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Recent Blog Posts

Tax Issues That May Affect Married Couples Who Are Separated

 Posted on July 21, 2021 in Taxation Law

tax law attorneyWhen a couple chooses to end their marriage, they will need to address a wide variety of financial matters, and they will need to make decisions about how to handle multiple types of divorce-related tax issues. However, there are many situations where couples separate before getting divorced, either as a trial to determine whether to move forward with ending their marriage or in preparation for their final split once the divorce process is complete. 

When a couple is living separately while they are still legally married, they will need to address certain types of unique tax issues. The decisions they make during this time may be based on how they expect to handle matters during their divorce, or they may need to take temporary measures to ensure that both parties’ financial needs are addressed properly. It is important for spouses to understand their rights and options when addressing these matters, since decisions that may be beneficial for one spouse may lead to financial difficulties for the other.

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Do Section 1031 Exchanges Apply to Pre-2018 Cryptocurrency Transactions?

 Posted on July 19, 2021 in Taxation Law

san jose tax lawyerVirtual currencies have represented a significant investment opportunity for many people over the last several years. Because of the increased level of financial activity surrounding cryptocurrency, the IRS has begun to pay closer attention to these transactions to ensure that investors are paying the required taxes. 

In the past, some cryptocurrency investors have treated transactions in which one type of virtual currency was traded for another as “like-kind” exchanges, which would allow them to defer capital gains taxes on these transactions. The Tax Cuts and Jobs Act of 2017 disallowed the use of tax-free exchanges for personal property in 2018 or later. However, some investors may have used these types of exchanges for transactions that took place before 2018, and they should be aware that they could potentially face tax audits and be required to pay taxes that apply to these transactions.

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IRS Resumes Tax Collection Programs Suspended Due to COVID-19

 Posted on June 25, 2021 in Tax Audits

During the COVID-19 pandemic, many individuals, families, and businesses have experienced financial difficulties, and to help avoid additional strain that would affect the national economy, the IRS temporarily suspended some of the activities it usually takes to collect unpaid taxes. However now that the United States is emerging from this national emergency with many businesses reopening and people returning to work, the IRS has stated that it will be resuming its regular collection programs. Taxpayers who are facing tax audits or who have unpaid taxes will need to be aware of the potential types of actions that the IRS may take against them.

IRS Tax Enforcement Operations

san jose tax lawyerAs of June 15, 2021, the IRS has begun to return to its normal practices of collecting taxes. Typically, the IRS sends notices to taxpayers who have tax debts, informing them of the balance that is due. The IRS will be following up with those who have not responded to these notices. Those who have tax liabilities from tax returns filed for 2019 or 2020 are required to respond to notices from the IRS within 30 days, either by paying the amount due or requesting an offer in compromise or other forms of relief. This window is extended to 45 days for those who reside outside the United States. Beginning August 15, 2021, anyone who has failed to respond to a notice from the IRS may be subject to tax liens or levies.

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How Can COVID-19 Relief Affect Tax Issues During Divorce?

 Posted on June 21, 2021 in Taxation Law

san jose tax lawyerThe coronavirus pandemic has affected many people’s finances, but fortunately, different forms of relief have been made available from federal and state governments. While this has provided many people with benefits allowing them to meet their financial needs, it may also complicate certain matters. Couples who are going through a divorce will need to determine how COVID-19 relief may affect them, including whether they will be able to receive stimulus payments and claim tax credits. When addressing issues related to divorce and taxes, it is important to work with an attorney who can explain the laws and ensure that the decisions made are financially beneficial.

COVID-19 Stimulus Payments and Tax Credits 

Most people received multiple stimulus payments in 2020 and 2021 that were meant to address the ways that the COVID-19 has affected the national economy. These payments were treated as “recovery rebates,” and they functioned as a prepayment for tax credits that could be claimed when filing an annual tax return. The initial stimulus payment for individuals with an income of $75,000 or less was $1,200, and married couples who earn less than $150,000 received $2,400. Families were also able to receive a stimulus payment of $500 for each dependent child. Additional stimulus payments of $600 per individual were sent out in December 2020 and January 2021, and a third stimulus payment of $1,400 per individual, plus up to $1,400 per child, was sent in March 2021.

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Do Gift Taxes Apply When Dividing Property During Divorce?

 Posted on June 18, 2021 in Taxation Law

san jose tax attorneyDivorcing couples often need to address complex financial issues, especially if they will be dividing multiple types of property, assets, and debts. In addition to determining how they can divide all of their marital property fairly and equitably, couples will also need to understand how the decisions they make will affect their tax obligations. When addressing issues related to divorce and taxes, including gift taxes, it is important to work with an attorney who understands how tax laws apply to property settlements.

Divorce Settlements and Non-Taxable Gifts

When a person makes a gift of money or property to someone else, gift taxes may apply, and a gift tax return may need to be filed. However, in most cases, transfers of property between spouses either before or after their divorce are exempt from gift taxes. Typically, these transfers will be considered non-taxable gifts if they fall into one of the following categories:

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How Are Child Support and Spousal Support Payments Taxed?

 Posted on May 18, 2021 in Taxation Law

San Jose, CA tax attorney for child support and spousal supportCouples who have decided to end their marriage will need to address a wide variety of financial issues. During this process, spouses will not only want to make financially advantageous decisions, but they will need to consider how these decisions will affect their taxes. One divorce-related tax issue that may arise involves determining how taxes will apply to child support or spousal support payments made by one party to the other.

Taxes on Support Payments

In the past, child support and spousal support were taxed differently. The person who paid spousal support was able to deduct these payments from their taxable income, and the person who received spousal support was required to report these payments as part of their income and pay taxes on the amount received. Child support was handled differently, with the payor not being allowed to deduct payments, and the payee not reporting payments as income. 

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What Tax Filing Status Should I Use During My Divorce?

 Posted on May 12, 2021 in Taxation Law

San Jose tax law attorney for divorce filing statusEnding your marriage can be a difficult decision, but if you have decided that it is the best choice for you and your family, you will want to make sure you are taking the right steps to begin the next phase of your life on secure financial footing. In addition to addressing matters related to your property, income, and family finances, you will also need to look at your taxes. A variety of divorce-related tax issues may arise, and one of the most important is determining what filing status to use when filing your annual tax returns.

Options for Filing Status for Divorcing Spouses

For the year when your final divorce decree was or will be issued, you will not be able to file taxes jointly with your spouse. That is, if you will be finalizing your divorce in 2021, you and your ex will each be required to file separate 2021 tax returns before the April 15th deadline in 2022. However if you are still legally married on December 31, 2021, you can still file a joint tax return for 2021. 

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IRS to Increase Tax Audits for Wealthy Individuals and Partnerships

 Posted on May 11, 2021 in Tax Audits

San Jose, CA tax audit attorney for high income taxpayersThe Internal Revenue Service (IRS) regularly conducts tax audits of individual taxpayers and businesses. During an audit, it will seek to collect taxes that were underpaid due to misreported income, improper deductions, or other issues, as well as any applicable penalties. Under the administration of President Joe Biden, these efforts may increase, and the IRS will be looking to conduct more audits of individuals who earn high incomes or own significant assets, as well as large partnerships and corporations.

Increased IRS Budget and Focus on Closing the Tax Gap

President Biden recently announced the American Families Plan, a proposal that would increase infrastructure spending and provide aid to families with middle to low incomes. This proposal also included an increase in the IRS’s budget by $80 billion over 10 years. This increase would allow the IRS to conduct more audits and narrow the “tax gap,” or the difference between what U.S. taxpayers owe and what is actually collected. Experts believe that the tax gap is close to $1 trillion per year.

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Why Is Careful Drafting of the Language in a Lease So Important?

 Posted on April 23, 2021 in Small Business Taxes

San Jose business lawyer for residential and commercial leasesWhether you are a landlord or a tenant, you will want to make sure you fully understand the terms of your lease agreement. Commercial and residential leases address a wide variety of issues that affect landlords and tenants, and if the language in a lease is not carefully drafted, this can lead to disputes that could result in financial losses or other legal issues. Before signing a lease, it is important to have an attorney review the agreement and identify any language that may need to be revised or other issues that could lead to problems in the future.

Terms to Address in a Residential or Commercial Lease

Some of the terms that should be reviewed before signing a lease include:

  • Severability - This clause states that if one or more terms in a lease are found to be invalid, this will not affect any other provisions in the lease. If this clause is not included or is not worded properly, an entire lease agreement could be found to be invalid based on a single error.

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When Is Innocent Spouse Relief Available for IRS Tax Debts?

 Posted on April 15, 2021 in Tax Audits

San Jose, CA tax debt relief attorneyWhen a married couple files a joint tax return, “joint and several liability” will apply to any tax debts related to that return. This means that if the Internal Revenue Service (IRS) conducts a tax audit and determines that the couple owes taxes due to erroneous information on their joint tax return, the spouses will be equally liable for paying these tax debts. This can sometimes come as a surprise, especially if a couple has gotten divorced since filing the joint tax return in question. Even if a divorce decree addressed tax issues and states that one spouse will be responsible for paying joint tax debts, the IRS can still pursue repayment from both spouses. However in some cases, a person may receive innocent spouse relief if they were not responsible for the tax debts.

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