tax: Disputing IRS Penalties in Today's Environment - 08/22/21 09:47 AM
It is important for taxpayers to exercise their rights and dispute IRS penalties when they are unjustified. Currently, the IRS is way behind on processing tax returns and other documents sent by taxpayers. To a certain degree this is normal for the IRS, but it has been exacerbated by the pandemic. There are far more taxpayers with problems and less staff at IRS facilities. Many IRS staff are still working from home. Taxpayers are being mailed notices assessing penalties and interest and a demand for payment.
 
Many of these notices lack merit, but individuals and businesses often do not know what … (0 comments)

tax: IRS Criminal Investigation Voluntary Disclosure Practice and Unfiled Tax Returns - 07/12/21 03:34 PM
IRS Criminal Investigation Voluntary Disclosure Practice is a great option for those with potential criminal tax liability. Taxpayers must determine whether their conduct was willful or not willful. If it was willful, Voluntary Disclosure Practice may be an appropriate solution to avoiding criminal prosecution. On the other hand, if one's conduct was not willful, alternatives to the Voluntary Disclosure Practice are appropriate.
 
Nonfilers should consider Voluntary Disclosure Practice as a potential solution to willful non-compliance for failing to file tax returns. 
 
On the other hand, taxpayers that are not willful can instead file amended tax returns that have misstatements. Nonfilers can simply file their past due … (2 comments)

tax: Franchise Tax Board of California Creates New Power of Attorney Notices to Help Taxpayers - 05/08/21 11:22 AM
The Franchise Tax Board of California has created a new notice to inform taxpayers about the Power of Attorney representing them on file with the agency. FTB 3912 will be received by the taxpayer alerting them to the person who has the authority with the Franchise Tax Board to represent them in:
Audits Appeals Collection matters Other issues  There are also instructions on how to revoke a Power of Attorney that you are no longer engaging to represent you. This can be accomplished online with your MyFTB account, by phone or by mail.
 
On top of FTB 3912, the FTB has created … (1 comments)

tax: Another Court, This Time in California, Authorizes IRS John Doe Summons on Cryptocurrency Exchange - 05/05/21 04:56 PM
Happy Cinco de Mayo!
 
A federal court in the Northern District of California entered an order today authorizing the IRS to serve a John Doe summons on another cryptocurrency exchange today. The IRS is seeking information about US taxpayers that have engaged in cryptocurrency transactions in recent years.
https://www.justice.gov/opa/pr/court-authorizes-service-john-doe-summons-seeking-identities-us-taxpayers-who-have-used-1
 
This follows a previous IRS John Doe summons in a federal court in Massachusetts in April 2021 of another cryptocurrency exchange.
 
Anyone that has had cryptocurrency transactions (meaning a purchase followed by a sale or an exchange) or that currently owns crypocurrency needs to make sure that they are in compliance with their tax obligations. It … (2 comments)

tax: How to Report Unemployment Compensation in a Community Property State - 05/02/21 11:28 AM
The IRS has recently provided guidance on how to report unemployment compensation in a community property state when not filing jointly. This is mainly for married filing separately spouses. The new exclusion for unemployment compensation was a hot topic that has finally been put to rest.
Q4. I'm married and don't file a joint return with my spouse. We live in a community property state. Are we eligible for the exclusion? (added April 29, 2021)
A4. Yes. Because you live in a community property state, you report half of your unemployment compensation and half of your spouse's unemployment compensation on your tax return and your … (0 comments)

tax: New Secret IRS $1,000,000 Payment Plan - 04/26/21 11:34 AM
The IRS' $250,000 payment plan has been increased substantially according to reports from tax practitioners. It is now old and the IRS is allowing taxpayers with much higher tax debts to enter into a payment plan with no documentation required. How high? $1,000,000. They quadrupled the $250,000 that was implemented in 2020. The $250,000 payment plan was ground breaking in that it increased the dollar limit from $100,000 for payment plans not requiring financial disclosure of income and assets.
 
I have heard recently that the IRS has over nine months of unopened mail. They still have not processed all of their 2019 … (0 comments)

tax: IRS John Doe Summons of Cryptocurrency Exchange in US District Court Will Impact Tax Returns and Tax Debts - 04/24/21 12:08 PM
The IRS issued a John Doe summons in US District Court on Circle Internet Financial Inc. requesting information on the identities of US taxpayers engaged in cyptocurrency transactions of at least $20,000 between 2016-2020. Cryptocurrency transactions have been used to conduct transactions that are difficult to trace. In turn, the taxable income has often gone unreported. This John Doe summons will undoubtedly lead to US taxpayers reporting more of their taxable income and in turn, paying more taxes.
https://www.justice.gov/opa/pr/court-authorizes-service-john-doe-summons-seeking-identities-us-taxpayers-who-have-used-0
 
In 2019 the IRS began their efforts to identify if taxpayers had virtual currency transactions. It was a yes/no question on Schedule 1, Form … (2 comments)

tax: Charitable Contribution Deduction for Non-Itemizers Doubled in 2021 - 02/21/21 05:22 PM
The maximum above the line cash charitable contribution deduction for Married Filing Jointly (MFJ) taxpayers not itemizing deductions has doubled to $600 for tax year 2021. For Married Filing Separately (MFS) and non-married taxpayers, the maximum above the line (before Adjusted Gross Income [AGI]) deduction remains the same as last year, $300.
This rule does not apply to non-cash charitable contributions such as property. In order to deduct charitable contributions of property, Schedule A (Form 1040) must be used to itemize deductions. 90% of individual taxpayers do not have itemized deductions greater than their standard deduction. The Tax Cuts and Jobs Act … (1 comments)

tax: Business Meals Deduction Doubled for 2021 and 2022 - 02/20/21 10:45 AM
The business meals deduction has doubled from 50% to 100% for years 2021 and 2022. This includes food and beverages purchased from a restaurant. The challenge for businesses is knowing what qualifies in our current environment where many restaurants are rapidly opening and closing their doors due to public health ordinances. Dining in with a documented business purpose is obviously deductible. The questions that have arisen regarding business meals deductibility are related to:
1. Take out meals 
2. Delivered meals
3. Third party food delivery services (Think Grubhub, DoorDash)
4. Meals from catering services
 
Some of these questions have still not been answered and will require … (2 comments)

tax: Is Unemployment Compensation Taxable Income? - 02/13/21 01:48 PM
Unemployment compensation is taxable federally and in most states. California is one of the states that do not tax unemployment compensation.
 
Certain states automatically withhold taxes on unemployment compensation while others give taxpayers the option to have taxes withheld from benefits.
 
A state might issue two Forms 1099-G for unemployment compensation:
 
one from the state and one for the weekly federal unemployment compensation as part of the COVID-19 relief package. All of it is taxable income that must be declared on a tax return.
 
There is no Social Security tax or Medicare tax on unemployment benefits, unlike wages or self-employment income.
 
Recipients are expected to … (1 comments)

tax: Tax Return eFiling Opens Today Although Some May Want to Delay - 02/12/21 05:35 PM
Taxpayers can eFile their tax returns starting today. Some, however, may want to delay filing. The US Congress is in the process of passing new legislation that will impact taxes. A third round of Economic Impact Payments (EIP) are likely for individuals and their dependents. If one chooses to file their tax return before the income thresholds are established, you may file with income above the EIP3 threshold. By waiting until the thresholds are established, you have the potential to make changes to your tax return to qualify with a lower income level.
 
Another important factor is the Child Tax Credit (CTC). … (0 comments)

tax: Mortgage Cancellation of Debt Exclusion Reduced for 2021-2025 - 02/03/21 05:38 PM
 
The IRS has extended for years 2021-2025 the cancellation of debt (COD) exclusion related to a qualified principal residence mortgage. Mortgages used to buy, build or improve a taxpayer’s main home will qualify. The mortgage must secure the property. A refinancing is also valid as long as it was used to buy, build or improve the main home and the dollar value of the refinanced mortgage does not exceed the old mortgage principal prior to the refinancing.    
 
The limit for this type of cancelled debt exclusion from income is $750,000 ($375,000 for married filing separately), down from the previous $2,000,000 ($1,000,000 … (0 comments)

tax: Mortgage Insurance Premium Deduction Extended For 2021 - 02/01/21 01:03 PM
The mortgage insurance premium (MIP) deduction for a qualified residence has been extended for year 2021. Mortgage insurance premiums (MIP) are paid by borrowers whose downpayment is less than 20% on a real estate purchase. It compensates the lender for their increased risk due to the small amount of equity of the borrower. 
 
Mortgage insurance premium (MIP) deductions are only useful if a taxpayer's itemized deductions on Schedule A (Form 1040) are greater than their standard deduction based on their filing status. The deduction will be included in the home mortgage interest section of Schedule A (Form 1040), line 8d.
 
The deduction starts to … (0 comments)

tax: Student Loan Debt, Eviction & Foreclosure Moratoriums, Economic Impact Payments, Recovery Rebate Credit and Tax Refunds - 01/22/21 11:37 AM
President Biden signed over a dozen Executive Orders almost immediately after entering office. Federal student loan debt payments will be suspended, there will be a freeze on collections of defaulted loans and no interest shall apply to the debt. It is important to note that some student loans are state loans, educational institution loans or from other lenders and are not covered by this Executive Order.  The program will be extended until September 30, 2021. Here is more info on the topic:
https://studentaid.gov/announcements-events/coronavirus?utm_content=&utm_medium=email&utm_name=&utm_source=govdelivery&utm_term=
 
Delinquent student loans under normal circumstances can lead to the Treasury Offset Program (TOP) seizing tax refunds. Other debts that … (0 comments)

tax: Tax Filing Opening Date Postponed Until February 12 - 01/18/21 03:30 PM
On February 12 the IRS will start accepting individual tax returns for processing. Usually it begins at the end of January, but with the new tax legislation recently passed in December 2020, the IRS needs more time in order to get their systems ready. They are hoping this will help to reduce refund delays, but that remains to be seen.
 
The IRS is advising taxpayers to file electronically and to use direct deposit instead of a check by mail to get refunds faster. The USPS has been stressed by the pandemic and checks could take longer to receive by snail mail.
 
If you … (4 comments)

tax: How to Check the Status of Your Economic Impact Payment (EIP) from the IRS - 01/08/21 04:49 PM
The IRS is recommending everyone to use their Get My Payment (GMP) system on the IRS website to check the status of an Economic Impact Payment (EIP). The website will show the status of the first and second Economic Impact Payment (EIP) as well as how the payment was paid. For instance, by direct deposit, check or debit card. It is not recommended to call the IRS. They are being inundated with calls and are understaffed due to the pandemic. Use this website to check your payment status:
 
https://www.irs.gov/coronavirus/get-my-payment
 
If you do not receive either the first or second Economic Impact Payment (EIP) or … (2 comments)

tax: IRS OK's Deduction for Eligible Expenses related to Paycheck Protection Program (PPP) Loans - 01/06/21 03:15 PM
The US Treasury Department along with the Internal Revenue Service (IRS) released guidance today, Revenue Ruling 2021-02, permitting the deductibility of eligible expenses related to forgiven Paycheck Protection Program (PPP) loans.
 
Notice 2020-32 and Revenue Ruling 2020-27 had not allowed deductions for expenses leading to forgiveness of Paycheck Protection Program (PPP) loans related to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).
 
Revenue Ruling 2021-02 will relieve the anxiety faced by businesses concerned about their tax liability exposure related to the Paycheck Protection Program (PPP). COVID-19 has created a tremendous amount of changes to tax laws and businesses and their tax advisors … (0 comments)

tax: How the Collection Statute Expiration Date (CSED) Can Reduce Your Taxes - 12/23/20 10:59 AM
The IRS Collection Statute Expiration Date (CSED) is the amount of time that the IRS has to collect upon an assessed tax. After this period ends, the IRS has no legal recourse against a taxpayer regarding unpaid taxes. The IRS has to write it off as a loss and move on. The Collection Statute Expiration Date (CSED) is 10 years from assessment.
 
As an example, a taxpayer mails their Form 1040 individual income tax return on April 1, 2021, the IRS receives it on April 10, 2021 and then assesses the tax on April 20, 2021. The Collection Statute Expiration Date (CSED) … (0 comments)

tax: Seek Hardship Status When You Cannot Afford to Pay Your Taxes - 12/20/20 03:15 PM
Taxpayers that cannot afford to pay their unpaid taxes can apply for a temporary hardship status called Currently Not Collectible (CNC). This is one of various collection alternatives that are available when dealing with the IRS. The taxpayer will have to disclose their assets, liabilities, income and expenses. If no assets or equity in assets are available to pay down the debt, the only factor will be the net monthly disposable income. Expenses are based on IRS standards, not actual expenses incurred by the taxpayer.
Currently Not Collectible (CNC) is a great option for unemployed and underemployed individuals experiencing a hardship with … (0 comments)

tax: California Sales & Use Tax Small Business Tax Relief Program Extended - 12/19/20 04:23 PM
The California Department of Tax and Fee Administration (CDTFA) has extended their Small Business Tax Relief Payment Plan for Sales and Use Tax. Small businesses with less than $5 million in taxable annual sales and a maximum of $50,000 in sales and use taxes due will be able to setup a monthly payment plan and avoid interest and penalties. The tax liability will have to be paid off in 12 or fewer months.
CDTFA has allowed businesses operating in sectors hit hardest by operational restrictions due to COVID-19 and with over $5 million in annual taxable sales the ability to apply for … (1 comments)

 
Howard Richardson, Tax Problems, IRS and State Tax Representation (Richardson Accounting and Tax)

Howard Richardson

Tax Problems, IRS and State Tax Representation

Torrance, CA

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Richardson Accounting and Tax

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