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PILLA TALKS TAXES - Featured Article
_________________________________________ 

IRS GRANTS MORE FILING AND PAYMENT RELIEF

Important Updates 

 

In the March 2020 issue of PTT, I featured an article entitled, “Sorting Out the Tax Filing and Payment Deadlines.” In it I addressed at length the IRS’s notice dated March 20, 2020, which is Notice 2020-18. That notice explains that the IRS extended filing and payment deadlines for personal income taxes. There were limits to the extensions, as explained in that article. 

On April 9, 2020, the Treasury issued another order expanding the return filing and the tax payment deadlines, along with other deadlines. That notice is IRS Notice 2020-23, April 9, 2020. I address here the combined effect of both notices. 

 

The Filing and Payment Extensions per Notices 2020-18 and 2020-23

The tax return filing and tax payment extension to July 15, 2020 is expanded. Per Notice 2020-23, the automatic extension (no application or communication with the IRS is required) applies to all of the following: 

·  Form 1040 – personal income tax

·  Form 1120 – corporate income tax

·  Form 1065 – partnership income tax

·  Form 1041 – estate and trust income tax                             

·  Forms 706 and 709 – estate and gift tax returns

·  Form 8971 – Information regarding beneficiaries

·  Form 990-T – Excise taxes on exempt organization business income

·  Form 990-PF – Return of private foundation

·  Form 990-W – ES payments on exempt organization business income

·  Estate tax payments 

·  Excise tax payments on private foundation 

·  Estimated (ES) payments for individuals on Form 1040 

·  ES payments on self-employment income

·  ES payments for estates and trusts 

·  ES payments for corporations

 

Notice 2020-23 is clear that all existing extension procedures still apply. That is to say, Form 4868 provides an automatic extension of six months to file Form 1040. In my March article, I maintained that the 4868 filing extension gets six months from the newly prescribed date (July 15) in which to file the return. That would push the extended filing date to January 15, 2021. 

This position is supported by the plain language of Treasury Regulation §1.6081-4(a). This is the authority for a filing extension. It allows for a six-month extension from “the date prescribed for filing the return.” The regulation does not state or use April 15 as the starting point of the six-month extension. Rather, it refers only to the “date prescribed” for filing. Given the president’s disaster declaration, the “prescribed date” is now July 15. The six-month extension pushes the filing date to January 15, 2021. 

However correct I might be in this analysis (which is quite simple), the IRS takes a different view. The IRS states unequivocally in Notice 2020-23, §III.B, that the extended filing date per Form 4868 is October 15, 2020. The IRS cites no legal authority for its position. Notice 2020-23 is also clear (and correctly so) that Form 4868 does not extend the time for paying the taxes. Under the relief authorized by the IRS in Notices 2020-18 and 2020-23, the deadline for paying the tax is July 15, 2020. 

However, true to its historical pattern, the IRS does not say one word about the payment extension available by filing Form 1127, Application for Extension of Time to Pay, which extension is available by operation of code §6161(a). The IRS has lied about this fact for all of the 40-plus years I’ve been in this business and they continue to do. See the March issue for a full analysis of the right to request a filing extension. 

So the question is, does a Form 4868 filing extension get you to October 15 (as maintained by the IRS) to file the return, or does Treasury Regulation §1.6081-4(a) apply to get you to January 15, 2021? 

I believe the regulation is plain and simple, and I believe the IRS is simply wrong. But as a wise man once said, “Why take the chance?” All failure to file penalties are avoided by simply filing the return by July 15, or if extended by Form 4868, by October 15. 

That said, if you cannot pay by then, you must follow the procedures I lay out in the March issue. 

The Filing and Payment Options at a Glance

The key differences between the policies expressed in IRS Notices 2020-18 and 2020-23, and the IRS’s longstanding filing and payment extension rules, are explained below.      

·  The filing deadline for all income tax returns is automatically extended to July 15, and no application is necessary;

·  A further filing extension is available by submitting Form 4868 by the July 15 deadline; pushes deadline to October 15;

·  Businesses can use Form 7004 to get more time to file beyond the July 15 deadline;

· The tax payment deadline is automatically extended to July 15; no application is necessary and no cap on the amount of tax owed applies;

·  A further extension is available by submitting Form 1127 by the July 15 deadline, but Notices 2020-18 and 2020-23 are silent on this extension;

· Interest and penalties are automatically waived through July 15;

· Penalties for failure to file and failure to pay are waived at least through October 15 if Form 4868 is timely filed, and if the IRS grants additional time to pay per a timely filed Form 1127; 

· Interest (but not penalties) applies to taxes not paid by July 15, even if additional time is granted per Form 1127; 

· You lose the option for the additional filing and payment options if you don’t file Form 4868 (or Form 7004 for businesses), or Form 1127 on or before July 15; and 

· The payment extension applies to estimated payments due by self-employed persons.

 

Note that Notice 2020-18 covers only federal income tax return filings and tax payments, including self-employment tax payments and estimated payments owed by self-employed persons up to July 15. Notice 2020-23 covers corporation, partnership and other returns per the above list.

 

The above is a part of an article from the April-May 2020 issue of Pilla Talks Taxes Newsletter. Subscribers to Pilla Talks Taxes are able to read complete articles as well as the rest of the newsletter when they log into their subscription account on their non mobile device. https://taxhelponline.com/subscriber-login.html


For more on how extending your filing and payment options on your 2019 taxes, check out my video: 

URGENT! IRS EXTENDS APRIL 15th DEADLINE! 

       

LOOKING TO STAY CURRENT ON THE LATEST TAX CHANGES?

Dan Pilla' monthly newsletter, Pilla Talks Taxes, features news stories and developments in federal taxes that effect your pocket book. Each information packed issue shows you how to use little known strategies to cut your taxes, protect yourself from the IRS, exercise important taxpayers' rights and keeps you up to date on the latest trends in Washington on the important subjects of taxes and your rights. You can't afford to miss a single issue!

An email address is needed to recieve this newsletter.  MORE INFO

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ARTICLES FOUND IN THE  

PILLA TALKS TAXES ISSUE:

April - May 2020 

 

UNDERSTANDING THE CORONAVIRUS AID,
RELIEF, AND ECONOMIC SECURITY ACT

    Critical Help for Individuals and Businesses 

ECONOMIC IMPACT PAYMENTS  
    The Centerpiece of CARES 

THE PAYCHECK PROTECTION PROGRAM
    Guaranteed and Forgivable Federal Loans

PAYCHECK PROTECTION PROGRAM FORM    

IRS GRANTS MORE FILING AND PAYMENT RELIEF 
    Important Updates to Last Month's Newsletter

ECONOMIC INJURY DISASTER LOANS  
   $10,000 Credit is Available

RETIREMENT ACCOUNT DISTRIBUTIONS  CARES
  Act Relaxes Certain Rules

EMPLOYMENT TAX PAYMENT RELIEF
  Payment Relief Provided Under CARES

THE EMPLOYEE RETENTION CREDIT  
  Refundable Credit on Employment Taxes

EMPLOYEE MEDICAL AND SICK LEAVE CREDITS    
  More COVID-19 Business Credits

DISASTER BENEFITS FOR EMPLOYERS  
  How Pre-CARES Law Helps

 

 

 

Missed a prior featured article?

Here are links to some of the favorites:

FIVE THINGS EVERY CITIZEN
NEEDS TO KNOW ABOUT IRS CONTACTS

 

LEVY OF SOCIAL SECURITY BENEFITS

 

HOW LONG DO I KEEP TAX RECORDS?

 

CHANGE IN POLICY ON
ENFORCEMENT OF STRUCTURING LAW

Laws Pertaining to Moving Your Money
from Account to Account

 

WHAT EVERY CITIZEN NEEDS TO KNOW 
ABOUT RETIREMENT FUND DISTRIBUTIONS

The Tax Consequences of Taking Your 401(k) or IRA  

 

"I'M FROM THE IRS... -And You're Going to Jail!"

 

PASSPORTS AND THE IRS
  They Have More in Common Than You Might Think

 

END OF THE YEAR TAX PLANNING
  9 Simple Steps That Can Cut Taxes and Pain

  



MASTER INDEX OF PILLA TALKS TAXES

RESEARCH REPORTS, ARTICLES

Looking for a specific issue or article? 
Single Issues available for download, $15.95 per issue.

Contact us to order. 1-800-553-6458

 

 

 

PILLA TALKS TAXES - Featured Article
_________________________________________ 

FIFTH CIRCUIT DECLARES "INDIVIDUAL MANDATE" UNCONSTITUTIONAL

What is the Impact of the Decision?

On December 18, the Fifth Circuit Court of Appeals issued its decision in the case of Texas v. United States, Docket No. 1-10011 (5th Cir. Dec. 18, 2019). The decision strikes at a core element of the 2010 Patient Protection and Affordable Care Act (ACA). It held that the so-called “individual mandate” of Code §5000A is unconstitutional. 

Necessary Historical Background 

The ACA was intended to force all Americans to purchase government-approved health insurance, either through private insurance companies or through government-run insurance “Exchanges.” The idea was that by forcing generally healthy individuals and young people (who otherwise might choose not to purchase health insurance) into the medical insurance pool, the cost of insurance would go down overall. 

Of course, we know that didn’t happen. In fact, the opposite occurred. The cost of health insurance actually sky-rocketed due to massive government intervention into the health insurance market. The government now regulates a huge swath of the economy and imposes its will on tens of millions of Americans in the most intimate of all personal of decisions—healthcare decisions. 

Moreover, the cost to the government to provide “free health care” to those who cannot afford insurance is likewise sky-rocketing. For example, the Congressional Budget Office estimated that federal outlays for health insurance subsidies and related spending will rise by about 60% over the next ten years, from $58 billion in 2018 to $91 billion by 2028. CBO, The Budget and Economic Outlook: 2018 to 2028 at 51 (April 2018) (https://tinyurl.com/CBOBudgetEconOutlook-2018-2028). 

What is the “Individual Mandate”? 

One of the key elements of the ACA is the so-called “individual mandate.” The individual mandate—which was the subject of the Fifth Circuit’s analysis—requires individuals to purchase and maintain government-approved health insurance, referred to as “minimum essential coverage.” See: Code §5000A(a). 

If an individual fails to do so, he must pay a penalty to the IRS called a “shared responsibility payment.” Such payment is referred to in the statute specifically and expressly as a “penalty.” See: §5000A(b)(1). 

Certain exceptions are provided under §5000A(e), which are not the subject of this article. 

Attacks on the Constitutionality of the ACA 

Legal attacks against the ACA and the individual mandate started even before the ink was dry on the law. The Supreme Court’s decision in the case of National Federation of Indep. Businesses (NFIB) v. Sebelius, 567 U.S. 519, 538 (2012), constituted the initial culmination of those attacks. The plaintiff in that case challenged the constitutionality of the individual mandate, arguing that Congress had no authority to force people to buy a product or face a government-imposed penalty for failure to do so. The case ended up in the Supreme Court shortly after lower court review. 

In a bizarre opinion written by Chief Justice Roberts, the Court simply changed the language of the statute to support the conclusion that the individual mandate was constitutional. 

First, the Individual Mandate is Unconstitutional 

The NFIB decision clearly states that reviewing the “penalty” language of §5000A in its “most straightforward reading” was in fact a command “to purchase insurance,” and as such, it “would have rendered it unconstitutional.” The Court stated that such a power could not have been justified under the Constitution’s Commerce Clause because it would have done more than “regulate commerce . . . among the several states.” U.S. Const. art. I, § 8, cl. 3. Rather, it would have compelled people to enter into commerce in the first place, something that was never intended by the Constitution. See: NFIB, 567 U.S. at 557–58. 

Chief Justice Roberts opined that concluding otherwise would empower the government to compel Americans into all kinds of behavior that the government thinks is beneficial for them, including, for example, “compelling them to purchase broccoli.” See NFIB, 567 U.S. at 558 (Roberts, C.J.).

 For similar reasons, the Chief Justice concluded that this command to purchase insurance could not be sustained under the Constitution’s Necessary and Proper clause. The individual mandate was not “proper” because it expanded federal power, “vest[ing] Congress with the extraordinary ability to create the necessary predicate to the exercise of” its interstate commerce clause powers. Id. at 560. The “joint dissent” issued by Justices Scalia, Kennedy, Thomas, and Alito reached the same conclusions on both the Interstate Commerce clause and Necessary and Proper clause questions. NFIB at 65060 (joint dissent).

 Both Justice Roberts in the Opinion of the Court and the dissenters agreed that a reading of the Commerce Clause to include a power to create commerce would make a Leviathan of the federal government, “everywhere extending the sphere of its activity and drawing all power into its impetuous vortex.” NFIB, at 554 (Roberts, C.J.) The Chief Justice was quoting The Federalist No. 48, written by James  Madison.

 Justice Scalia, writing for the joint dissenters, likewise stated that such a broad, expansive reading of the Commerce Clause would render that provision a “fount of unlimited power.” NFIB at 653. And, quoting Alexander Hamilton writing in The Federalist No. 33, Justice Scalia declared the government would become a “hideous monster whose devouring jaws . . . spare neither sex nor age, nor high nor low, nor sacred nor profane.” 

It’s Unconstitutional. But Wait. It’s Constitutional! 

So how, in light of the harsh criticism from the various justices, was it possible to in fact find that the individual mandate is indeed constitutional? The answer: Chief Justice Roberts simply changed the language of the statute. 

Rather than giving the law its “most straightforward reading,” using its plain and simple terms, as imposing a “penalty” for not purchasing insurance, he altered it to hold that it was merely a “tax” on the “decision” to not purchase insurance—terms that are simply not found in the statute. 

He then justified the statutory contortion by saying, “The question is not whether that is the most natural interpretation of the mandate, but only whether it is a ‘fairly possible’ one.” NFIB, at 562; citations omitted. 

So Much for the Integrity of the Supreme Court

In the NFIB arguments, the Federal government asserted that the mandate could be read not as a “command” to buy insurance, but rather as an option to purchase insurance. That is to say, one had the free choice to buy insurance or pay a “tax.” And if it was indeed a voluntary choice on the part of the taxpayer to buy insurance or merely pay a tax, the provision would be found to be constitutional. 

Chief Justice Roberts bought that argument. He then strained mightily to conclude that §5000A could be read as a legitimate exercise of Congress’s taxing power, rather than a penalty, which the statute plainly says it is. He pointed to four reasons justifying his conclusion. It is worthy to note that this portion of Roberts’ Opinion was joined by no other Justice of the Court. That is, Justice Roberts was standing alone on this ground. 

First, Roberts reasoned that the shared-responsibility payment reflected “the essential feature of any tax: It produce[d] at least some revenue for the Government.” NFIB at 564. Second, he pointed out that the shared-responsibility payment was “paid into the Treasury by taxpayers when they file their tax returns.” Id. at 563. Third, he observed that the amount owed under the ACA was “determined by such familiar factors as taxable income, number of dependents, and joint filing status.” Id. Fourth and finally, he said “[t]he requirement to pay [was] found in the Internal Revenue Code and enforced by the IRS, which . . . collect[ed] it in the same manner as taxes.” Id. at 563–64. 

Given all this, and regardless of the fact that the statute uses the word “penalty” in the context of not purchasing insurance, the Court ruled that it is indeed a tax on the voluntary decision to not buy insurance in the first place. Roberts concluded that “[t]he Federal Government does have the power to impose a tax on those without health insurance.” Id. at 575. As such, under the Constitution’s taxing authority (Art I, sec. 8), the individual mandate is in fact constitutional. 

First, It Was Unconstitutional. But Then It was Constitutional. Now, It’s Unconstitutional Again! 

So if the Supreme Court’s NFIB decision held the individual mandate to be constitutional (even though a plain reading of the statute would render it unconstitutional), how can the Fifth Circuit (a lower court) now hold that it is indeed unconstitutional? 

The answer: fundamental circumstances have changed. 

As part of the Tax Cuts and Jobs Act (TCJA), signed into law by President Trump in December 2017, Congress amended §5000A as to the “shared responsibility payment” amount. Specifically, the amount a person must pay for failing to comply with the individual mandate is figured as the “lesser” of “zero percent” of one’s household income or “$0.” This amendment is effective January 2019. Pub. L. No. 115- 97, § 11081, see also Code §5000A(c). 

However, it is important to note that the individual mandate is still on the books as an affirmative duty for all Americans. It still consists of the same three fundamental components it always featured, which are:

1. Subsection (a) prescribes that certain individuals “shall . . . ensure” that they and their dependents are “covered under minimum essential coverage.” Code §5000A(a). 

2. Subsection (b) “impose[s] . . . a penalty” called a “[s]hared responsibility payment” on those who fail to ensure they have minimum essential coverage. Code §5000A(b). 

3. Subsection (c) sets the amount of that payment. 

All Congress did through the TCJA was change the amount of the penalty in subsection (c) to zero dollars. See: Code §5000A(c). 

Along Comes the Fifth Circuit in Texas v. United States 

The Fifth Circuit points out in its decision that the four essential elements of §5000A, which, in the opinion of Chief Justice Roberts, made it a “tax” rather than a penalty, were fundamentally changed by the TCJA amendment. Specifically, the Fifth Circuit pointed out: 

The four central attributes that once saved the statute because it could be read as a tax no longer exist. Most fundamentally, the provision no longer yields the “essential feature of any tax” because it does not produce “at least some revenue for the Government.” Id. at 564. Because the provision no longer produces revenue, it necessarily lacks the three other characteristics that once rendered the provision a tax. The shared-responsibility payment is no longer “paid into the Treasury by taxpayer[s] when they file their tax returns” because the payment is no longer paid by anyone. Id. at 563 (alteration in original and internal quotation marks omitted). The payment amount is no longer “determined by such familiar factors as taxable income, number of dependents, and joint filing status.” Id. The amount is zero for everyone, without regard to any of these factors. The IRS no longer collects the payment “in the same manner as taxes” because the IRS cannot collect it at all. Id. at 563–64 (internal quotation marks omitted). Texas v. United States, Slip Op. at 38. 

Because the provision no longer yields any revenue, it cannot be saved by Chief Justice Roberts’ legal gymnastics holding that it is a “tax.” In light of that, the Fifth Circuit declared: 

The proper application of NFIB to the new version of the statute is to interpret it according to what Chief Justice Roberts—and four other Justices of the Court—said was the “most straightforward” reading of that provision: a command to purchase insurance. NFIB at 562 (Roberts, C.J.). As the district court properly observed, “the only reading available is the most natural one.” Under that reading, the individual mandate is unconstitutional because, under NFIB, it finds no constitutional footing in either the Interstate Commerce Clause or the Necessary and Proper Clause. Id. at 546–61 (Roberts, C.J.); id. at 650–60 (joint dissent). Id. at 39.

 The Fifth Circuit went on in its analysis to reject various other, equally strained, arguments offered by the various states that intervened in the case to save the statute. One such argument is that the mandate “does not even need constitutional justification because it is merely a suggestion, not binding legislative action.” Id. at 40. 

The Fifth Circuit recognized this for the fraud that it is. It pointed out that the Supreme Court in NFIB “already held that the ‘most straightforward’ reading of the individual mandate—which emphatically demands that individuals ‘shall’ buy insurance, 26 U.S.C. § 5000A(a)—is a command to purchase health insurance.” Id. at 41. Apart from the “tax” twist put on the law by Chief Justice Roberts, such a mandate was ruled unconstitutional under any other provision. 

The Fifth Circuit concluded: 

Now that the shared responsibility payment has been zeroed out, the only logical conclusion under NFIB is to read the individual mandate as a command. . . . It is an individual mandate, not an individual suggestion. Id. at 41; emphasis in original. 

As a stand-alone command to purchase a product in the market place, without the essential elements of a “tax” attached to it, is it unconstitutional. This reading is consistent with Chief Justice Roberts’ reasoning in NFIB in the first place. 

Is the ACA Now Dead? 

The next question, and where there seems to be a great deal of confusion in the news, is what does the Fifth Circuit’s decision do to the entirety of the ACA? Recall that the individual mandate is just one small part of a very large, highly invasive healthcare reform law. Is the entire law now considered unconstitutional because one component was declared so? 

The short answer is no, because of the legal doctrine of “severability.” If other elements of the ACA are “inseverable from the individual mandate,” those elements would likewise be deemed unconstitutional. Id. at 44. If any separate element of the law can stand alone without the individual mandate, such element would be considered constitutional in its own right. 

The Fifth Circuit remanded the case to the district court to undertake the process of answering that complicated question. 

Thus, there is substantially more litigation in the offing to reach a final conclusion. In the meantime, there is no “penalty” for not having individual health insurance.

This is  an article from the December 2019 issue of Pilla Talks Taxes Newsletter. Subscribers to Pilla Talks Taxes are able to read complete articles as well as the rest of the newsletter when they log into their subscription account on their non mobile device. http://taxhelponline.com/subscriber-login.html 

      

LOOKING TO STAY CURRENT ON THE LATEST TAX CHANGES?

Dan Pilla' monthly newsletter, Pilla Talks Taxes, features news stories and developments in federal taxes that effect your pocket book. Each information packed issue shows you how to use little known strategies to cut your taxes, protect yourself from the IRS, exercise important taxpayers' rights and keeps you up to date on the latest trends in Washington on the important subjects of taxes and your rights. You can't afford to miss a single issue!

An email address is needed to recieve this newsletter.  MORE INFO

10 issues per year. $99.00 per yr Order Now!

  

ARTICLES FOUND IN THE LATEST 

PILLA TALKS TAXES ISSUES:

December 2019

FIFTH CIRCUIT DECLARES “INDIVIDUAL MANDATE” UNCONSTITUTIONAL
What Is the Impact of the Decision?

 

SMALL BUSINESS OWNERS BEWARE
According to the IRS, You are a Tax Cheat!

 

IRS MUST PROVE PROPER MAILING
Update on Recent Tax Court Decisions
By Scott MacPherson 

 

 

 

Missed a prior featured article?

Here are links to some of the favorites:

FIVE THINGS EVERY CITIZEN
NEEDS TO KNOW ABOUT IRS CONTACTS

 

LEVY OF SOCIAL SECURITY BENEFITS

 

HOW LONG DO I KEEP TAX RECORDS?

 

CHANGE IN POLICY ON
ENFORCEMENT OF STRUCTURING LAW

Laws Pertaining to Moving Your Money
from Account to Account

 

WHAT EVERY CITIZEN NEEDS TO KNOW 
ABOUT RETIREMENT FUND DISTRIBUTIONS

The Tax Consequences of Taking Your 401(k) or IRA  

 

"I'M FROM THE IRS... -And You're Going to Jail!"

 

PASSPORTS AND THE IRS
  They Have More in Common Than You Might Think

 

END OF THE YEAR TAX PLANNING
  9 Simple Steps That Can Cut Taxes and Pain

  



MASTER INDEX OF PILLA TALKS TAXES

RESEARCH REPORTS, ARTICLES

Looking for a specific issue or article? 
Single Issues available for download, $15.95 per issue.

Contact us to order. 1-800-553-6458

 

 

 

PILLA TALKS TAXES - Featured Article
_________________________________________ 

VIRTUAL CURRENCY OWNERS CAN'T HIDE

IRS Already Has Thousands of Names

by Daniel J Pilla  

 

For years I’ve been arguing with the owners of crypto-currency, such as Bitcoin, also known as virtual currency, over: 1) whether gains derived from trading in such a currency are taxable, and 2) whether, in any event, the IRS can find out whether one traded in virtual currency. 

As to question 2, the IRS did find out because the agency served summons on various virtual currency clearing houses as part of their ongoing compliance initiative. As a result, starting the last week if July, the IRS will be sending letters to virtual currency owners who potentially failed to report income and pay the tax from virtual currency transactions or did not report their transactions properly. 

According to the IRS, “By the end of August, more than 10,000 taxpayers will receive these letters.” See: IRS News Release IR-2019-132 (July 26, 2019). IRS Commissioner Chuck Rettig warns that “Taxpayers should take these letters very seriously.” A copy of IRS Letter 6173 is attached following this article. 

As to question 1, as far as the IRS is concerned, virtual currency is property and is to be treated like any other property for tax purposes. That is, if you buy virtual currency for X dollars, and sell it for X-plus, the profit is taxable income. In 2014, the IRS issued Notice 2014-21, addressing the virtual current issue. Question 1 of the Frequently Asked Questions addressed in the notice reads: 

Q-1: How is virtual currency treated for federal tax purposes? A-1: For federal tax purposes, virtual currency is treated as property. General tax principles applicable to property transactions apply to transactions using virtual currency. 

I said repeatedly that the IRS would not look the other way on this issue. As far as the agency is concerned, any “accession to wealth” is taxable, and profit from trading in such currency is no exception. Now is the time to get help if you misreported for failed to report virtual currency trades.

 

This is  an article from the July 2019 issue of Pilla Talks Taxes Newsletter. Subscribers to Pilla Talks Taxes are able to read complete articles as well as the rest of the newsletter when they log into their subscription account on their non mobile device. http://taxhelponline.com/subscriber-login.html 

      

LOOKING TO STAY CURRENT ON THE LATEST TAX CHANGES?

Dan Pilla' monthly newsletter, Pilla Talks Taxes, features news stories and developments in federal taxes that effect your pocket book. Each information packed issue shows you how to use little known strategies to cut your taxes, protect yourself from the IRS, exercise important taxpayers' rights and keeps you up to date on the latest trends in Washington on the important subjects of taxes and your rights. You can't afford to miss a single issue!

An email address is needed to recieve this newsletter.  MORE INFO

10 issues per year. $99.00 per yr Order Now!

  

ARTICLES FOUND IN THIS 

PILLA TALKS TAXES ISSUE:

JULY 2019

HOW TO AVOID AN ASSESSMENT
OF THE TRUST FUND RECOVERY PENALTY
    Excerpt Dan's upcoming new book

 

DEMOCRAT CANDIDATES TARGET TRUMP'S TAX LAW
    Result? Middle Class Tax Hikes!

 

STATE WORKER RECLASSIFICATIONS
CAN BE APPLIED RETROACTIVELY
    Ninth Circuit Opens the Doors for Massive Liabilities

 

VIRTUAL CURRENCY OWNERS CAN'T HIDE
IRS Already Has Thousands of Names

  

 

 

 

Missed a prior featured article?

Here are links to some of the favorites:

FIVE THINGS EVERY CITIZEN
NEEDS TO KNOW ABOUT IRS CONTACTS

 

LEVY OF SOCIAL SECURITY BENEFITS

 

HOW LONG DO I KEEP TAX RECORDS?

 

CHANGE IN POLICY ON
ENFORCEMENT OF STRUCTURING LAW

Laws Pertaining to Moving Your Money
from Account to Account

 

WHAT EVERY CITIZEN NEEDS TO KNOW 
ABOUT RETIREMENT FUND DISTRIBUTIONS

The Tax Consequences of Taking Your 401(k) or IRA  

 

"I'M FROM THE IRS... -And You're Going to Jail!"

 

PASSPORTS AND THE IRS
  They Have More in Common Than You Might Think

 

END OF THE YEAR TAX PLANNING
  9 Simple Steps That Can Cut Taxes and Pain

  



MASTER INDEX OF PILLA TALKS TAXES

RESEARCH REPORTS, ARTICLES

Looking for a specific issue or article? 
Single Issues available for download, $15.95 per issue.

Contact us to order. 1-800-553-6458

 

 

 

PILLA TALKS TAXES - Featured Article
_________________________________________ 

CALIFORNIA REACTS TO WAYFAIR

ESTABLISHES NEW USE TAX COLLECTION REQUIREMENTS
FOR REMOTE SELLERS

by Daniel J Pilla  

 

California Governor Gavin Newsom recently signed a law that reacts to the Supreme Court’s 2018 decision in South Dakota v. Wayfair, Inc., 138 S. Ct. 2080. That decision dismantled the long-standing “physical presence” test for determining whether the various states had the right to assess and collect sales taxes against a remote retailer—that is, a seller with no presence in the state seeking to assess the tax. The physical presence test required a seller to have an actual presence of some kind within the state, such as sales people, a warehouse, a phone center, a show floor, etc., before that state could impose sales taxes. 

The Supreme Court trashed the physical presence test in favor of what is called the “nexus” test. The nexus test suggests that any connection between the seller and the state can trip liability for the tax. The flood gates have opened as states around the nation are passing laws to impose taxes on remote sellers. This is so important that I include a chapter in my new book, Dan Pilla’s Small Business Tax Guide, to address this issue. My chapter on Wayfair-related state sales tax laws details four different ways that the various states are claiming “nexus,” and thus imposing taxes on remote sellers. 

California’s law requires out-of-state retailers with no physical presence in California to collect use tax if, during the preceding or current calendar year, the total combined sales of tangible personal property for delivery in California by the retailer and all persons related to the retailer exceed $500,000. The law also requires all retailers, whether located inside or outside of California, to collect and pay the district use tax on all sales made for delivery in any district that imposes a district tax. This requirement attaches if, during the preceding or current calendar year, the total combined sales of tangible personal property in California, or for delivery in California by the retailer and all persons related to the retailer, exceed $500,000. 

In other words, any retailer whose total sales of tangible personal property in California, including sales for resale, exceed the $500,000 threshold is considered “engaged in business” in every district in California that imposes a district tax. As such, the retailer is now required to collect the district use tax on taxable sales made for delivery in every taxing district, regardless of the amount of the retailer’s sales to any individual district. 

This requirement was effective as of April 1, 2019. The new district use tax collection requirement was effective as of April 25, 2019. For more information, California has a link on its website explaining the law. See the “Special Notice, New Use Tax Collection Requirements for Remote Sellers and New District Use Tax Collection Requirements for All Retailers,” at:

www.cdtfa.ca.gov/formspubs/l632.pdf 

A second guide entitled, “Use Tax Collection Requirements Based on Sales into California Due to the Wayfair Decision,” is available at: www.cdtfa.ca.gov/industry/wayfair.htm

This is just one more reason everyone in business needs my new book, Dan Pilla’s Small Business Tax Guide. 

This is  an article from the August 2019 issue of Pilla Talks Taxes Newsletter. Subscribers to Pilla Talks Taxes are able to read complete articles as well as the rest of the newsletter when they log into their subscription account on their non mobile device. http://taxhelponline.com/subscriber-login.html 

      

LOOKING TO STAY CURRENT ON THE LATEST TAX CHANGES?

Dan Pilla' monthly newsletter, Pilla Talks Taxes, features news stories and developments in federal taxes that effect your pocket book. Each information packed issue shows you how to use little known strategies to cut your taxes, protect yourself from the IRS, exercise important taxpayers' rights and keeps you up to date on the latest trends in Washington on the important subjects of taxes and your rights. You can't afford to miss a single issue!

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ARTICLES FOUND IN 

PILLA TALKS TAXES ISSUE:

AUGUST 2019

THE TAXPAYER FIRST ACT AND
THE “
NEW” INDEPENDENT OFFICE OF APPEALS

      What Does it Mean?

CALIFORNIA REACTS TO WAYFAIR

      Establishes New Use Tax Collection Requirements
for Remote Sellers

THE KEY TO THE VALIDITY OF IRS LIENS

     “First in Time is First in Line” by Scott MacPherson

LET’S NOT FORGET THERE’S A REASON
FOR KEEPING TAX RETURNS PRIVATE

     by Lawrence Gibbs   

 

 

 

Missed a prior featured article?

Here are links to some of the favorites:

FIVE THINGS EVERY CITIZEN
NEEDS TO KNOW ABOUT IRS CONTACTS

 

LEVY OF SOCIAL SECURITY BENEFITS

 

HOW LONG DO I KEEP TAX RECORDS?

 

CHANGE IN POLICY ON
ENFORCEMENT OF STRUCTURING LAW

Laws Pertaining to Moving Your Money
from Account to Account

 

WHAT EVERY CITIZEN NEEDS TO KNOW 
ABOUT RETIREMENT FUND DISTRIBUTIONS

The Tax Consequences of Taking Your 401(k) or IRA  

 

"I'M FROM THE IRS... -And You're Going to Jail!"

 

PASSPORTS AND THE IRS
  They Have More in Common Than You Might Think

 

END OF THE YEAR TAX PLANNING
  9 Simple Steps That Can Cut Taxes and Pain

  



MASTER INDEX OF PILLA TALKS TAXES

RESEARCH REPORTS, ARTICLES

Looking for a specific issue or article? 
Single Issues available for download, $15.95 per issue.

Contact us to order. 1-800-553-6458

 

 

 

PILLA TALKS TAXES - Featured Article
_________________________________________ 

COMPLETING FORM W-4, EMPLOYEES WITHHOLDING

ALLOWANCE CERTIFICATE

How Hard Can It Be?

by Daniel J Pilla  

 

The 2019 filing season brought into sharp focus—much more so than in past years—just how few Americans understand how to complete Form W-4, Employees Withholding Allowance Certificate. For example, the news media was apoplectic over reports in February showing that tax refunds were down about 9% over last year’s numbers. A hysterical cry went out that such data was proof that the Tax Cuts and Jobs Act was nothing more than tax cuts for the rich. After all, if your refund is down, it must mean your tax hit went up.

There were a number of problems with these reports. For starters, only about 25 million individual tax returns, out of the expected 152 million, were filed by the time the reports were issued. Thus, the sample size of returns was too small to draw any firm conclusions. Most notably, however, was the fact that effective January 2018 (one year before the filing season began) the IRS changed the withholding tables to reflect the fact that most taxpayers would in fact pay less tax in 2018 than they did in prior years because of the Jobs Act. Said another way, people were getting their tax refunds every month in their pay checks rather than at the end of the year.

Finally, by the time we were at the high tide of filing season and well over 100 million returns were filed, it came to light that the average tax refund was actually up a few points over last year. There was no corresponding celebration by the media to acknowledge that the Jobs Act indeed did cut taxes for most citizens.

In the background of this discussion is a point that I’ve been making for years: people either don’t pay attention to filling out their Form W-4, or they just don’t know how to do it. I rather believe more of the latter element drives the issue. In light of the firestorm of controversy, the IRS redesigned Form W-4 so people might more accurately set their withholding. Now there’s backlash over whether the IRS created a document that, like just about every other tax form, is way too complicated for the average person to read, comprehend and complete.

My response is that this just isn’t that complicated.

Understanding Exemptions and Allowances

Let’s start with understanding the very basics of the form. It is titled (and has been for decades), Employees Withholding Allowance Certificate. It calls for the citizen to inform his employer of the number of withholding allowances he wishes to claim for withholding purposes. The fewer allowances claimed, the more money is withheld. The opposite is also true. The greater the allowances claimed, the less is taken.

Likewise, a person declares on the form his tax return filing status, whether single, married (filing jointly or separately), or head of household. Your tax return filing status impacts whether more or less is taken. For example, if you are a single person with one withholding allowance, more will be withheld than if you are married filing jointly with one allowance. That is a function of the different tax tables that apply to the various filing categories.

Suppose you are married with two children. Prior to the Jobs Act, you were entitled to claim an exemption on your tax return for yourself and each dependent. Thus, in this example, you would get four exemptions on your tax return. These exemptions operated to reduce your tax liability because each exemption reduced taxable income by about $4,500. Since most people believe that exemptions and allowances are the same thing, they claimed only four allowances on their W-4. Because this misunderstanding caused over withholding, about 80% of all taxpayers overpaid their taxes, leading to a refund of about $3,000, on which the IRS paid no interest whatsoever.

But as I said, allowances and exemptions are not the same thing. An allowance is defined as any tax return item that reduces your tax liability. That certainly includes exemptions but is by no means limited to them. For example, standard or itemized deductions also reduce your tax liability. So do tax credits and retirement fund contributions. All of these (and more) need to be included in calculating allowances. I explain this further below.

IRS Redesigns the W-4

In the wake of the confusion and controversy of the 2019 filing season, the IRS redesigned Form W-4. Actually, it’s not the form so much as the worksheet that goes with the form that was redesigned. In my opinion, it’s for the better. The worksheet more clearly walks the reader through the process of figuring allowances. The new design is intended to get people closer to their ideal withholding amount so their withholding better matches their tax debt. That is to say, they do not over-withhold and thus und up with a big refund (and no interest); nor do they under-withhold and (worse) end up with an unfunded surprise tax debt they can’t pay.

A Walk Through the Form 

This is part of an article from the May 2019 issue of Pilla Talks Taxes Newsletter. Subscribers to Pilla Talks Taxes are able to read complete articles as well as the rest of the newsletter when they log into their subscription account on their non mobile device. http://taxhelponline.com/subscriber-login.html 

      

LOOKING TO STAY CURRENT ON THE LATEST TAX CHANGES?

Dan Pilla' monthly newsletter, Pilla Talks Taxes, features news stories and developments in federal taxes that effect your pocket book. Each information packed issue shows you how to use little known strategies to cut your taxes, protect yourself from the IRS, exercise important taxpayers' rights and keeps you up to date on the latest trends in Washington on the important subjects of taxes and your rights. You can't afford to miss a single issue!

An email address is needed to recieve this newsletter.  MORE INFO

10 issues per year. $99.00 per yr Order Now!

  

ARTICLES FOUND IN 

PILLA TALKS TAXES ISSUES:

JUNE 2019

PREVIEW DAN PILLA'S SMALL BUSINESS GUIDE
CHAPTER 18

How to Get the Most Out of Your Return Preparer

 

WHAT EVERY TAX PRO NEEDS TO KNOW
ABOUT MEDICAL MARIJUANA
Legal May Not Mean "Legal"
by Scott MacPherson, Attorney

 

MAY 2019

 

COMPLETING FORM W-4,
EMPLOYEES WITHOLDING ALLOWANCE CERTIFICATE
        How Hard Can It Be? 

W-4 FORM  

IRS WITH THE BURDEN TO PROVE MAILING
      Failure Will Lead to Abatement of Assessment 

 

LESSONS FOR DEMOCRATS
FROM THE SOCIAL SECURITY TRUSTEES' REPORT 

 

 

 

 

Missed a prior featured article?

Here are links to some of the favorites:

FIVE THINGS EVERY CITIZEN
NEEDS TO KNOW ABOUT IRS CONTACTS

 

LEVY OF SOCIAL SECURITY BENEFITS

 

HOW LONG DO I KEEP TAX RECORDS?

 

CHANGE IN POLICY ON
ENFORCEMENT OF STRUCTURING LAW

Laws Pertaining to Moving Your Money
from Account to Account

 

WHAT EVERY CITIZEN NEEDS TO KNOW 
ABOUT RETIREMENT FUND DISTRIBUTIONS

The Tax Consequences of Taking Your 401(k) or IRA  

 

"I'M FROM THE IRS... -And You're Going to Jail!"

 

PASSPORTS AND THE IRS
  They Have More in Common Than You Might Think

 

END OF THE YEAR TAX PLANNING
  9 Simple Steps That Can Cut Taxes and Pain

  



MASTER INDEX OF PILLA TALKS TAXES

RESEARCH REPORTS, ARTICLES

Looking for a specific issue or article? 
Single Issues available for download, $15.95 per issue.

Contact us to order. 1-800-553-6458

 

 

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