Posted on May 24, 2019 in Taxation Law

If you have to pay estimated quarterly taxes, it is critical to pay the correct amount. Underpaying can result in a penalty, and overpaying gives what is essentially an interest-free loan to the government that cannot be recouped until a return is filed.

This is especially true in light of the Tax Cuts and Jobs Act of 2017, which substantially changed income taxes. The law altered the tax brackets and tax rates for individual or married taxpayers, made changes to the allowable deductions for business expenses, increased the standard deduction and child tax credit, took away personal exemptions, and limited or ended other deductions. Because of this, many taxpayers will need to adjust the amount of the taxes they remit each quarter via estimated tax payments. 

Who Must Pay Estimated Quarterly Taxes?

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 Posted on May 20, 2019 in Small Business Taxes

A recent U.S. Supreme Court case has prompted California legislators to change a state use tax law that affects out-of-state sellers. Under the new law, some retailers outside of California must register with the California Department of Tax and Fee Administration (CDTFA) and collect California use tax.

The law applies to remote sellers who have total sales of $500,000 in tangible personal property for delivery in California in the preceding or current calendar year. The law went into effect on April 1, 2019, so these sellers are required to collect and remit taxes on sales which occurred on or after this date. 

Examples of out-of-state sellers that may be affected by this change include online merchants, mail-order catalogs, or telephone salespeople. Retailers with a physical presence in California will continue to have the same registration and use tax obligations as before the new law was passed.

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 Posted on May 13, 2019 in Taxation Law

The administration of retirement accounts is notoriously technical, and mistakes by plan sponsors can occur. Furthermore, since an account holder will be maintaining and contributing to a retirement account for many years, there are often changes that must be made. Tax issues may arise when 403(b) and 401(a) retirement plans need to be corrected, and the IRS must typically be notified of any corrections. Fortunately, the IRS has several self-correction mechanisms in place that allow plan sponsors to resolve errors or mistakes on their own.

The IRS has three correction programs:

1. Self-Correction Program (SCP): Used to amend certain plan failures without communicating with the IRS or paying a user fee.
2. Voluntary Correction Program (VCP): Used to rectify failures not eligible for the SCP or get the IRS’s statement in writing that specified failures were correctly resolved.

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 Posted on April 24, 2019 in Taxation Law

Retirement should be a carefree time for those who have earned the chance to enjoy the later years of their life. When you no longer have to work, you are probably looking forward to spending time with family and pursuing hobbies, and you will be able to use the money you have saved throughout your career to provide for your needs. However, one thing that retirees are often surprised by is the fact that the funds coming out of their retirement accounts may be subject to taxes.

Because retirees are on a fixed income, every dollar counts, and these taxes can cut into the amount of money you will be able to comfortably withdraw from your retirement savings. Fortunately, an experienced tax attorney can help you understand how you will be taxed during your retirement years.

Taxation on Retirement Income

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 Posted on April 17, 2019 in Small Business Taxes

Property taxes are an issue that affects many taxpayers in California, and changes to these taxes may be coming in the near future. In the 2020 election, voters will be able to decide if Prop. 13 should continue to apply to businesses. The measure would increase property taxes that businesses have to pay the state of California.

What is Prop. 13?

Prop. 13 is a ballot measure approved by California residents in 1978 that placed a limit on real property tax reassessment on all types of properties allowing reassessment only on completion of construction or when properties are sold. This means that currently, property owners pay taxes that are based on the value of a property when it was purchased, regardless of the property’s current market value. In effect, Prop. 13 prevented increases in property tax rates on homes, businesses, and farms by about 57 percent. 

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 Posted on April 10, 2019 in Taxation Law

There are several ways the IRS will be involved in the estate of someone who has died (known as a “decedent”). The IRS is notorious for enforcing payment of the taxes it claims it is due, including in situations involving a deceased person’s estate. 

Tax issues will be important to a deceased person’s personal representative, executor, successor trustee, and heirs, because the estate must pay all taxes due before the estate’s assets can be distributed to the beneficiaries. The IRS can even audit the tax returns of a dead person.

The estate will have to pay any income taxes due for the year of the person’s death (as well as for any year that the decedent did not file). Just like a taxpayer filing his or her income taxes each year, the estate administrator will file a Form 1040 for the estate. Depending on how organized the estate is, the estate administrator may need to file a Request for Transcript of Tax Return in order to get needed documents related to the deceased person’s income and taxes.

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 Posted on March 29, 2019 in Small Business Taxes

As a business owner, the law requires that you take certain steps when you make large transactions. For cash transactions over $10,000, you must submit a form to the IRS reporting such a payment. Form 8300 is due 15 days after the transaction is completed. Entities who must file this form include individuals, companies, corporations, partnerships, associations, trusts, or estates.

How to File a Transaction Report

The IRS recommends that businesses electronically file cash transaction reports. Electronic filing has several benefits: it is fast and easy to do, and it costs the business nothing. Businesses also have the option to file Form 8300 on paper. To file electronically, a business needs to have an account with the Financial Crimes Enforcement Network’s BSA E-Filing System.

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 Posted on March 22, 2019 in Taxation Law

Income Tax Day--April 15, 2019--is just around the corner. This year, your taxes may be different from years past, thanks to the tax reform passed by the U.S. government. The Tax Cuts and Jobs Act (TCJA) has changed a wide variety of tax laws, and the IRS has stated that nearly every taxpayer will be impacted. 

These are some important ways taxes have changed that should be kept in mind when filing your 2018 taxes:

• Tax rates changed. Taxes will be levied against taxpayers according to seven income tax brackets. These brackets range from 10 percent to 37 percent.
• Higher standard deduction. The standard deduction has almost doubled. For 2018, it is $12,000 for singles, $18,000 for heads of household, and $24,000 for married couples filing together. There is a higher deduction available to the blind and those who are 65 and older. This means that many people will opt to take the standard deduction instead of itemizing deductions.

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 Posted on March 13, 2019 in Taxation Law

Failing to pay your tax obligations can lead to major consequences. One problem you might run into is that you may not be able to obtain a U.S. passport or renew an existing passport. Carrying tax debt could also keep you from using your already issued passport. This can be detrimental for those who need to travel internationally for work or family reasons.

The IRS has prioritized the enforcement of this consequence of not paying back taxes for the past year. The law targets those with “seriously delinquent tax debts,” which is defined as a debt of $52,000 or more, including taxes, penalties, and interest.

If the IRS identifies you as being seriously delinquent, it will inform the State Department, which by law will deny a passport application or renewal. If you have in your possession a valid passport, the State Department also has the power to revoke the passport or limit your ability to leave the United States.

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 Posted on February 22, 2019 in Taxation Law

Under the Tax Cuts and Jobs Acts of 2017, certain owners of rental properties may be eligible for a significant tax deduction. The law allows for a 20 percent deduction against “qualified” business income for pass-through businesses. In determining whether someone qualifies for this deduction, a key consideration is whether the taxpayer engages in a “qualified trade or business” for purposes of Section 199A of the Internal Revenue Code. In some cases, it can be difficult to determine whether a business meets these qualifications, and the IRS has issued additional guidance about safe harbor for rental real estate businesses.

Qualifying for Safe Harbor

According to the IRS, the 20% qualified business income (QBI) deduction can only be taken against business income, rather than real estate investments. To achieve the required classification as a qualified trade or business, the IRS has set forth two major requirements for owners of rental real estate.

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