John D. Teter Law Offices

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San Jose, CA business law attorney

Over the past few years, California’s employment laws have been in flux due to court decisions and legislation that have affected how workers are classified. Specifically, Assembly Bill 5 (AB5) has required some companies to classify their workers as employees rather than independent contractors, which will allow workers to receive a minimum wage and benefits. However, companies such as Uber and Lyft have fought against these requirements, and voters will be able to decide whether to implement a measure in the upcoming election to determine whether certain types of workers will receive an exemption from the requirements put in place by AB5.

NOTE: AB5 has very recently been renumbered as AB2257 and clarifies current definitions of employee versus independent contractor and enumerates a number of exemptions for certain industries. Prop 22 was placed on the ballot prior to this change in numbering and therefore refers to the old AB5. 

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San Jose, CA tax attorney retirement accounts

Many Americans have spent years saving money in a retirement account such as a 401(k) or IRA while planning to use this money to support themselves later in life. Retirement accounts can offer certain tax benefits, but they also provide restrictions on when these funds can be withdrawn. In times of economic hardship, account holders may wonder about their options for using these funds. Fortunately, the Coronavirus Aid, Relief, and Economic Security (CARES) Act has given those who have been affected by the COVID-19 crisis the ability to use funds in a retirement account while avoiding some of the penalties for early withdrawal.

Withdrawals and Loans from Retirement Accounts Under the CARES Act

Typically, account holders will face a 10 percent penalty (on top of any taxes that would normally apply) if they withdraw funds from a retirement account before reaching the age of 59 ½. The CARES Act has waived this tax for withdrawals of up to $100,000 made before December 31, 2020, by people who qualify for relief due to being impacted by the coronavirus pandemic. Qualifying accounts and retirement plans include 401(k)s, IRAs, 403(b)s, and profit-sharing plans.

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San Jose, CA tax attorney foreign foreign tax compliance

U.S. taxpayers are required to report all of the income they earn and pay applicable taxes, including income earned from foreign investments and offshore accounts. The requirements related to these types of accounts can often be complex. Taxpayers who are not compliant may be audited, and they could face penalties that include civil fines or criminal prosecution. 

Foreign tax compliance has become more difficult since the end of the Offshore Voluntary Disclosure Program (OVDP). This program, which was discontinued in September 2018, allowed taxpayers to avoid penalties by disclosing their foreign assets and paying taxes due. Since the end of the OVDP, some taxpayers who had previously been compliant may be facing additional scrutiny and potential penalties from the IRS. The IRS’s Streamlined Domestic Offshore Procedures (SDOP) and Streamlined Foreign Offshore Procedures (SFOP) programs are still available for taxpayers able to make sworn nonwillfulness statements and file the required forms and make the required payment.

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San Jose, CA tax attorney employer tax credits

Since the beginning of March, it is an understatement to say that COVID-19 has greatly impacted business owners, employees, and the workplace nationwide. Most businesses have either gone remote, closed temporarily, or shut their doors for the last time. Not only are the businesses themselves leaving many people without work, but those who become infected with COVID-19 or are required to self-quarantine may be unable to work even if they are employed. In order to address the financial impact of coronavirus, the Internal Revenue Service (IRS) has implemented two new employer tax credits to help U.S. employees who have been affected by the global pandemic.

Sick and Family Leave

There are multiple credits tied to requests for medical leave since you may not necessarily be requesting this absence from work for your own self. The following are the employer credits to which you may be entitled:

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San Jose tax lawyer for payroll tax extensionFor the past few months, the coronavirus pandemic has affected states across the country. Some states with larger populations, such as California and New York, have experienced a much larger infected population and have consequently placed restrictions on businesses and individuals in an effort to slow the spread of the virus. Nonessential businesses were ordered to shut down brick-and-mortar operations and work from home, if possible. Even though not all businesses were affected equally by the pandemic, many businesses are still struggling to stay afloat during this time. In response to the struggles that many businesses are feeling, California Governor Gavin Newsom issued an executive order allowing businesses affected by COVID-19 to request an extension to file payroll reports and taxes to the state.

How Can I Receive an Extension for Filing?

Payroll taxes consist of four separate categories: unemployment insurance (UI), employment training tax (ETT), state disability insurance (SDI), and personal income tax (PIT). Normally, these taxes are filed and paid by an employer on a regular basis. SDI and PIT due dates depend on the employer’s federal deposit schedule and the amount of PIT that has been withheld. UI and ETT payments are due quarterly, or every three months.

Usually, an employer would face penalties for late filing, and the employer would be required to pay a penalty plus interest on late payments. However during a state of emergency, employers can request that the deadline for their payroll taxes be extended up to 60 days. California Governor Newsom stated in an executive order that businesses that have been directly affected by the COVID-19 pandemic can request this extension.

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