The Government is pressing taxpayers with large civil penalties for late-filed Forms 3520.  The IRS may assert the penalty in the context of a foreign trust or if you are a U.S. person who received foreign gifts of money or other property.  This is an evolving and complex area of the law, and there is a recent, taxpayer-friendly case from New York that is worth reading. The Wilson Case In Wilson v. United States, 2019 US Dist. LEXIS 199902 (ED NY. Nov. 18, 2019), the United States District Court for the Eastern District of New York ruled that the IRS... Read More

We are in tough economic times.  A record number of Americans have filed for unemployment benefits, and business owners are forecasting a significant drop in profits, as they seek to cut costs and penny-pinch to make it through the year.  The near-term outlook is tight, as we work together to help fight and pull out of a health crisis. Despite the difficult times, taxpayers should remain calm, stay focused, and take advantage of the procedural relief offered by the IRS and the Franchise Tax Board to keep your head above the water and eventually get back on your feet.  One... Read More

The recent COVID-19 pandemic has already had a significant effect on our personal and professional lives.  Between states and localities implementing “shelter-in-place” orders, commercial activity grinding to a near halt, and the stock market seeing massive losses, the United States has taken a severe economic hit as well.  Many taxpayers may be wondering how the COVID-19 virus will affect tax obligations given the rampant financial hardship and uncertainty in the United States. Here is what to know. IRS Extends Filing Deadline and Federal Tax Payments The IRS announced on March 21, 2020, that the federal income tax filing due date... Read More

A new law allows individuals under the age of 60 to withdraw up to $100,000 from their IRAs without facing an early distribution penalty. As Congress begins to implement the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act in the coming days, there are important aspects of the law Americans should know about aside from $1,200 direct payments.  Individuals in dire financial circumstances due to the COVID-19 pandemic may be looking to their retirement accounts for relief. The CARES Act allows taxpayers to distribute up to $100,000 from their IRA prior to their 60th birthday without paying the 10% early... Read More

The IRS can assess a penalty for the failure to timely file a tax return on or before the due date, and a penalty for failing to timely pay the balance shown on a return.  See § IRC 6651(a)(1) and (2).  The amount of the penalties can be substantial, and if unchecked, they can total up to 25 percent of the tax due on the return.  It is important to remember that an extension to file doesn’t extend the time to pay, and so the prudent course of action is to always timely file to avoid the failure to file... Read More

Both the IRS and the FTB offer the ability to make electronic payments online.  Therefore, the days of manually writing a check and mailing it to the taxing agency via certified mail make little sense, given that secure options exist for electronic payments.  Manual checks can be lost in the mail, stolen, or incorrectly posted to the wrong tax period. For the IRS, individual taxpayers can make an electronic payment online through Direct Pay with a bank account.  See the following link:  https://www.irs.gov/payments/direct-pay.  An individual taxpayer may use this service to pay Form 1040 taxes, estimated taxes, or other associated... Read More

Taxpayers should always file their tax return on or before the due date and confirm with their tax return preparer that the return was timely filed.  This means obtaining a copy of the electronic receipt that the accountant received after filing the return.  Many taxpayers fail to do this and assume that the accountant timely filed the return.  If, however, for some unexpected reason, the return was not timely filed (e.g., the return preparer mistakenly failed to transmit the return, or the IRS never received the return), the taxpayer may be faced with a late filing penalty.  The amount of... Read More

IRS Has Begun Sending Letters to Virtual Currency Owners Advising Them to Pay Back Taxes, Files Amended Returns; Part of IRS' Larger Efforts The Internal Revenue Service has begun sending letters to taxpayers with virtual currency transactions that potentially failed to report income and pay the resulting tax from virtual currency transactions or did not report their transactions properly.  Last year the IRS announced a Virtual Currency Compliance Campaign to address tax noncompliance related to the use of virtual currency through outreach and examinations of taxpayers. Virtual currency is an ongoing focus area for IRS Criminal Investigation. Taxpayers who do... Read More

In Dynamex Operations West, Inc. v. Superior Court (Ct.App. 2/7 B249546, Los Angeles County Super Ct. No. BC332016), the California Supreme Court issued a critical decision on the question whether an individual worker should correctly be classified as an employee, or instead, as an independent contractor.  The court held that it was appropriate to look to a standard, commonly referred to as the "ABC" test, to distinguish employees from independent contractors.   Under this test, an employer's failure to prove any one of the three prerequisites will be sufficient in itself to establish that the worker is an employee for purposes... Read More

On April 16, 2019 the IRS Large Business and International division (LB&I) announced the approval of three additional compliance campaigns. Two of these campaigns, the Captive Services Provider Campaign and the Loose Filed Forms 5471 Campaign, are of importance to our clients and are explained in further detail below. Captive Services Provider Campaign The section 482 regulations and the OECD Transfer Pricing Guidelines provide rules for determining arm’s length pricing for transactions between controlled entities, including transactions in which a foreign captive subsidiary performs services exclusively for the parent or other members of the multinational group. The arm’s length price... Read More