Posted on January 16, 2024 in Employment Taxes

The COVID-19 pandemic caused significant financial problems for many businesses due to forced closures and other issues that limited their ability to generate revenue and pay wages to employees. In response, the IRS created the employee retention credit (ERC), which allowed employers to receive credits on payroll taxes so that they could continue paying wages to employees

While this option was available in 2020 and 2021, some employers continued to claim employee retention credits in the subsequent years. While the IRS has performed tax audits of some employers and imposed penalties for erroneous ERC claims, it has also recognized that many of these claims occurred because employers received incorrect advice from tax return preparers or other parties. To address these concerns and help employers address issues related to ERC claims, the IRS has created a voluntary disclosure program.

Addressing concerns related to ERC claims and other tax issues can be a complex process. To ensure that they will be able to respond to tax audits, make any required payments to the IRS, and limit potential penalties, businesses may want to consider working with an attorney who has experience handling employment tax issues, IRS penalties, and other related matters.

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 Posted on January 04, 2024 in Employment Taxes

Worker classification is a common issue that affects businesses across many different industries. Although treating workers as independent contractors may provide some benefits for employers, incorrectly classifying employees as independent contractors can result in serious legal and financial consequences. Employers who are concerned about potential tax penalties related to worker misclassification may want to consult with an attorney to determine what steps they can take to protect themselves.

Determining Employee vs. Independent Contractor Status

The distinction between employees and independent contractors is crucial, because it can affect whether an employer will be required to provide certain benefits to workers, and it can also determine how taxes will be applied to the compensation a worker receives. The Internal Revenue Service (IRS) provides guidelines to help determine how a worker should be classified:

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 Posted on December 18, 2023 in Employment Taxes

In recent years, cryptocurrency has gained significant popularity as a form of investment, as well as a way to pay for products and services and a method that employers may use to pay wages to their employees. As more people and businesses embrace cryptocurrencies like Bitcoin, Ethereum, and Litecoin, questions arise regarding the tax implications of virtual currency transactions. One common concern is whether capital gains taxes will be applied to cryptocurrency transactions. An attorney who has experience addressing tax laws related to virtual currency can address concerns about taxation to help confirm that these issues will be addressed correctly.

The Tax Treatment of Cryptocurrency

The Internal Revenue Service (IRS) treats cryptocurrency as property for federal tax purposes rather than as traditional currency. This means that any transaction involving the purchase, sale, or exchange of cryptocurrency may have tax consequences similar to those associated with stocks or real estate.

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 Posted on December 08, 2023 in Taxation Law

For people who earn large incomes or own valuable assets, taxes can be a significant issue. Individuals and married couples with large estates may be concerned about the taxes that will apply when transferring assets to children, grandchildren, or other loved ones. While estate taxes may apply when assets are inherited by beneficiaries following a person’s death, strategies may be used to reduce the value of an estate and minimize the taxes that must be paid. However, changes to the federal estate and gift tax exclusion that will take place in the next few years may affect these strategies. An attorney with experience in tax law can provide guidance on how these changes may affect tax planning strategies.

Reduction of the Federal Estate and Gift Tax Exclusion in 2026

When Congress passed the Tax Cuts and Jobs Act of 2017, the federal estate tax exclusion was increased significantly. While the basic exclusion amount (BEA) had previously been set at $5 million (adjusted for inflation), it was doubled under the new law. In 2023, the BEA is $12.92 million. However, the increased exclusion is set to sunset after 2025. Starting on January 1, 2026, it will revert to $5.49 million.

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 Posted on November 30, 2023 in Taxation Law

There are a number of schemes that U.S. taxpayers may use to attempt to minimize the taxes they are required to pay to the Internal Revenue Service (IRS). While some schemes are legitimate, making use of opportunities provided under the tax laws, others are considered to be illegal, and they could result in tax audits by the IRS to identify misreported income or assets, address underpaid taxes, and assess penalties for nonpayment of taxes or failure to file the correct forms and reports. For international businesses or U.S. businesses that own foreign subsidiaries, transfer pricing is one area that may be under scrutiny by the IRS.

Transfer pricing is a complex area of tax law that deals with the pricing of goods, services, and intellectual property transferred between related entities within multinational corporations or between U.S. parents and controlled foreign corporations (CFCs). During audits, the IRS may take steps to determine the appropriate prices for these transactions to ensure they reflect fair market value.

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 Posted on November 22, 2023 in Taxation Law

Digital assets such as cryptocurrency and NFTs have gained significant popularity in recent years. As more people and businesses engage in digital asset transactions, it is important to understand the tax law implications and the reporting requirements set forth by the Internal Revenue Service (IRS). The IRS has issued notice that it may be implementing new rules affecting digital asset transactions. Owners of virtual currency or other digital assets may want to consider consulting with an attorney who has experience in this area to ensure that they meet all requirements put in place by the IRS and are taking the correct steps to avoid potential tax penalties.

What Are Digital Assets?

Digital assets are virtual or electronic representations of value that can be digitally traded or transferred. Some of the most well-known types of digital assets are cryptocurrencies such as Bitcoin, Ethereum, and Litecoin. These decentralized forms of currency operate using blockchain technology. Non-fungible tokens (NFTs), which use the blockchain to recognize ownership of assets such as images, videos, or music, are also considered digital assets.

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 Posted on November 07, 2023 in Tax Audits

For business owners, taxes are a significant concern. Fortunately, there are steps that can be taken to reduce a business’s tax burden by utilizing the deductions that are available. For many business owners, structuring a business as a pass-through entity can provide advantages. Pass-through entities such as partnerships, S corporations, and limited liability companies (LLCs) are popular choices among small businesses due to their flexibility and the pass-through deduction that was put in place by the Tax Cuts and Jobs Act of 2017. 

However, owners of pass-through entities need to be aware of the risk that they could face tax audits. Recently, the IRS announced that its Large Business & International (LB&I) division would be focusing on large or complex pass-through entities as part of its ongoing effort to address tax evasion. Business owners who are facing IRS audits may want to consider working with an attorney who has experience in cases involving pass-through entities.

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 Posted on October 30, 2023 in Taxation Law

Art is a passion for many people, and some are fortunate enough to acquire impressive collections over several years. In some situations, a person may wish to donate artwork to charitable organizations. Not only does this allow a collector to give back to his or her community, but it also provides potential tax benefits in the form of deductions. 

However, taxpayers who donate artwork can face penalties if they improperly claim deductions on their tax returns. The Internal Revenue Service (IRS) closely scrutinizes these types of deductions due to their potential for abuse and misrepresentation, and it may conduct tax audits in situations where art donations and tax deductions seem suspicious. For taxpayers who wish to donate art or claim other types of deductions, an attorney with experience in tax law can provide guidance and help avoid potential penalties.

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 Posted on October 25, 2023 in Taxation Law

Retirement planning is a crucial aspect of ensuring that a person and family will have a secure financial future. There are numerous methods that may be used to save money for retirement and ensure that it will be invested correctly and grow in value. At the same time, it is important to address tax-related issues related to retirement accounts and the distributions that will be received after retirement. 

One option that has gained popularity in recent years is the use of Qualified Longevity Annuity Contracts (QLACs). With the passing of the SECURE 2.0 Act, QLACs have become an even more attractive tool for retirement planning. To ensure that these and other tools can be used correctly while minimizing taxes, you may want to consider working with an experienced tax law attorney.

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 Posted on October 10, 2023 in Taxation Law

Dealing with tax issues can be a stressful and time-consuming process. When taxpayers encounter disputes with the Internal Revenue Service (IRS), they may be unsure about their options for resolving these issues or whether they can negotiate agreements that will allow them to reduce the taxes or penalties they will be required to pay. In some situations, there may be methods available to resolve tax issues without going through time-consuming and expensive Tax Court, District Court, or Court of Claims litigation. 

Fortunately, the IRS offers several alternative dispute resolution (ADR) programs that aim to provide taxpayers with more efficient and cost-effective options for resolving their tax disputes. Taxpayers who are looking to settle tax disputes should consider working with an attorney who can provide guidance on the programs that are available and the best steps to take to resolve these concerns effectively.

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