John D. Teter Law Offices

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San Jose, CA 95128
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San Jose tax attorney for COVID-19 small business reliefThe COVID-19 pandemic has led to struggles for many people and businesses. While the rollout of vaccines in 2021 will eventually allow for a return to normal activities, many businesses will continue to experience a loss of revenue due to requirements to close, scale back operations, or lay off employees. Fortunately, the federal government has implemented programs meant to provide relief to businesses and taxpayers who have been affected by the pandemic. The Coronavirus Response and Relief Supplemental Appropriations Act of 2021 (CRRSAA), which was signed into law on December 27, 2020, made a number of changes that may benefit both small businesses and individual taxpayers. These include:

  • Additional PPP loans - The Paycheck Protection Program, which was implemented as part of the CARES Act of 2020, provided loans for businesses, and these loans were forgivable so long as a business could show that a certain percentage of the loan was used for payroll purposes. Under the CRRSAA, businesses that had previously received a PPP loan will be able to receive an additional loan, although to qualify, a business must not be publicly owned, it must employ fewer than 300 people, and it must be able to show that its gross receipts in any quarter of 2020 were 25% less than in the same quarter in 2019. First-time loans will also be available to businesses that had not previously taken a PPP loan, and eligible businesses include self-employed individuals, independent contractors, and sole proprietors.
  • PPP loan forgiveness - Loans of $150,000 or less may be forgiven if a business used at least 60% of the loan for payroll expenses, including wages and benefits. The remaining 40% can be used for operational costs. In addition to rent, utilities, and mortgage interests, operational costs have been expanded to include software, personal protective equipment for employees, and modifications necessary to meet health guidelines.
  • Tax deductions for business expenses - PPP loans are treated as tax-free if they are forgiven. In addition, businesses may claim tax deductions for payroll and operating expenses, even if a PPP loan was used to pay these expenses.
  • EIDL Grants - Businesses in low-income communities may be able to receive up to $10,000 in Economic Injury Disaster Loan grants. Businesses that receive both grants and PPP loans will no longer be required to deduct an EIDL advance from the amount received in a PPP loan.
  • Employer tax credits - If a business were required to close due to government orders or experienced a decrease in gross receipts of 50% in 2020 compared to the same period in 2019, it will be eligible for a 50% payroll tax credit, which will apply to wages of up to $10,000 per employee. This employee retention credit is not available for those who have received a PPP loan.

Contact Our San Jose, CA Small Business Tax Attorney

If you have questions about what forms of COVID-19 relief you may qualify for or how this will affect your taxes, John D. Teter Law Offices can provide the legal help you need. We will work with you to make sure you can make use of the tax benefits available to you, and we will help you determine the best strategies to minimize your tax burden and address any taxes that you owe. To learn more about how we can help, contact our San Jose tax lawyer at 408-866-1810.

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San Jose, CA real estate investment tax attorneyMajor financial transactions can have a variety of tax consequences, but taxpayers may be able to make use of tax laws and regulations to minimize the taxes they will be required to pay. Real estate transactions will often result in capital gains taxes being applied to the profits earned, but in some cases, a taxpayer may be able to use a “like-kind exchange” to defer the taxes owed. However, the Tax Cuts and Jobs Act (TCJA) of 2017 made some changes to the types of property that can be included in these exchanges, and the IRS recently issued new rules that will apply in these cases.

What Is a Like-Kind Exchange?

Section 1031 of the Internal Revenue Code allows taxpayers to defer capital gains taxes when selling certain types of property if the proceeds from the sale are reinvested into replacement property. The replacement property must be of a “like-kind” to the original property, meaning that it is property of the same type. Typically, business or investment property can be exchanged for other business or investment property.

Updated Rules for Section 1031 Exchanges

The TCJA restricted like-kind exchanges to real property used for business or investment purposes. It also eliminated certain types of personal or intangible property from being considered in these exchanges, including equipment and machinery, artwork and collectibles, vehicles, and patents or other intellectual property.

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San Jose tax lawyer for expatriatesPeople who live in the United States are required to pay a variety of different types of taxes. Because the U.S. Tax Code is so complex, taxpayers are not always aware of issues that may affect the taxes they pay, and they may encounter situations that trigger unexpected tax obligations. In addition to paying taxes while residing in the United States, taxpayers will also need to meet certain requirements when moving to other countries.

U.S. citizens who plan to relinquish their citizenship or permanent residency “Green Card” holders who will no longer be lawful permanent residents of the United States will need to follow expatriation procedures with the IRS. In some cases, an exit tax may apply, or a person may face a tax audit based on his or her compliance with tax obligations in previous years. By working with a tax law attorney, these individuals can understand their obligations and take steps to minimize penalties and avoid ongoing tax issues.

Preparing for Expatriation

All expatriates are required to file Form 8854 for the year in which they terminated their citizenship or ended their residency in the United States. This form certifies that a taxpayer has complied with tax obligations in the 5 years prior to expatriation. Expatriates who defer tax payments or compensation or who have an interest in nongrantor trusts will need to file Form 8854 annually.

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San Jose foreign tax compliance lawyerU.S. taxpayers who own offshore accounts or other foreign assets may struggle to understand their requirements for reporting foreign investments to the Internal Revenue Service (IRS) and paying taxes on foreign income. In some cases, these matters have become even more confusing following recent changes to the programs the IRS has made available to taxpayers. In 2018, the IRS ended the Offshore Voluntary Disclosure Program (OVDP), and recently, it also took down the Delinquent International Information Return Submission Procedures (DIISP) from its website. This has left many taxpayers concerned about their ability to become compliant with IRS requirements and avoid penalties related to reporting foreign assets and income.

What Is DIISP?

Previously, the DIISP allowed taxpayers to receive a waiver of the penalties that would normally apply to unreported foreign assets. Taxpayers could qualify for the DIISP if they did not have any unreported income, as long as they could show that they had reasonable cause for their non-compliance, such as death, serious illness, natural disasters, or ignorance of tax laws.

The IRS quietly ended the DIISP in November 2020 without providing any notice that these procedures would no longer be available. Without this option, taxpayers will be required to follow other procedures to become compliant, and they may be subject to tax penalties.

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San Jose, CA property tax attorney for Proposition 19Tax laws in the United States change regularly at both the federal and state levels. In the 2020 election, California voters passed a ballot measure that made some changes to how property taxes are addressed when a person moves to a new home or transfers ownership of real estate property. Taxpayers will want to understand how this new law will affect them and what they can do to avoid tax increases.

Proposition 19 and Property Tax Reassessment

Under Proposition 13, which passed in 1978, property taxes in California are based on the purchase price of a property, and they are subject to small annual increases. When a property is sold or transferred to a new owner, property taxes are reassessed based on the market value of the property. However some homeowners have been allowed to transfer their property tax assessments to a new home. In addition, parents or grandparents could transfer a primary residence to their children or grandchildren without the need for reassessment, and they could transfer other types of property with the first $1 million in value being exempt from reassessment.

Proposition 19 has expanded some homeowners’ ability to transfer their tax assessment to a new home of an equal or lesser value. While this type of transfer was previously only allowed within the same county, a tax assessment will now be allowed to be transferred anywhere within the state of California. An assessment can also be transferred to a new home of a higher value while making adjustments to reflect this increase. Homeowners over the age of 55 were previously limited to one tax assessment transfer, but they will now be allowed to transfer a tax assessment up to three times.

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