The Law Offices of Scott Kauffman

For the first time in history, the Internal Revenue Service (IRS) extended the income tax filing deadline. Due to the coronavirus pandemic, the agency pushed the April 15 deadline back three months. The move bought taxpayers more time to deal with their taxes while navigating these uncertain times. Now the tax deadline is fast approaching just days away. Taxpayers who are preparing to send in their returns are wise to take a moment to make sure they accounted for these thre...e points: State taxes. It is easy to get caught up in federal tax obligations, but do not forget to file state tax returns. Most states also extended their deadlines to July 15. If you have yet to file state returns, now is the time to get this information in order and ready to go. Delays. The IRS has stated that taxpayers should prepare for delays when it comes to getting their tax refunds. The agency is just starting to reopen and has approximately 20 million pieces of unopened mail to sort and process. Additional extensions. Those who are not yet ready to file their returns can request an additional extension. Taxpayers can file a formal request with the IRS and push the filing deadline back to October 15, 2020. The IRS generally expects those who receive an additional extension to pay their tax bill. The extension moves back the filing date, not the tax bill deadline. As a result, taxpayers could find themselves facing additional interest if they do not pay their bill on time. Those who are struggling to pay their tax bill have options. An attorney experienced in tax law matters can review your situation and discuss the benefits and risks of each payment option. https://bit.ly/2ZV29Sq

The Internal Revenue Service (IRS) is slowly reopening offices. According to a recent post in Accounting Today, the agency has opened all but a few offices and plans on opening remaining facilities by July 13, just days before the most recent tax deadline extension set for July 15. Upon its reopening, the agency recently announced it will begin a new initiative to focus audit efforts on high wealth taxpayers. Thus far, the agency has announced a focus on two specific segments... of high income earners: those connected to a pass-through business structure like partnerships and S-corporations as well as taxpayers who have a private foundation. What triggered the initiative? The IRS has stated it will put this new initiative into effect with its reopening on July 15. The initiative was, at least in part, triggered by Treasury Secretary Steven Mnuchin when he called on the agency to increase its audit rate for high income earning taxpayers in March of 2020. The enforcement initiative will make use of data analytics in an attempt to make the audits as efficient as possible. Any tips for taxpayers that meet the initiative's focus? Those who are connected to a pass-through business or use a private foundation are wise to take action to protect their interests. This can include retaining a tax professional to review your tax situation. Have this professional check for compliance. If not, discuss changes that could help better ensure compliance. This process can also result in the organization and preparation of paperwork, easing the way for a prompt response in the event of a federal tax audit. https://bit.ly/2ZAIsiT

In the past, when it came to tax obligations businesses who sold goods online often only needed to worry about the states they had offices and manufacturing sites. This physical presence led to tax obligations within that state. That basic rule changed two years ago. What happened two years ago to change state sales tax laws? Two years ago the Supreme Court of the United States (SCOTUS) issued its holding and Wayfair v. South Dakota. This holding led to monumental tax law cha...nge allowing for states to collect sales taxes from online transaction. The holding essentially changed how states determined the physical presence of a business. Instead of just looking at how the business operated, where its offices were, the state taxing authorities could now base tax obligations off of the location of the consumer. Since the holding, states have been working to adjust their tax policies to collect sales taxes from these purchases. States that have not already put such collection practices into effect will likely do so in the near future. What does this mean today? The push for states to increase the collection of sales taxes from online transactions is particularly of note considering the current coronavirus pandemic. Social distancing recommendations and the shutdowns of many stores have led consumers to purchase goods online. In addition to the surge of online transactions, state officials are likely looking at this tax as a way to build their coffers. Many state budgets are struggling due to the current coronavirus pandemic. As of the time of this post, 43 states along with the District of Colombia have enacted laws to take advantage of sales tax on online transactions. As for compliance, the majority has states have viewed the last couple of years as a transition period. Audits were minimal, penalties sparse. That is likely to change. Once COVID-19 related tax measures are lifted, many professionals within the tax field are predicting state tax authorities will increase enforcement measures. This will likely translate to a jump in audits. Vendors who are looking to come into compliance may consider voluntary disclosure programs. In the least, they should look to legal counsel for guidance. https://bit.ly/2Vj9PMY

Under a new measurement, businesses can now use a three-prong test to determine independent contractor status.

Sales tax rules changed two years ago, and federal agencies are gearing up to enforce the new codes.