Federal & State Tax Agencies Responding To COVID-19 With Tax Relief – Tax Day Officially Changed To July 15th

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Federal & State Tax Agencies Responding To COVID-19 With Tax Relief – Tax Day Officially Changed To July 15th

IRS Coronavirus Tax Relief

The IRS has established a special section focused on steps to help taxpayers, businesses and others affected by the coronavirus and as information becomes available, the IRS will be updating this special page on its website.

President Donald Trump declared the coronavirus pandemic a national emergency. Therefore, under Sec. 7508A, the declaration of an emergency under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, P.L. 100-707, the IRS is allowed to delay certain tax filing and payment deadlines.

IRS And Treasury Department Initial Guidance

On March 18, 2020 the Treasury Department and the IRS issued the first formal guidance.  The Treasury Department and IRS are extending the due date for Federal income tax payments due April 15, 2020, to July 15, 2020, for payments due of up to $10 million for corporations and up to $1 million for individuals – regardless of filing status – and other unincorporated entities. Associated interest, additions to tax, and penalties for late payment will also be suspended until July 15, 2020.

Click here for the press release issued by the Treasury Department.

Click here for Notice 2020-17 issued by the IRS.

This relief is available solely with respect to:

  • Federal income tax payments (including payments of tax on self-employment income) due on April 15, 2020, in respect of an affected taxpayer’s 2019 taxable year, and
  • Federal estimated income tax payments (including payments of tax on self-employment income) due on April 15, 2020, for an affected taxpayer’s 2020 taxable year.

No extension is provided in this relief for the payment or deposit of any other type of Federal tax.  This did not however extend the April 15th filing deadline – until now …

Treasury Secretary Steve Mnuchin’s Announcement

On March 20, 2020 Treasury Secretary Steve Mnuchin tweeted “At @realDonaldTrump’s direction, we are moving Tax Day from April 15 to July 15. All taxpayers and businesses will have this additional time to file and make payments without interest or penalties.”

As a result of the postponement of the due date for making Federal income tax payments up to the applicable postponed payment amount from April 15, 2020, to July 15, 2020, the period beginning on April 15, 2020, and ending on July 15, 2020, will be disregarded in the calculation of any interest, penalty, or addition to tax for failure to pay the Federal income taxes postponed by this relief. Interest, penalties, and additions to tax with respect to such postponed Federal income tax payments will begin to accrue on July 16, 2020. In addition, interest, penalties and additions to tax will accrue, without any suspension or deferral, on the amount of any Federal income tax payments in excess of the applicable postponed payment amount due but not paid by an affected taxpayer on April 15, 2020.

California Coronavirus Tax Relief

The California Franchise Tax Board (“FTB”) on March 13, 2020 announced special tax relief for California taxpayers affected by the COVID-19 pandemic. Affected taxpayers are granted an extension to file 2019 California tax returns and make certain payments until July 15, 2020 (as further extended by FTB), in line with Governor Newsom’s March 12 Executive Order.

“During this public health emergency, every Californian should be free to focus on their health and wellbeing,” said State Controller Betty T. Yee, who serves as chair of FTB. “Having extra time to file their taxes helps allows people to do this, as the experts work to control the spread of coronavirus.”

This relief includes moving the various tax filing and payment deadlines that occur on March 15, 2020, through July 15, 2020, to July 15, 2020. This includes:

  • Partnerships and LLCs who are taxed as partnerships whose tax returns are due on March 15 now have a 120-day extension to file and pay by July 15.
  • Individual filers whose tax returns are due on April 15 now have a 90-day extension to file and pay by July 15.
  • Quarterly estimated tax payments due on April 15 now have a 90-day extension to pay by July 15.
  • Quarterly estimated tax payments due on June 15 now have a 30-day extension to pay by July 15.

Taxpayers claiming the special COVID-19 relief should write the name of the state of emergency (for example, COVID-19) in black ink at the top of the tax return to alert FTB of the special extension period. If taxpayers are e-filing, they should follow the software instructions to enter disaster information.

The FTB will also waive interest and any late filing or late payment penalties that would otherwise apply.

Other States

The American Institute Of Certified Public Accounts has put out a comprehensive list of what tax relief is being offered at the State level.

An Opportunity For Taxpayers Who Owe The IRS

Do not think that if you owe the IRS your tax problem will disappear because of the measures being considered by the government. Instead you should be utilizing this valuable time to get yourself prepared so that when activity in this nation regains momentum, you are ready to make the best offer or proposal to take control of your outstanding tax debts.

As a prerequisite to any proposal to the IRS, you must be in current compliance. That means if you have any outstanding income tax returns, they must be completed and submitted to IRS.

Also, if you are required to make estimated tax payments, you must be current in making those payments. Fortunately, as we are now in 2020, taxpayers who expect to owe for 2019 should have their 2019 income tax returns done now so that the 2019 liability can be rolled over into any proposal and the requirement to make estimated tax payments will now start for 2020.

Remember that COVID-19 does not alter the tax laws, so all taxpayers should continue to meet their tax obligations as normal. Individuals and businesses should keep filing their tax returns and making payments and deposits with the IRS, as they are required to do.

The take away from this – use the Federal government’s downtime to your advantage to prepare for the future.

What Should You Do?

You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes. If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), San Diego County (Carlsbad) and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income. Also if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

IRS Responding To COVID-19 With Tax Relief – Tax Day Officially Changed To July 15th

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IRS Responding To COVID-19 With Tax Relief – Tax Day Officially Changed To July 15th

IRS Coronavirus Tax Relief

The IRS has established a special section focused on steps to help taxpayers, businesses and others affected by the coronavirus and as information becomes available, the IRS will be updating this special page on its website.

President Donald Trump declared the coronavirus pandemic a national emergency. Therefore, under Sec. 7508A, the declaration of an emergency under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, P.L. 100-707, the IRS is allowed to delay certain tax filing and payment deadlines.

IRS And Treasury Department Initial Guidance

On March 18, 2020 the Treasury Department and the IRS issued the first formal guidance.  The Treasury Department and IRS are extending the due date for Federal income tax payments due April 15, 2020, to July 15, 2020, for payments due of up to $10 million for corporations and up to $1 million for individuals – regardless of filing status – and other unincorporated entities. Associated interest, additions to tax, and penalties for late payment will also be suspended until July 15, 2020.

Click here for the press release issued by the Treasury Department.

Click here for Notice 2020-17 issued by the IRS.

This relief is available solely with respect to:

  • Federal income tax payments (including payments of tax on self-employment income) due on April 15, 2020, in respect of an affected taxpayer’s 2019 taxable year, and
  • Federal estimated income tax payments (including payments of tax on self-employment income) due on April 15, 2020, for an affected taxpayer’s 2020 taxable year.

No extension is provided in this relief for the payment or deposit of any other type of Federal tax.  This did not however extend the April 15th filing deadline – until now …

Treasury Secretary Steve Mnuchin’s Announcement

On March 20, 2020 Treasury Secretary Steve Mnuchin tweeted “At @realDonaldTrump’s direction, we are moving Tax Day from April 15 to July 15. All taxpayers and businesses will have this additional time to file and make payments without interest or penalties.”

Subsequently on March 21, 2020 the IRS issued a press release that that the federal income tax filing due date is automatically extended from April 15, 2020, to July 15, 2020.

Taxpayers can also defer federal income tax payments due on April 15, 2020, to July 15, 2020, without penalties and interest, regardless of the amount owed. This deferment applies to all taxpayers, including individuals, trusts and estates, corporations and other non-corporate tax filers as well as those who pay self-employment tax.

Taxpayers do not need to file any additional forms or call the IRS to qualify for this automatic federal tax filing and payment relief. Individual taxpayers who need additional time to file beyond the July 15 deadline, can request a filing extension by filing Form 4868 for individuals and Form 7004 for corporations.

As a result of the postponement of the due date for making Federal income tax payments up to the applicable postponed payment amount from April 15, 2020, to July 15, 2020, the period beginning on April 15, 2020, and ending on July 15, 2020, will be disregarded in the calculation of any interest, penalty, or addition to tax for failure to pay the Federal income taxes postponed by this relief. Interest, penalties, and additions to tax with respect to such postponed Federal income tax payments will begin to accrue on July 16, 2020. In addition, interest, penalties and additions to tax will accrue, without any suspension or deferral, on the amount of any Federal income tax payments in excess of the applicable postponed payment amount due but not paid by an affected taxpayer on April 15, 2020.

But if you are due a refund you should file as soon as possible. The IRS states that most tax refunds are still being issued within 21 days.

California Coronavirus Tax Relief

The California Franchise Tax Board (“FTB”) on March 13, 2020 announced special tax relief for California taxpayers affected by the COVID-19 pandemic. Affected taxpayers are granted an extension to file 2019 California tax returns and make certain payments until July 15, 2020 (as further extended by FTB), in line with Governor Newsom’s March 12 Executive Order.

“During this public health emergency, every Californian should be free to focus on their health and wellbeing,” said State Controller Betty T. Yee, who serves as chair of FTB. “Having extra time to file their taxes helps allows people to do this, as the experts work to control the spread of coronavirus.”

This relief includes moving the various tax filing and payment deadlines that occur on March 15, 2020, through July 15, 2020, to July 15, 2020. This includes:

  • Partnerships and LLCs who are taxed as partnerships whose tax returns are due on March 15 now have a 120-day extension to file and pay by July 15.
  • Individual filers whose tax returns are due on April 15 now have a 90-day extension to file and pay by July 15.
  • Quarterly estimated tax payments due on April 15 now have a 90-day extension to pay by July 15.
  • Quarterly estimated tax payments due on June 15 now have a 30-day extension to pay by July 15.

Taxpayers claiming the special COVID-19 relief should write the name of the state of emergency (for example, COVID-19) in black ink at the top of the tax return to alert FTB of the special extension period. If taxpayers are e-filing, they should follow the software instructions to enter disaster information.

The FTB will also waive interest and any late filing or late payment penalties that would otherwise apply.

Other States

The American Institute Of Certified Public Accounts has put out a comprehensive list of what tax relief is being offered at the State level.

An Opportunity For Taxpayers Who Owe The IRS

Do not think that if you owe the IRS your tax problem will disappear because of the measures being considered by the government. Instead you should be utilizing this valuable time to get yourself prepared so that when activity in this nation regains momentum, you are ready to make the best offer or proposal to take control of your outstanding tax debts.

As a prerequisite to any proposal to the IRS, you must be in current compliance. That means if you have any outstanding income tax returns, they must be completed and submitted to IRS.

Also, if you are required to make estimated tax payments, you must be current in making those payments. Fortunately, as we are now in 2020, taxpayers who expect to owe for 2019 should have their 2019 income tax returns done now so that the 2019 liability can be rolled over into any proposal and the requirement to make estimated tax payments will now start for 2020.

Remember that COVID-19 does not alter the tax laws, so all taxpayers should continue to meet their tax obligations as normal. Individuals and businesses should keep filing their tax returns and making payments and deposits with the IRS, as they are required to do.

The take away from this – use the Federal government’s downtime to your advantage to prepare for the future.

What Should You Do?

You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes. If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income. Also if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

California Cannabis Businesses Coping With COVID-19

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State & local governments are taking unprecedented measures to stop dine-in restaurant service, close gyms and movie theaters, and ban or limit all gatherings to fight the spread of the coronavirus.  What remains open are those establishments that are considered to be “essential businesses”.

What Are “Essential Businesses”?

State & local governments designate as “essential businesses” those businesses or firms that perform an essential government function. While the list may vary between different jurisdictions, they typically include:

  • Healthcare operations, including home health workers.
  • Essential infrastructure, including construction of housing and operation of public transportation and utilities.
  • Grocery stores, farmers markets, food banks, convenience stores.
  • Businesses that provide necessities of life for economically disadvantaged individuals and shelter facilities.
  • Pharmacies, healthcare supply stores and healthcare facilities.
  • Gas stations and auto repair facilities.
  • Garbage collection.
  • Hardware stores, plumbers, electricians, pool service, landscape maintenance, exterminators and other service providers necessary to maintain the safety, sanitation and essential operation of residences and other essential businesses.
  • Educational institutions, for the purposes of facilitating distance learning.
  • Laundromats, dry cleaners and laundry service providers.
  • Businesses that ship or deliver groceries, food and goods directly to residences.
  • Businesses that supply products needed for people to work from home, including electronic stores, mobile phone stores and office supply stores.
  • Airlines, taxis and other transportation providers offering services needed for essential activities.
  • Home-based care for seniors, adults or children.
  • Childcare facilities providing services that enable essential employees to go to work.
  • Roles required for any essential business to “maintain basic operations,” which include security, payroll and similar activities.
  • Hotels, motels and lawfully permitted vacation rentals and homesharing.

Are Licensed Cannabis Businesses “Essential Businesses”?

On Thursday, March 19, 2020 Governor Gavin Newsom issued a stay at home order to protect the health and well-being of all Californians and to establish a consistent approach across the state to slow the spread of COVID-19. This order went into effect on Thursday, March 19, 2020, and is in place until further notice.  On March 21, 2020 the Bureau Of Cannabis Control (BCC) affirmed that this order identifies certain services as essential, including food, prescriptions, and healthcare. These services can continue despite the stay at home order. Because cannabis is an essential medicine for many residents, licensees may continue to operate at this time so long as their operations comply with local rules and regulations. The scope should also include the supply chain of growers, manufacturers, and distributors.  Any licensee that continues to operate must adopt social distancing and anti-congregating measures and must follow the CDC’s Interim Guidance for Businesses and Employers to Plan and Respond to Coronavirus Disease at all times.

Tax Relief For All Businesses And Individuals

President Donald Trump declared the coronavirus pandemic a national emergency. Therefore, under Sec. 7508A, the declaration of an emergency under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, P.L. 100-707, the IRS is allowed to delay certain tax filing and payment deadlines.

The IRS has established a special section focused on steps to help taxpayers, businesses and others affected by the coronavirus and as information becomes available, the IRS will be updating this special page on its website.

On March 18, 2020 the Treasury Department and the IRS issued the first formal guidance.  The Treasury Department and IRS are extending the due date for Federal income tax payments due April 15, 2020, to July 15, 2020, for payments due of up to $10 million for corporations and up to $1 million for individuals – regardless of filing status – and other unincorporated entities. Associated interest, additions to tax, and penalties for late payment will also be suspended until July 15, 2020.

Click here for the press release issued by the Treasury Department.

Click here for Notice 2020-17 issued by the IRS.

This relief is available solely with respect to:

  • Federal income tax payments (including payments of tax on self-employment income) due on April 15, 2020, in respect of an affected taxpayer’s 2019 taxable year, and
  • Federal estimated income tax payments (including payments of tax on self-employment income) due on April 15, 2020, for an affected taxpayer’s 2020 taxable year.

This relief has since been expanded extending the filing deadline of tax returns from April 15th to July 15th.

As a result of the postponement of the due date for making Federal income tax payments up to the applicable postponed payment amount from April 15, 2020, to July 15, 2020, the period beginning on April 15, 2020, and ending on July 15, 2020, will be disregarded in the calculation of any interest, penalty, or addition to tax for failure to pay the Federal income taxes postponed by this relief. Interest, penalties, and additions to tax with respect to such postponed Federal income tax payments will begin to accrue on July 16, 2020. In addition, interest, penalties and additions to tax will accrue, without any suspension or deferral, on the amount of any Federal income tax payments in excess of the applicable postponed payment amount due but not paid by an affected taxpayer on April 15, 2020.

Remember that COVID-19 does not alter the tax laws, so all taxpayers should continue to meet their tax obligations as normal. Individuals and businesses should keep filing their tax returns and making payments and deposits with the IRS, as they are required to do.

The take away from this – use the Federal government’s downtime to your advantage to prepare for the future.

What Should You Do?

You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes. If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The cannabis tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income. And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

 

How Are Cannabis Businesses Coping With COVID-19?

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State & local governments are taking unprecedented measures to stop dine-in restaurant service, close gyms and movie theaters, and ban or limit all gatherings to fight the spread of the coronavirus.  What remains open are those establishments that are considered to be “essential businesses”.

What Are “Essential Businesses”?

State & local governments designate as “essential businesses” those businesses or firms that perform an essential government function. While the list may vary between different jurisdictions, they typically include:

  • Healthcare operations, including home health workers.
  • Essential infrastructure, including construction of housing and operation of public transportation and utilities.
  • Grocery stores, farmers markets, food banks, convenience stores.
  • Businesses that provide necessities of life for economically disadvantaged individuals and shelter facilities.
  • Pharmacies, healthcare supply stores and healthcare facilities.
  • Gas stations and auto repair facilities.
  • Garbage collection.
  • Hardware stores, plumbers, electricians, pool service, landscape maintenance, exterminators and other service providers necessary to maintain the safety, sanitation and essential operation of residences and other essential businesses.
  • Educational institutions, for the purposes of facilitating distance learning.
  • Laundromats, dry cleaners and laundry service providers.
  • Businesses that ship or deliver groceries, food and goods directly to residences.
  • Businesses that supply products needed for people to work from home, including electronic stores, mobile phone stores and office supply stores.
  • Airlines, taxis and other transportation providers offering services needed for essential activities.
  • Home-based care for seniors, adults or children.
  • Childcare facilities providing services that enable essential employees to go to work.
  • Roles required for any essential business to “maintain basic operations,” which include security, payroll and similar activities.
  • Hotels, motels and lawfully permitted vacation rentals and homesharing.

Are Cannabis Businesses “Essential Businesses”?

Again you need to check with your local jurisdiction but in California it is highly likely that your local jurisdiction has ordered that cannabis businesses are essential businesses if in the case of licensed cannabis dispensaries and lounges, it is provided that cannabis products are picked up, or if licensed to do, for delivery, and the lounge areas of such establishments shall not be used.  The scope should also include the supply chain of growers, manufacturers, and distributors.

All licensed cannabis businesses in good standing are included as “Essential Businesses” and must follow the existing terms of any local Order as written. Such Order typically requires that they, like all other Essential Businesses, establish practices that includes 6-foot distances between individuals, frequent 20-second hand-washing or hand-sanitizing, cough and sneeze covering, regularly cleaning high-touch surfaces, and avoiding all social greetings involving contact (handshaking, etc.). These best practices plus the Bureau Of Cannabis Control (BCC) authorized curbside pickup and contact-less delivery are expected to protect customers and employees by reducing contact.

Tax Relief For All Businesses And Individuals

President Donald Trump declared the coronavirus pandemic a national emergency. Therefore, under Sec. 7508A, the declaration of an emergency under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, P.L. 100-707, the IRS is allowed to delay certain tax filing and payment deadlines.

The IRS has established a special section focused on steps to help taxpayers, businesses and others affected by the coronavirus and as information becomes available, the IRS will be updating this special page on its website.

On March 18, 2020 the Treasury Department and the IRS issued the first formal guidance.  The Treasury Department and IRS are extending the due date for Federal income tax payments due April 15, 2020, to July 15, 2020, for payments due of up to $10 million for corporations and up to $1 million for individuals – regardless of filing status – and other unincorporated entities. Associated interest, additions to tax, and penalties for late payment will also be suspended until July 15, 2020.

Click here for the press release issued by the Treasury Department.

Click here for Notice 2020-17 issued by the IRS.

This relief is available solely with respect to:

  • Federal income tax payments (including payments of tax on self-employment income) due on April 15, 2020, in respect of an affected taxpayer’s 2019 taxable year, and
  • Federal estimated income tax payments (including payments of tax on self-employment income) due on April 15, 2020, for an affected taxpayer’s 2020 taxable year.

No extension is provided in this relief for the payment or deposit of any other type of Federal tax, or for the filing of any tax return or information return.

As a result of the postponement of the due date for making Federal income tax payments up to the applicable postponed payment amount from April 15, 2020, to July 15, 2020, the period beginning on April 15, 2020, and ending on July 15, 2020, will be disregarded in the calculation of any interest, penalty, or addition to tax for failure to pay the Federal income taxes postponed by this relief. Interest, penalties, and additions to tax with respect to such postponed Federal income tax payments will begin to accrue on July 16, 2020. In addition, interest, penalties and additions to tax will accrue, without any suspension or deferral, on the amount of any Federal income tax payments in excess of the applicable postponed payment amount due but not paid by an affected taxpayer on April 15, 2020.

Again, we emphasize that this relief to allow a delay of payment does not impact the April 15, 2020 filing deadline for your tax return.  If additional time to file is needed, you would need to apply for an automatic six-month extension using Form 4868 for individuals and Form 7004 for corporations.  It also does not impact the 2nd quarter 2020 individual estimated tax payment due June 15, 2020.

Remember that COVID-19 does not alter the tax laws, so all taxpayers should continue to meet their tax obligations as normal. Individuals and businesses should keep filing their tax returns and making payments and deposits with the IRS, as they are required to do.

The take away from this – use the Federal government’s downtime to your advantage to prepare for the future.

What Should You Do?

You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes. If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The cannabis tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), San Francisco Bay Area (including Walnut Creek and San Jose) and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income. And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

Federal & State Tax Agencies Responding To COVID-19 With Tax Relief – IRS And Treasury Department Issues Initial Guidance

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Federal & State Tax Agencies Responding To COVID-19 With Tax Relief – IRS And Treasury Department Issues Initial Guidance

IRS Coronavirus Tax Relief

The IRS has established a special section focused on steps to help taxpayers, businesses and others affected by the coronavirus and as information becomes available, the IRS will be updating this special page on its website.

President Donald Trump declared the coronavirus pandemic a national emergency. Therefore, under Sec. 7508A, the declaration of an emergency under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, P.L. 100-707, the IRS is allowed to delay certain tax filing and payment deadlines.

IRS And Treasury Department Initial Guidance

On March 18, 2020 the Treasury Department and the IRS issued the first formal guidance.  The Treasury Department and IRS are extending the due date for Federal income tax payments due April 15, 2020, to July 15, 2020, for payments due of up to $10 million for corporations and up to $1 million for individuals – regardless of filing status – and other unincorporated entities. Associated interest, additions to tax, and penalties for late payment will also be suspended until July 15, 2020.

Click here for the press release issued by the Treasury Department.

Click here for Notice 2020-17 issued by the IRS.

This relief is available solely with respect to:

  • Federal income tax payments (including payments of tax on self-employment income) due on April 15, 2020, in respect of an affected taxpayer’s 2019 taxable year, and
  • Federal estimated income tax payments (including payments of tax on self-employment income) due on April 15, 2020, for an affected taxpayer’s 2020 taxable year.

No extension is provided in this relief for the payment or deposit of any other type of Federal tax, or for the filing of any tax return or information return.

As a result of the postponement of the due date for making Federal income tax payments up to the applicable postponed payment amount from April 15, 2020, to July 15, 2020, the period beginning on April 15, 2020, and ending on July 15, 2020, will be disregarded in the calculation of any interest, penalty, or addition to tax for failure to pay the Federal income taxes postponed by this relief. Interest, penalties, and additions to tax with respect to such postponed Federal income tax payments will begin to accrue on July 16, 2020. In addition, interest, penalties and additions to tax will accrue, without any suspension or deferral, on the amount of any Federal income tax payments in excess of the applicable postponed payment amount due but not paid by an affected taxpayer on April 15, 2020.

Again, we emphasize that this relief to allow a delay of payment does not impact the April 15, 2020 filing deadline for your tax return.  If additional time to file is needed, you would need to apply for an automatic six-month extension using Form 4868 for individuals and Form 7004 for corporations.  It also does not impact the 2nd quarter 2020 individual estimated tax payment due June 15, 2020.

California Coronavirus Tax Relief

The California Franchise Tax Board (“FTB”) on March 13, 2020 announced special tax relief for California taxpayers affected by the COVID-19 pandemic. Affected taxpayers are granted an extension to file 2019 California tax returns and make certain payments until June 15, 2020, in line with Governor Newsom’s March 12 Executive Order.

“During this public health emergency, every Californian should be free to focus on their health and wellbeing,” said State Controller Betty T. Yee, who serves as chair of FTB. “Having extra time to file their taxes helps allows people to do this, as the experts work to control the spread of coronavirus.”

This relief includes moving the various tax filing and payment deadlines that occur on March 15, 2020, through June 15, 2020, to June 15, 2020. This includes:

  • Partnerships and LLCs who are taxed as partnerships whose tax returns are due on March 15 now have a 90-day extension to file and pay by June 15.
  • Individual filers whose tax returns are due on April 15 now have a 60-day extension to file and pay by June 15.
  • Quarterly estimated tax payments due on April 15 now have a 60-day extension to pay by June 15.

The FTB’s June 15 extended due date may be pushed back even further if the Internal Revenue Service grants a longer relief period.

Taxpayers claiming the special COVID-19 relief should write the name of the state of emergency (for example, COVID-19) in black ink at the top of the tax return to alert FTB of the special extension period. If taxpayers are e-filing, they should follow the software instructions to enter disaster information.

The FTB will also waive interest and any late filing or late payment penalties that would otherwise apply.

Other States

The American Institute Of Certified Public Accounts has put out a comprehensive list of what tax relief is being offered at the State level.

An Opportunity For Taxpayers Who Owe The IRS

Do not think that if you owe the IRS your tax problem will disappear because of the measures being considered by the government. Instead you should be utilizing this valuable time to get yourself prepared so that when activity in this nation regains momentum, you are ready to make the best offer or proposal to take control of your outstanding tax debts.

As a prerequisite to any proposal to the IRS, you must be in current compliance. That means if you have any outstanding income tax returns, they must be completed and submitted to IRS.

Also, if you are required to make estimated tax payments, you must be current in making those payments. Fortunately, as we are now in 2020, taxpayers who expect to owe for 2019 should have their 2019 income tax returns done now so that the 2019 liability can be rolled over into any proposal and the requirement to make estimated tax payments will now start for 2020.

Remember that COVID-19 does not alter the tax laws, so all taxpayers should continue to meet their tax obligations as normal. Individuals and businesses should keep filing their tax returns and making payments and deposits with the IRS, as they are required to do.

The take away from this – use the Federal government’s downtime to your advantage to prepare for the future.

What Should You Do?

You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes. If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Metropolitan Los Angeles (Long Beach and Ontario) and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income. Also if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

Federal & State Tax Agencies Responding To COVID-19 With Tax Relief

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Federal & State Tax Agencies Responding To COVID-19 With Tax Relief

 IRS Coronavirus Tax Relief

 The IRS has established a special section focused on steps to help taxpayers, businesses and others affected by the coronavirus and as information becomes available, the IRS will be updating this special page on its website.

President Donald Trump declared the coronavirus pandemic a national emergency. Therefore, under Sec. 7508A, the declaration of an emergency under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, P.L. 100-707, the IRS is allowed to delay certain tax filing and payment deadlines.

Treasury Secretary Steve Mnuchin’s Announcement

On March 17, 2020 Treasury Secretary Steve Mnuchin announced a series of tax relief measures that he intends to push through that are designed to assist taxpayers and tax preparers during the COVID-19 pandemic. Mr. Mnuchin is seeking relief for individuals and corporations to permit the delay in making their tax payments for 90 days from the April 15 deadline.  Individuals can defer up to $1 million in payments. Corporations can defer up to $10 million in payments.  During that time, the IRS will not charge interest or penalties.

Mr. Mnuchin’s announcement does not delay the April 15th filing deadline.   It affects 2019 federal income taxes only.  Mr. Mnuchin did not address 2020 estimated tax payments, payroll taxes, or estate and gift taxes.

Formal guidance is still forthcoming and will be communicated in further blogs.

California Coronavirus Tax Relief

The California Franchise Tax Board (“FTB”) on March 13, 2020 announced special tax relief for California taxpayers affected by the COVID-19 pandemic. Affected taxpayers are granted an extension to file 2019 California tax returns and make certain payments until June 15, 2020, in line with Governor Newsom’s March 12 Executive Order.

“During this public health emergency, every Californian should be free to focus on their health and wellbeing,” said State Controller Betty T. Yee, who serves as chair of FTB. “Having extra time to file their taxes helps allows people to do this, as the experts work to control the spread of coronavirus.”

This relief includes moving the various tax filing and payment deadlines that occur on March 15, 2020, through June 15, 2020, to June 15, 2020. This includes:

  • Partnerships and LLCs who are taxed as partnerships whose tax returns are due on March 15 now have a 90-day extension to file and pay by June 15.
  • Individual filers whose tax returns are due on April 15 now have a 60-day extension to file and pay by June 15.
  • Quarterly estimated tax payments due on April 15 now have a 60-day extension to pay by June 15.

The FTB’s June 15 extended due date may be pushed back even further if the Internal Revenue Service grants a longer relief period.

Taxpayers claiming the special COVID-19 relief should write the name of the state of emergency (for example, COVID-19) in black ink at the top of the tax return to alert FTB of the special extension period. If taxpayers are e-filing, they should follow the software instructions to enter disaster information.

The FTB will also waive interest and any late filing or late payment penalties that would otherwise apply.

Other States

The American Institute Of Certified Public Accounts has put out a comprehensive list of what tax relief is being offered at the State level.

An Opportunity For Taxpayers Who Owe The IRS

Do not think that if you owe the IRS your tax problem will disappear because of the measures being considered by the government. Instead you should be utilizing this valuable time to get yourself prepared so that when activity in this nation regains momentum, you are ready to make the best offer or proposal to take control of your outstanding tax debts.

As a prerequisite to any proposal to the IRS, you must be in current compliance. That means if you have any outstanding income tax returns, they must be completed and submitted to IRS.

Also, if you are required to make estimated tax payments, you must be current in making those payments. Fortunately, as we are now in 2020, taxpayers who expect to owe for 2019 should have their 2019 income tax returns done now so that the 2019 liability can be rolled over into any proposal and the requirement to make estimated tax payments will now start for 2020.

Remember that COVID-19 does not alter the tax laws, so all taxpayers should continue to meet their tax obligations as normal. Individuals and businesses should keep filing their tax returns and making payments and deposits with the IRS, as they are required to do.

The take away from this – use the Federal government’s downtime to your advantage to prepare for the future.

What Should You Do?

You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes. If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Metropolitan Los Angeles (Long Beach and Ontario) and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income. Also if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

 

 

 

 

 

affected by tornado damage tax relief

Are You Affected By The March 2020 Tennessee Tornadoes? IRS Is Providing You With Tax Relief And Extending Upcoming Tax Deadlines.

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Are You Affected By The March 2020 Tennessee Tornadoes? IRS Is Providing You With Tax Relief And Extending Upcoming Tax Deadlines.

The IRS announced on March 6, 2020 that victims of tornadoes and severe storms in parts of Tennessee, including Nashville that took place during the first week of March 2020 may qualify for tax relief. Individuals and households who reside or have a business in the counties of Davidson, Putnam and Wilson have until July 15, 2020, to file certain individual and business tax returns and make certain tax payments.

IRS Tax Relief Details

The IRS is offering this relief to any area designated by the Federal Emergency Management Agency (FEMA), as qualifying for individual assistance. The current list of eligible localities is always available on the disaster relief page on IRS.gov.

The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after March 3, 2020 and before March 18, 2020, are granted additional time to file through July 15, 2020. This includes 2019 business tax returns due on March 16, 2020, 2019 individual and business income tax returns due on April 15, 2020, the 2020 quarterly estimated income tax payment due on April 15, 2020, the 2020 quarterly estimated income tax payment due on June 15, 2020, and the quarterly payroll and excise tax returns normally due on April 30, 2020.

In addition, penalties on payroll and excise tax deposits due on or after March 3, 2020, and before March 18, 2020, will be abated as long as the deposits were made by March 18, 2020.

Importance To Preserve Records

Keep in mind that the IRS has up to three years to select a tax return for audit. The FTB has up to four years to select a tax return for audit. In some cases this period is extended to six years. When a taxpayer is selected for audit, the taxpayer has the burden of proof to show that expenses claimed are properly deductible. Having the evidence handy and organized makes meeting this burden of proof much easier.

Essential Records to Have for a Tax Audit

If you are getting ready for a tax audit, one of the most important things to do is gather and organize your tax records and receipts. There’s a good chance that you have a large amount of documents and receipts in your possession. No matter how organized you are, it can be a daunting task to collect the right pieces and make sure that you have them organized and handy for the audit conference.

We have seen many tax audits that hinge on whether or not the taxpayer can provide proper documentation for their previous tax filings. A tax lawyer in Orange County or elsewhere can make sure that the documentation is complete and proper.  By submitting this to your tax attorney in advance of the audit, your tax attorney can review your documentation and determine if there are any gaps that need to be addressed before starting the dialogue with the IRS agent.

So what are the most essential tax records to have ahead of your audit? Here are a few must-have items:

  • Any W-2 forms from the previous year. This can include documents from full-time and part-time work, large casino and lottery winnings and more.
  • Form 1098 records from your bank or lender on mortgage interest paid from the previous year.
  • Records of any miscellaneous money you earned and reported to the IRS including work done as an independent contractor or freelancer, interest from savings accounts and stock dividends.
  • Written letters from charities confirming your monetary donations from the previous year.
  • Receipts for business expenses you claimed.
  • Mileage Logs for business use of vehicle.
  • Entertainment and Travel Logs for business activities.

Develop And Implement Your Backup Plan

Do not wait for the next disaster to come for then it may be too late to retrieve your important records for a tax audit or for that matter any legal or business matter. And if you do get selected for audit and do not have all the records to support what was claimed on your tax returns, you should contact an experienced tax attorney who can argue the application of your facts and circumstances to pursue the least possible changes in an audit.

The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), San Diego County (Carlsbad) and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income. And if you are involved in cannabis, check out what a cannabis tax attorney can do for you. Additionally, if you are involved in crypto currency, check out what a Bitcoin Tax Attorney can do for you.

Federal Government Enforcing Prohibition Of Cannabis On Public Lands

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Off-Site Manager of Marijuana Grow in Shasta-Trinity National Forest Sentenced to 10 Years in Prison

The U.S. Attorney’s Office for the Eastern District Of California issued a press release on February 24, 2020 that Dimas Ortiz, 26, of Michoacán, Mexico, was sentenced by U.S. District Judge Kimberly J. Mueller to 10 years in prison and ordered to pay $10,000 in restitution to the U.S. Forest Service for growing marijuana on the National Forest and for depredation of Public Lands and Resources, U.S. Attorney McGregor W. Scott announced.

The Federal Case Against Dimas Ortiz

According to court documents, Ortiz oversaw the marijuana growing operations of several other men in the Shasta-Trinity National Forest to the west of Weaverville, near Limedyke Mountain, at an elevation of approximately 2,500 feet. On August 7, 2017, law enforcement officers executed a search of the grow and eradicated more than 2,500 marijuana plants. A camp site was found where the on-site workers had camped. Ortiz oversaw the operation from a distance. He helped finance the operation, provided the supplies for the grow site, and directed the activities of his co-defendants. Ortiz expected the operation to yield 800 pounds of processed marijuana, worth $500,000, of which he was to receive 25%. In 2016, Ortiz was the driver for the same grow site and he and others harvested approximately 800 pounds of processed marijuana.

The environmental damage to the forest was analyzed and documented by Integral Ecology Research Center, a non-profit organization dedicated to the research and conservation of wildlife and their ecosystems that has examined over 100 public land marijuana grow sites.

According to the report of the investigation filed with the court, at this grow site, a half-full 33.8 oz. bottle of carbofuran was found hidden among the fertilizer bags and a bag containing an estimated 20 pounds of suspected powder carbofuran. Carbofuran is a toxic pesticide that is banned in the United States. A food bottle found at the site had been reused and contained a mixture of refried beans and carbofuran (suspected bait for animals). The environmental assessment concluded that the carbofuran and other pesticides and fertilizer at the grow site likely posed a significant direct risk to a number of endangered species, including the bald eagle, the northern spotted owl, and the coho salmon. Four cisterns were discovered with water diverted from mountain streams for use in the marijuana grow’s irrigation system with an estimated 4,500 feet of plastic irrigation lines for water and over 2,200 pounds of soluble fertilizer.

The report estimates that the operation used over 15,000 gallons of water per day. Open campsite latrines were also found in proximity to waterways that would cause watershed contamination from the latrines’ fecal matter after the next substantial rain. About 1,000 pounds of trash and 500 pounds of plastic irrigation lines were hauled out of the site. Tests on samples of the marijuana plants determined that carbofuran was present in the plant material.

Cannabis Is Illegal Under Federal Law

Anyone conducting business in cannabis surely knows that under Federal law (Controlled Substances Act 21 U.S.C. 801) marijuana is designated as a Schedule I controlled substance due to the historical belief that it has a high potential for abuse, no currently accepted medical use in treatment, and lack of accepted safety for use under medical supervision. The Trump Administration is serious about cracking down on this as we reported in our blog.

But until Federal law changes, the cannabis industry will still have to bear the followings risks and challenges:

Higher Taxes Still Remain

It still remains to be seen when favorable changes will be made to the Internal Revenue Code which treats businesses in the marijuana industry differently resulting in such business paying at least 3-times as much in taxes as ordinary businesses.

Generally, businesses can deduct ordinary and necessary business expenses under I.R.C. §162. This includes wages, rent, supplies, etc. However, in 1982 Congress added I.R.C. §280E. Under §280E, taxpayers cannot deduct any amount for a trade or business where the trade or business consists of trafficking in controlled substances…which is prohibited by Federal law. Marijuana, including medical marijuana, is a controlled substance. What this means is that dispensaries and other businesses trafficking in marijuana have to report all of their income and cannot deduct rent, wages, and other expenses, making their marginal tax rate substantially higher than most other businesses.

Reporting Of Cash Payments Still Remain

The Bank Secrecy Act of 1970 (“BSA”) requires financial institutions in the United States to assist U.S. government agencies to detect and prevent money laundering. Specifically, the act requires financial institutions to keep records of cash purchases of negotiable instruments, and file reports of cash purchases of these negotiable instruments of more than $10,000 (daily aggregate amount), and to report suspicious activity that might signify money laundering, tax evasion, or other criminal activities. The BSA requires any business receiving one or more related cash payments totaling more than $10,000 to file

IRS Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business.

The minimum penalty for failing to file EACH Form 8300 is $25,000 if the failure is due to an intentional or willful disregard of the cash reporting requirements. Penalties may also be imposed for causing, or attempting to cause, a trade or business to fail to file a required report; for causing, or attempting to cause, a trade or business to file a required report containing a material omission or misstatement of fact; or for structuring, or attempting to structure, transactions to avoid the reporting requirements. These violations may also be subject to criminal prosecution which, upon conviction, may result in imprisonment of up to 5 years or fines of up to $250,000 for individuals and $500,000 for corporations or both.

Marijuana-related businesses operate in an environment of cash transactions as many banks remain reluctant to do business with many in the marijuana industry. Like any cash-based business the IRS scrutinizes the amount of gross receipts to report and it is harder to prove to the IRS expenses paid in cash. So it is of most importance that the proper facilities and procedures be set up to maintain an adequate system of books and records.

How Do You Know Which Cannabis Tax Attorney Is Best For You?

Given that cannabis is still illegal under existing Federal law you need to protect yourself and your marijuana business from all challenges created by the U.S. government.  While cannabis is legal in California, that is not enough to protect you.  It’s coming down that the biggest risk is TAXES.  Be proactive and engage an experienced Cannabis Tax Attorney in your area. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County, Los Angeles and other California locations protect you and maximize your net profits. And if you are involved in crypto currency, check out what a Bitcoin Tax Attorney can do for you.

Weedmaps Under Pressure To Disclose Cannabis Businesses To The Feds

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Eastern District of California seeks documents on roughly 30 companies from cannabis-retail listing service Weedmaps, according to grand-jury subpoena.

According to a report from MarketWatch prosecutors in the U.S. attorney’s office for the Eastern District of California ordered the production of records from Ghost Management Group LLC, which owns a subsidiary called Weedmaps that provides an online directory of cannabis retailers. Weedmaps’ online services allow pot consumers to rate and compare stores, find deals and place orders for delivery.

The subpoena covers documents related to cannabis businesses listed on Weedmaps, and records related to its ordering service. Prosecutors also sought documents and other records kept by Weedmaps related to its own staff, investors and accounting, according to the subpoena issued late last year.

While Weedmaps does not sell cannabis but merely serves that industry by providing an advertising service, such action by the Department Of Justice (“DOJ”) to go after third parties providing ancillary services to the cannabis industry is very chilling.

Cannabis Is Illegal Under Federal Law.

It is enough that a cannabis businesses have to face the fact that under 21 U.S.C. § 812 (known as the Federal Controlled Substances Act), the Federal government classifies marijuana as a Schedule 1 substance with a high potential for abuse, no currently accepted medical use in treatment, and lack of accepted safety for use under medical supervision.

The federal penalties for possession of any amount of marijuana are as follows:

  • First Offense – Misdemeanor involving up to one year of incarceration and $1,000 in fines
  • Second Offense – Misdemeanor punishable by 15 days to 2 years behind bars and $2,500 in fines
  • Third and subsequent offenses – Misdemeanor or felony punishable by 90 days to 3 years of incarceration and fines of up to $5,000.

The penalties for the sale of marijuana depend on the amount of marijuana you have been accused of selling or attempting to sell:

  • Less than 50 kilograms – Felony punishable by up to 5 years in prison and/or up to $250,000 in fines
  • 50 to 99 kilograms – Felony punishable by up to 20 years in prison and/or fines of up to $1,000,000
  • 100 to 999 kilograms – Felony involving 5 to 40 years incarceration and/or fines of up to $2,000,000
  • 1000 kg and up – Felony carrying a sentence of 10 years to life in prison and/or up to $4,000,000 in fines

As for the cultivation of marijuana, the federal authorities punish it on the basis of the number of plants you were caught growing:

  • Less than 50 plants – Felony punishable by up to 5 years in prison and/or up to $250,000 in fines
  • 50 to 99 plants – Felony punishable by up to 20 years in prison and/or up to $1,000,000 in fines
  • 100 to 999 plants – Felony carrying a 5 to 40-year prison sentence and/or fines of up to $5,000,000
  • 1,000 plants or more – Felony involving 10 years to life in prison and/or fines of up to $10,000,000

With aggravating factors such as a trafficking activity that results in an injury or death, a sale within 1,000 feet of a school, or a case involving five grams sold to a minor, the above penalties may increase dramatically but the fact that a cannabis business is properly licensed by the State can be a mitigating factor decreasing these penalties.

Risk To Being Shut Down And Assets Seized By Your Local Federal District Attorney

On January 4, 2018 former Attorney General Jeff Sessions rescinded what was known as the “Cole Memo”.

The Cole Memo which came out of the DOJ under the Obama administration in 2013, directed U.S. Attorneys to use discretion to prioritize certain types of violations in prosecuting cannabis operators, but, strictly speaking, it did not make operations in cannabis legal.

The Cole Memo included eight factors for prosecutors to look at in deciding whether to charge a medical marijuana business with violating the Federal law:

  • Does the business allow minors to gain access to marijuana?
  • Is revenue from the business funding criminal activities or gangs?
  • Is the marijuana being diverted to other states?
  • Is the legitimate medical marijuana business being used as a cover or pretext for the traffic of other drugs or other criminal enterprises?
  • Are violence or firearms being used in the cultivation and distribution of marijuana?
  • Does the business contribute to drugged driving or other adverse public health issues?
  • Is marijuana being grown on public lands or in a way that jeopardizes the environment or public safety?
  • Is marijuana being used on federal property?

But now that the Cole Memo has be rescinded, federal prosecutors in cannabis legal states will now be free to decide how aggressively they wish to enforce federal marijuana laws. While State law and public acceptance of marijuana usage may temper federal prosecutors’ aggressiveness, this risk of seizure and shutdown is still real and for those cannabis businesses that are not licensed by the State, not only will they rise to the top of the Federal District Attorney’s list but also by State authorities. Criminal prosecution is also possible at both the Federal and State levels so it is important to have qualified legal counsel lined-up and available to intervene.

What Should You Do?

Considering the risks of cannabis you need to protect yourself and your investment, especially if you are not holding a valid license with the State. Level the playing field and gain the upper hand by engaging a Cannabis Tax Attorney at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), the Inland Empire (Ontario and Palm Springs) and other California locations. We can come up with solutions and strategies to these risks and protect you and your business to maximize your net profits. And if you are involved in crypto currency, check out what a Bitcoin Tax Attorney can do for you.

Proposed Treasury Regulations Issued On Deducting Business Meals

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Proposed Treasury Regulations Issued On Deducting Business Meals

The Tax Cuts And Jobs Act Of 2017 (“TCJA”) was signed into law by President Trump on December 22, 2017.  It has been a good 30 years since the last time the Internal Revenue Code received such a major update but for taxpayers.

Deductions Relating to Meal And Entertainment Expenses

Under prior law, a taxpayer generally can deduct business-related meal and entertainment expenses paid or incurred in entertaining a client, customer, or employee. The taxpayer had to show that the item was directly related to (or, in certain cases, associated with) the active conduct of the taxpayer’s trade or business.  In such case, a deduction is allowed, although it is generally limited to 50% of the expense amount.

Starting with 2018 more stringent rules apply with respect to a deduction for meal and entertainment expenses paid after 2017.  The TCJA repeals the deduction for most entertainment expenses, effective for amounts incurred after 2017. There is no exception for amount incurred that are directly related to, or associated with, the active conduct of the taxpayer’s trade or business. This repeal would extend to the cost of tickets to sporting events, stadium license fees, private boxes at sporting events, theater tickets, golf club dues, etc.

However, it is still possible that some amounts may still be deductible if they meet the exceptions in IRC § 274(e), a provision that was not touched by the TCJA.

The main exceptions in IRC § 274(e) allowing deductibility are:

  1. Expenses for food and beverages (and facilities used in connection therewith) furnished on the business premises of the taxpayer primarily for the taxpayer’s employees.
  2. Expenses for recreational, social, or similar activities (and facilities used in connection therewith) primarily for the benefit of employees, other than highly-compensated employees.
  3. Expenses incurred by a taxpayer which are directly related to business meetings of the taxpayer’s employees, stockholders, agents, or directors.
  4. Expenses directly related and necessary to attendance at a business meeting or convention of any certain organizations such as business leagues, chambers of commerce, real estate boards, and boards of trade.
  5. Expenses for goods, services and facilities made available by the taxpayer to the general public.

This lack of clarity by the TCJA created a lot of confusion in the business community which the IRS was looking to address.

Proposed Regulations

On October 3, 2018 the IRS issued guidance, Notice 2018-76, clarifying that taxpayers may generally continue to deduct 50% of the food and beverage expenses associated with operating their trade or business, despite changes to the meal and entertainment expense deduction by the TCJA.    Now that the IRS issued Proposed Regulations, here is what you need to know.

Under the proposed regulations, taxpayers may deduct 50% of an otherwise allowable business meal expense if:

  1. The expense is an ordinary and necessary business expense under Sec. 162(a) paid or incurred during the tax year when carrying on any trade or business;
  1. The expense is not lavish or extravagant under the circumstances;
  1. The taxpayer or an employee of the taxpayer is present when the food and beverages are furnished;
  1. The food and beverages are provided to a current or potential business customer, client, consultant, or similar business contact; and
  1. For food and beverages provided during or at an entertainment activity, they are purchased separately from the entertainment, or the cost of the food and beverages is stated separately from the cost of the entertainment on one or more bills, invoices, or receipts.

Regarding the requirement in No. 4 above that the food and beverages be provided to a current or potential business contact, the IRS defines such a contact as “a person with whom the taxpayer could reasonably expect to engage or deal in the active conduct of the taxpayer’s trade or business such as the taxpayer’s customer, client, supplier, employee, agent, partner, or professional adviser, whether established or prospective.”

What Should You Do?

Like with any expense you are looking to deduct it is important to make sure that the tax law would support a deduction and that you have the required backup documentation in case you are audited by the IRS. Also, be mindful that in any audit by IRS, an agent will be making sure that taxpayers are not inflating the amount charged for food and beverages in order to circumvent the disallowance of entertainment.

You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes. If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles County (Long Beach) and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income.  Additionally, if you are involved in the cannabis industry, check out what a Cannabis Tax Attorney can do for you; and if you are involved in crypto currency, check out what a Bitcoin Tax Attorney can do for you.