. As a result, affected individuals and businesses will have until July 31, 2019, to file returns and pay any taxes that were originally due during this period. This includes individual income tax returns and payments normally due April 15, 2019. Eligible taxpayers will also have until July 31, 2019 to make 2018 IRA contributions.
The July 31, 2019, deadline also applies to quarterly estimated income tax payments due on April 15, 2019 and June 17, 2019 and the quarterly payroll and excise tax returns normally due on April 30, 2019. It also applies to tax-exempt organizations, operating on a calendar-year basis, that have a Form 990 information return due on May 15, 2019. Businesses, including corporations, S corporations and partnerships, that have a 2018 return due during this period also have the extra time.
In addition, penalties on payroll and excise tax deposits due on or after March 3, 2019, and before March 18, 2019, will be abated as long as the deposits are made by March 18, 2019.
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 activities.
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), 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. And if you are involved in cannabis, check out what our cannabis tax attorneys can do for you.
Don’t Let A Simpler Form 1040 Fool You – Be Prepared For An IRS Audit.
The Tax Cuts And Jobs Act Of 2017 (“TCJA”) was signed into law by President Trump on December 22, 2017. It has been a good 30 years since the last time the Internal Revenue Code received such a major update but for taxpayers.
Major Changes From The TCJA Include:
- Lower Income Tax Rates For Individuals.
- Increased Standard Deduction For Individuals
- Elimination Of Personal Exemptions
- Limitations of Deductibility Of Itemized Deductions including Mortgage Interest and State & Local Taxes.
- Lower Corporation Tax Rates.
A Simpler Form 1040
There are major changes to the 2018 Form 1040 compared to previous years.
While it has not come down to being a postcard, the new Form 1040 does streamline the reporting process as follows:
- The 2018 Form 1040 replaces Forms 1040, 1040A and 1040EZ with one 2018 Form 1040 that all taxpayers will file.
- Forms 1040A and 1040EZ are no longer available. Taxpayers who used one of these forms in the past will now file Form 1040.
- The 2018 Form 1040 uses a “building block” approach and allows taxpayers to add only the schedules they need to their 2018 tax return.
- The most commonly used lines on the prior year form are still on the form. Other lines are moved to new schedules and are organized by category. These categories include income, adjustments to income, nonrefundable credits, taxes, payments, and refundable credits.
Many taxpayers will only need to file Form 1040 and no schedules. Those with more complicated tax returns will need to complete one or more of the 2018 Form 1040 Schedules along with their Form 1040. These taxpayers include people claiming certain deductions or credits, or owing additional taxes.
Importance To Preserve Records
Keep in mind that the IRS has up to three years to select a tax return for audit. For California taxpayers, the Franchise Tax Board has up to four years to select a California State Income Tax Return for audit. In some cases these 3nad 4 year periods are 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 activities.
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. Additionally, if you are involved in the cannabis industry, check out Cannabis Tax Attorney.
Do You Have A Business That Involves Transactions In Cash? Beware Of IRS Required Filings That If Not Followed Could Lead To Penalties And Jail-time.
While there is no law making it illegal to transact business with cash, the IRS has an interest in requiring parties to report cash transactions to deter those who evade taxes, profit from the drug trade and engage in terrorist financing and other criminal activities. The government can often trace money from these illegal activities through the payments reported on this and other cash reporting forms. This is particularly true as more and more states are allowing the sale of cannabis at the medical and/or recreational level.
Bank Secrecy Act – Reporting Of Cash Payments.
Since 1970, the Bank Secrecy Act (“BSA”) requires financial institutions in the United States to assist U.S. government agencies to detect and prevent money laundering. Specifically, the BSA 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.
Electronic Filing Of Form 8300, Report of Cash Payments Over $10,000.
Although businesses have the option of filing Form 8300, Report of Cash Payments Over $10,000, on paper, there is the option to e-filing this form especially since the deadline to file the form is 15 days after a reportable cash transaction occurs.Businesses that file Form 8300 electronically get free, automatic acknowledgment of receipt when they file and since the reporting involves no IRS personnel interaction, it could arguably lower scrutiny by the IRS. To file Form 8300 electronically, a business must first set up an account with the Financial Crimes Enforcement Network’s BSA E-Filing System.
For more information about the reporting requirement, you can check out the fact sheet put out by IRS atFS-2019-1 which among other things includes reporting scenarios for specific businesses, such as automobile dealerships, taxi companies, landlords, colleges and universities, homebuilders and bail-bonding agents.
Financial Crimes Enforcement Network (“FinCEN”).
FinCEN is a bureau of the U.S. Department of the Treasury. The Director of FinCEN is appointed by the Secretary of the Treasury and reports to the Treasury Under-Secretary for Terrorism and Financial Intelligence. FinCEN’s mission is to safeguard the financial system from illicit use and combat money laundering and promote national security through the collection, analysis, and dissemination of financial intelligence and strategic use of financial authorities.
FinCEN carries out its mission by receiving and maintaining financial transactions data; analyzing and disseminating that data for law enforcement purposes; and building global cooperation with counterpart organizations in other countries and with international bodies.
FinCEN exercises regulatory functions primarily under the Currency and Financial Transactions Reporting Act of 1970, as amended by Title III of the USA PATRIOT Act of 2001. Under this authority the Secretary of the Treasury is to issue regulations requiring banks and other financial institutions to take a number of precautions against financial crime, including the establishment of AML programs and the filing of reports that have been determined to have a high degree of usefulness in criminal, tax, and regulatory investigations and proceedings, and certain intelligence and counter-terrorism matters. This authority has been delegated to FinCEN.
The basic concept underlying FinCEN’s core activities is “follow the money.” As FinCEN believes that the primary motive of criminals is financial gain, and they leave financial trails as they try to launder the proceeds of crimes or attempt to spend their ill-gotten profits. FinCEN shares the information it receives and analyzes with other law enforcement agencies to investigate and hold accountable a broad range of criminals, including perpetrators of fraud, tax evaders, and narcotics traffickers. More recently, the techniques used to follow money trails also have been applied to investigating and disrupting terrorist groups, which often depend on financial and other support networks.
What Should You Do?
The IRS scrutinizes in any cash-based business the amount of gross receipts to report and it is harder to prove to the IRS expenses paid in cash. However, this should not undermine the importance that the proper facilities and procedures be set up to maintain an adequate system of books and records which even in an environment of running a business without a traditional bank is possible.
If your business activities involve transactions in cash you need to 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), San Francisco Bay Area (including San Jose and Walnut Creek) 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.
How Another Government Shutdown In The Middle Of Tax Season Can Stifle IRS Operations And Increase Tax Problems For Taxpayers.
How Another Government Shutdown In The Middle Of Tax Season Can Stifle IRS Operations And Increase Tax Problems For Taxpayers.
As required by law, once a year the Taxpayer Advocate’s Office (an independent Federal government department that monitors the Internal Revenue Service) must send a report to Congress describing challenges the IRS is facing, problems experienced by taxpayers in dealing with the IRS and recommendations to resolve these problems.
On February 12, 2019, National Taxpayer Advocate Chief Nina E. Olson released her 2018 Annual Report to Congress describing challenges the IRS is facing as a result of the recent government shutdown. The release of the National Taxpayer Advocate’s report was delayed by a month because of the government shutdown.
Ms. Olson also released the second edition of the National Taxpayer Advocate’s “Purple Book” which presents 58 legislative recommendations designed to strengthen taxpayer rights and improve tax administration.
Impact of the government shutdown on taxpayer rights
Ms. Olson cited in her report how the IRS during a government shutdown is implementing the Anti-Deficiency Act, 31 U.S.C. §1341, which provides that in the absence of appropriated funds no obligation can be incurred except for the protection of life and property, the orderly suspension of operations, or as otherwise authorized by law. This means that absent an appropriation, many Federal employees are prohibited from working, even on a volunteer basis, “except for emergencies involving the safety of human life or the protection of property”. 31 U.S.C. §1342. Accordingly, each Federal agency must designate those employees whose work is necessary to sustain legal operations essential to the safety of human life and the protection of property.
Although not stated in the law or Justice Department guidance, the IRS Office of Chief Counsel has interpreted the “protection of property” exception to apply only to the protection of government property – not a taxpayer’s property.
This could be a big problem for taxpayers if just before a government shutdown the IRS issues a levy to a bank. When receiving a levy notice, the bank must freeze the taxpayer’s account for 21 days and then if the levy has not been released, the bank must turn the funds over to the IRS.
Ms. Olson in her report noted that the Internal Revenue Code requires the IRS to release a levy if it has determined the levy is creating an economic hardship due to the financial condition of the taxpayer. However, the IRS’s legal interpretation of the Anti-Deficiency Act would not permit personnel to work on any taxpayer’s account to release levies even if the taxpayer needed the levied funds to pay for basic living expenses or a life-saving operation.
Ironically, the IRS’s Lapsed Appropriations Contingency Plan allowed employees to open mail solely to search for checks payable to the government. The plan did not permit any employees to assist taxpayers experiencing an economic hardship.
Impact of the government shutdown on IRS operations
The report says the shutdown has had a significant impact on IRS operations. The IRS opened the 2019 filing season immediately after the shutdown ended, and a comparison of services between now and 2018 shows greater difficulties in getting assistance.
| Assistance Requested From IRS | 2018 | 2019 |
| Accounts Management – Percentage of IRS officials answering incoming calls | 86% | 48% |
| Accounts Management – Average wait time for call to be answered | 4 minutes | 17 minutes |
| Automated Collection System – Percentage of IRS officials answering incoming calls | 65% | 38% |
| Automated Collection System – Average wait time for call to be answered | 19 minutes | 48 minutes |
| Installment Agreement/Balance Due – Percentage of IRS officials answering incoming calls | 58% | 7% |
| Installment Agreement/Balance Due – Average wait time for call to be answered | 30 minutes | 81 minutes |
During the government shutdown, correspondence inventories ballooned. By January 24, 2019 the IRS had more than five million pieces of mail waiting to be processed; it had 80,000 responses to 2018 Earned Income Tax Credit (EITC) audits that had not been addressed (likely causing eligible taxpayers to have their legitimate EITC claims frozen during the 2019 filing season); and it had 87,000 amended returns waiting to be manually processed.
An Opportunity For Taxpayers Who Owe The IRS.
Do not think that if you owe the IRS your tax problem will disappear because the IRS is not fully operational in another government shutdown or is still catching up from the last government shutdown. Instead you should be utilizing this valuable time to get yourself prepared so that when IRS is resuming action against you, 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 2019, taxpayers who expect to owe for 2018 should have their 2018 income tax returns done now so that the 2018 liability can be rolled over into any proposal and the requirement to make estimated tax payments will now start for 2019.
Remember that it is the government that was shut down – not 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 by law.
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 our cannabis tax attorneys can do for you.
Don’t Let The Government Shutdown Give You A False Sense Of Security If You Owe The IRS
Don’t Let The Government Shutdown Give You A False Sense Of Security If You Owe The IRS
With the temporary opening of the Federal government for three weeks announced on January 25, 2019, tax issues that were held in limbo may now see some movement.
Temporary funding for the IRS for fiscal year 2019 expired at midnight on December 21, 2018. We previously reported how the government shutdown is impacting IRS operations – click here. That initial contingency plan contemplated that the shutdown would last no more than 5 days and involved furlough of 88% of the IRS workforce (totals approximately 87,000) leaving only 9,946 that are allowed to continue working.
Under an updated contingency plan covering the upcoming filing season, the IRS will recall 57% of its workforce to handle tax season duties increasing the number of IRS employees to 46,052 that are now allowed to work. The new plan will allow the IRS to process paper and electronic returns and issue refunds to taxpayers and adhere to its commitment that tax season will start on January 28, 2019 despite an ongoing government shutdown.
The Anti-Deficiency Act.
Overriding each Federal agency’s plan is the Anti-Deficiency Act, 31 U.S.C. §1341, which provides that in the absence of appropriated funds no obligation can be incurred except for the protection of life and property, the orderly suspension of operations, or as otherwise authorized by law. This means that absent an appropriation, many Federal employees are prohibited from working, even on a volunteer basis, “except for emergencies involving the safety of human life or the protection of property”. 31 U.S.C. §1342. Accordingly, each Federal agency must designate those employees whose work is necessary to sustain legal operations essential to the safety of human life and the protection of property.
U.S. Tax Court Operations.
The United States Tax Court shut down operations on Friday, December 28, 2018, at 11:59 p.m. If you have a pending case in U.S. Tax Court, here are some key points to keep in mind:
Q: What should I do if a document I mailed or sent to the U.S. Tax Court was returned to me?
A: If a document you sent to the U.S. Tax Court was returned to you, re-mail or re-send the document to the Court with a copy of the envelope or container (with the postmark or proof of mailing date) in which it was first mailed or sent. Retain the original envelope or container.
Q: My case was calendared for trial. What does the Tax Court’s closure mean for my pending case?
A: The U.S. Tax Court canceled trial sessions for January 28, 2019 (El Paso, TX; Los Angeles, CA; New York, NY; Philadelphia, PA; San Diego, CA; and Lubbock, TX), February 4, 2019 (Hartford, CT; Houston, TX; San Francisco, CA; Seattle, WA; St. Paul, MN; Washington, DC; and Winston-Salem, NC) and February 11, 2019 (Detroit, MI; Los Angeles, CA; New York, NY; San Diego, CA; and Mobile, AL). The U.S. Tax Court will inform taxpayers who had cases on the canceled trial sessions of their new trial dates.
The U.S. Tax Court will make a decision about the February 25, 2019 trial sessions (Atlanta, GA; Chicago, IL; Dallas, TX; Los Angeles, CA; and Philadelphia, PA) on or before February 7, 2019. Taxpayers with cases that are scheduled for trial sessions that have not been canceled or that have not yet been scheduled for trial should expect their cases to proceed in the normal course until further notice.
Q: What should I do if I received a bill for the tax liability that is the subject of my Tax Court case?
A: If you receive a collection notice for the tax that is in dispute in your U.S. Tax Court case, it may be because the IRS has not received your petition and has made a premature assessment. Once the government reopens, it will be necessary to contact the IRS and request that the IRS abate the premature assessment.
2019 Filing Season – Key IRS Information for Taxpayers.
The IRS has announced that the 2019 filing season will begin on January 28, 2019, for individual taxpayers. The IRS began accepting business tax returns (non-1040 series) on January 8, 2019.
- Acceptance Of Tax Returns. The IRS will accept paper and electronic individual income tax returns starting January 28, 2019.
- Issuance Of Tax Refunds. Refunds will be paid, but tax returns will continue to be subject to refund fraud, identity theft and other internal reviews as in prior years.
IRS Operations Backlogged Or Impacted From The Appropriations Lapse.
Automated applications. IRS.gov and many automated applications remain available, including such things as “Where’s My Refund”, the IRS2go phone app and online payment agreements.
Telephones. Limited live telephone customer service assistance is available. Due to the heavier call volume, taxpayers should be prepared for longer wait times. Automated toll-free telephone applications will remain operational.
In-person service. IRS walk-in taxpayer assistance centers should reopen. This allows taxpayers to make large cash payments or get assistance for identity theft relief.
Taxpayer appointments. People with appointments related to examinations (audits), collection, Appeals or Taxpayer Advocate cases should contact the IRS to see when their cancelled meeting is to be rescheduled or if a pending meeting is to be rescheduled.
Taxpayer correspondence. While able to receive mail, the IRS will be responding to paper correspondence to only a very limited degree during this lapse period. Taxpayers who mail in correspondence to the IRS during this period should expect a lengthy delay for a response after the IRS reopens due to a growing correspondence backlog.
Tax-exempt groups. The IRS will not be processing applications or determinations for tax-exempt status or pension plans. Taxpayers should expect a lengthy delay for a response after the IRS reopens due to a growing correspondence backlog.
An Opportunity For Taxpayers Who Owe The IRS.
Do not think that if you owe the IRS your tax problem will disappear because the IRS is not fully operational. Instead you should be utilizing this valuable time to get yourself prepared so that when IRS re-opens for business, 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 2019, taxpayers who expect to owe for 2018 should have their 2018 income tax returns done now so that the 2018 liability can be rolled over into any proposal and the requirement to make estimated tax payments will now start for 2019.
Remember that it is the government that was shut down – not 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 by law. Also, during the shutdown, interest does continue to accrue on all liabilities.
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 our cannabis tax attorneys can do for you.
Despite Continued Government Shutdown, Some IRS Employees Are Being Called Back To Work
Despite Continued Government Shutdown, Some IRS Employees Are Being Called Back To Work
Temporary funding for the IRS for fiscal year 2019 expired at midnight on December 21, 2018. We previously reported how the government shutdown is impacting IRS operations – click here. That initial contingency plan contemplated that the shutdown would last no more than 5 days and involved furlough of 88% of the IRS workforce (totals approximately 87,000) leaving only 9,946 that are allowed to continue working.
Under an updated contingency plan covering the upcoming filing season, the IRS will recall 57% of its workforce to handle tax season duties increasing the number of IRS employees to 46,052 that are now allowed to work. The new plan will allow the IRS to process paper and electronic returns and issue refunds to taxpayers and adhere to its commitment that tax season will start on January 28, 2019 despite an ongoing government shutdown.
The date when funding will be restored by Congress has not been established but under plans established by each Federal agency, as the lapse in funding continues more Federal government functions will be shutdown.
The Anti-Deficiency Act.
Overriding each Federal agency’s plan is the Anti-Deficiency Act, 31 U.S.C. §1341, which provides that in the absence of appropriated funds no obligation can be incurred except for the protection of life and property, the orderly suspension of operations, or as otherwise authorized by law. This means that absent an appropriation, many Federal employees are prohibited from working, even on a volunteer basis, “except for emergencies involving the safety of human life or the protection of property”. 31 U.S.C. §1342. Accordingly, each Federal agency must designate those employees whose work is necessary to sustain legal operations essential to the safety of human life and the protection of property.
Department Of Justice’s Contingency Plan.
The Department of Justice has issued guidance, which gives priority to continuing work on criminal cases. Consequently, no employees in the Tax Division of the Department Of Justice will be authorized to work on CIVIL MATTERS during a lapse in appropriations.
Updated Contingency Plan Of The IRS.
The following activities of IRS that will continue which are necessary for safety of human life or protection of government property that continue to be operational at IRS are:
- Continuing to complete and test upcoming filing year programs
- Processing electronic returns, up to the point of refund
- Processing paper tax returns through “batching”
- Processing remittances; and
- Maintaining criminal law enforcement operations.
The IRS will also be opening its call sites and responding to taxpayer questions; however, all IRS audit and examination functions and nonautomated collections will continue to be put on hold during the shutdown.
When funds are appropriated to the IRS, furloughed employees will return to work (they are expected to return within four hours after the reactivation is announced if it occurs on a scheduled work day).
An Opportunity For Taxpayers Who Owe The IRS.
Do not think that if you owe the IRS your tax problem will disappear because the IRS is not fully operational. Instead you should be utilizing this valuable time to get yourself prepared so that when IRS re-opens for business, 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 2019, taxpayers who expect to owe for 2018 should have their 2018 income tax returns done now so that the 2018 liability can be rolled over into any proposal and the requirement to make estimated tax payments will now start for 2019.
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 our cannabis tax attorneys can do for you.
January 31 Deadline Looms for Forms W-2 and 1099-MISC
January 31 Deadline Looms for Forms W-2 and 1099-MISC
The possibility that the government shutdown will continue into next month resulting in many IRS employees not working to process Forms W-2 and Forms 1099-MISC has no impact on the January 31 deadline for filing these forms.
Filing Deadlines for Forms W-2 and Forms 1099-MISC
The 2018 Forms W-2 must be filed with the Social Security Administration (SSA) by January 31, 2019. Form 1099-MISC must be filed with the IRS by January 31st if non-employee compensation (NEC) is being reported on the form. If a Form 1099-MISC is not reporting NEC and is filed on paper, the filing deadline is February 28, 2019. If the Form 1099-MISC is not reporting NEC and is filed electronically, the deadline is March 31, 2019.
Regardless of the deadlines above, all of these forms must be given to taxpayers no later than January 31st. This filing deadline was made uniform under The Protecting Americans from Tax Hikes (PATH) Act. Prior law required that only W-2’s had to be provided to employees no later than January 31st with all other reporting forms (including the copies to IRS) due by the end of February. Failure to file these forms correctly and timely may result in penalties to the employer or payor.
Extensions of time to file Form W-2 may be requested. One 30-day extension to file Form W-2 may be requested by submitting a complete application on Form 8809, Application for Extension of Time to File Information Returns. Form 8809 must include a detailed explanation of why the additional time is needed and be signed under penalties of perjury. The IRS states that extensions are granted only in extraordinary circumstances or catastrophe.
Penalties for Failing to File Correct and Timely Forms 1099s
Information reporting penalties apply if a payer fails to timely file an information return, fails to include all information required to be shown on the return, or includes incorrect information on the return. The penalties apply to all variations of Form 1099. The amount of the penalty is based on when the correct information return is filed.
For returns required to be filed for the 2018 tax year, the penalty is:
- $50 per information return for returns filed correctly within 30 days after the due date, with a maximum penalty of $545,500 a year ($191,000 for certain small businesses);
- $100 per information return for returns filed more than 30 days after the due date but by August 1, with a maximum penalty of $1,637,500 a year ($545,500 for certain small businesses); and
- $270 per information return for returns filed after August 1st or not filed at all, with a maximum penalty of $3,275,500 a year for most businesses, but $1,091,500 for certain small businesses.
For purposes of the lower penalty, a business is a small business for any calendar year if its average annual gross receipts for the three most recent tax years (or for the period it was in existence, if shorter) ending before the calendar year do not exceed $5 million.
Persons who are required to file information returns electronically but who fail to do so (without an approved waiver) are treated as having failed to file the return unless the person shows reasonable cause for the failure. However, they can file up to 250 returns on paper; those returns will not be subject to a penalty for failure to file electronically. The penalty applies separately to original returns and corrected returns.
The penalty also applies if a person reports an incorrect taxpayer identification number (TIN) or fails to report a TIN, or fails to file paper forms that are machine readable.
The penalty for failure to include the correct information on a return does not apply to a de minimis number of information returns with such failures if the failures are corrected by August 1st of the calendar year in which the due date occurs. The number of returns to which this exception applies cannot be more than the greater of 10 returns or 0.5 percent of the total number of information returns required to be filed for the year.
If a failure to file a correct information return is due to an intentional disregard of one of the requirements (i.e., it is a knowing or willing failure), the penalty is the greater of $530 per return or the statutory percentage of the aggregate dollar amount of the items required to be reported (the statutory percentage depends on the type of information return at issue). In addition, in the case of intentional disregard of the requirements, the $5 million limitation does not apply.
Under IRS Notice 2017-9, a safe harbor from penalties has been established for failure to file correct information returns and failure to furnish correct payee statements for certain de minimis errors. Under the safe harbor, an error on an information return or payee statement is not required to be corrected, and no penalty is imposed, if the error relates to an incorrect dollar amount and the error differs from the correct amount by no more than $100 ($25 in the case of an error with respect to an amount of tax withheld).
Automated Substitute For Return Program
When a taxpayer does not file and the IRS has information statements indicating a filing requirement, the IRS uses the data to file a return on behalf of the taxpayer if there is a projected balance owed. In 2012, the IRS used information statements to file 803,000 returns for taxpayers, totaling $6.7 billion in additional taxes owed. And the sad thing about this is in just about every case, the amount actually owed when a tax return is filed by the taxpayer is much lower than what the IRS says a non-filer taxpayer owes. We even had cases where the IRS ended up owing our clients money.
The Stakes Are High!
A recent U.S. Government Accountability Office study showed that the IRS spends $267 million on underreporter matching programs, compared with the $4.2 billion it spends on audits. But automated information-matching programs return almost six times more revenue than audits. You can see why with fewer IRS agents and reduced budgets, the IRS will increasingly rely on technology-driven matching programs to bring in more tax dollars.
What Should You Do?
So if you receive one of these audit notices or the IRS is looking to assert penalties on late or incomplete 1099 filings, it is important that you don’t ignore it. Protect yourself from excessive fines and possible jail time. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), San Diego County (Carlsbad) and elsewhere in California defend you from the IRS. If you are involved in cannabis, check out what our cannabis tax attorneys can do for you.
How The Federal Government’s Shutdown Is Creating Opportunity For Taxpayers With IRS Debt.
How The Federal Government’s Shutdown Is Creating Opportunity For Taxpayers With IRS Debt.
At midnight on December 21, 2018, funding for Federal government agencies lapsed triggering a partial shutdown of the federal government. The date when funding will be restored by Congress has not been established but under plans established by each Federal agency, as the lapse in funding continues more Federal government functions will be shutdown.
The Anti-Deficiency Act.
Overriding each Federal agency’s plan is the Anti-Deficiency Act, 31 U.S.C. §1341, which provides that in the absence of appropriated funds no obligation can be incurred except for the protection of life and property, the orderly suspension of operations, or as otherwise authorized by law. This means that absent an appropriation, many Federal employees are prohibited from working, even on a volunteer basis, “except for emergencies involving the safety of human life or the protection of property”. 31 U.S.C. §1342. Accordingly, each Federal agency must designate those employees whose work is necessary to sustain legal operations essential to the safety of human life and the protection of property.
Department Of Justice’s Contingency Plan.
The Department of Justice has issued guidance, which gives priority to continuing work on criminal cases. Consequently, no employees in the Tax Division of the Department Of Justice will be authorized to work on CIVIL MATTERS during a lapse in appropriations.
Internal Revenue Service’s Contingency Plan.
The IRS being an agency under the Department Of Treasury in late November issued a fiscal year 2019 “Lapsed Appropriations Contingency Plan” that governs what will happen at the IRS during a government shutdown — but only through December 31. With the government shutdown now continuing into 2019, a new plan will have to be formulated.
The initial plan covered only a five-day shutdown. Now that the shutdown is lasting longer than five business days and as of the writing of this blog no quick resolution appears in sight, the IRS will have to reassess ongoing activities and identify necessary adjustments of excepted positions and personnel.
The initial plan anticipated that preparation for the 2019 filing season will not be affected by the shutdown.
The initial plan also identified 9,946 IRS employees as “excepted/exempt” employees who would not be furloughed. The rest of the IRS’s 79,868 employees (as of November 10, 2018) would be furloughed, meaning they will be put on leave of absence without pay, under 5 C.F.R. Section 752.402.
The initial plan identified the following activities of IRS that will continue which are necessary for safety of human life or protection of government property:
- Continuing to complete and test upcoming filing year programs
- Processing electronic returns, up to the point of refund
- Processing paper tax returns through “batching”
- Processing remittances; and
- Maintaining criminal law enforcement operations.
When funds are appropriated to the IRS, furloughed employees will return to work (they are expected to return within four hours after the reactivation is announced if it occurs on a scheduled work day).
An Opportunity For Taxpayers Who Owe The IRS.
Do not think that if you owe the IRS your tax problem will disappear because the IRS is not fully operational. Instead you should be utilizing this valuable time to get yourself prepared so that when IRS re-opens for business, 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 2019, taxpayers who expect to owe for 2018 should have their 2018 income tax returns done now so that the 2018 liability can be rolled over into any proposal and the requirement to make estimated tax payments will now start for 2019.
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 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 our cannabis tax attorneys can do for you.
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