February, 2021 | TaxConnections

24 Feb 2021

Tax Treaties: United States And South Africa

Quick Summary. South Africa is a parliamentary democracy with three branches sharing Constitutional authority: the executive, judiciary, and parliament branches. Its blended legal system combines Roman-Dutch civil law, English common law, and customary law. Under South African law, there are three levels of governmental authority: National; Provincial; and Local government.

Beginning in 2001, South Africa moved from a source-based income tax system to a residence-based income tax system. Residents are taxed on their worldwide income. Non-residents are taxed on their South African sourced income. The same rates apply to both residents and non-residents.

Written by Jason Freeman | Posted in Tax Treaties: United States And South Africa

23 Feb 2021

How Will States Deal With Budgetary Issues?

As we begin a new year, new issues arise for states. As states are dealing with budgets for the year, spending has increased and tax revenue have decreased. The COVID-19 pandemic has changed our lives, the way we work, shop and interact with others.

A few states are seeing their residents, like California, New York and New Jersey, all high tax jurisdictions, moving to and becoming permeant residents of Florida, Texas, and Nevada, all states with low taxes or no state tax on companies or individuals.

How will states deal with these budgetary issues? Decrease spending? Increase tax rates? Expand the tax base? Tax out-of-state companies and Individuals? Increase tax credits and incentives, to attract investment? My guess, all the above, except for decreases to spending.

Written by George Rendziperis, J.D. | Posted in Freeman Law • State Budgets

23 Feb 2021

IRS Criminal Investigation Warn Taxpayers Of Covid-19 Scams With Second Round Of Economic Impact Payments

Puerto Rico U.S. Attorney’s Office And IRS-Criminal Investigation Warn Taxpayers About New Wave Of Covid-19 Scams As Second Round Of Economic Impact Payments Is Delivered

U.S. Attorney W. Stephen Muldrow and Tyler R. Hatcher, Acting Special Agent in Charge, Internal Revenue Service, Criminal Investigation (IRS-CI), Miami Field Office, made the announcement today in an effort to prevent taxpayers from falling victim to criminals.

In the last several months, IRS-CI has seen a variety of Economic Impact Payment (EIP) scams and other financial schemes designed to steal money and personal information from taxpayers. Criminals are taking advantage of the second round of Economic Impact Payments – as well as the approaching filing season – to trick honest taxpayers out of their hard-earned money.

Written by TaxConnections Admin | Posted in Economic Impact Payment • Financial Schemes • U.S. Attorney Office Announcement

23 Feb 2021

Spending In The Tax Law Exceeds Discretionary Spending!

On February 11, 2021, the Congressional Budget Office (CBO) released: The Budget and Economic Outlook: 2021 to 2031. It is grim as CBO estimates that the federal budget deficit for FY 2021 will be $2.3 trillion. But, that is $900 billion less than for 2020. The 2021 deficit is the second largest since 1945 (WWII) based on the deficit as a percent of GDP.

Something else interesting in the report is an appendix on tax expenditures. Tax expenditures are spending that exists in the tax law. For example, the American Opportunity Tax Credit provides taxpayers with a $2,500 tax credit for each of the first four years of college. While this government spending could have instead been given by a direct grant payable to the university to cover the students tuition, it was put into the tax law as a tax reduction. Whether as a tax credit or a direct grant, the financial effect to the government budget and the student are the same. Per CBO, there are over 200 tax expenditures (special rules) in the Federal income and employment taxes.

Written by Annette Nellen | Posted in Tax Law Spending

23 Feb 2021

How To Know It’s Really The IRS Calling Or Knocking On Your Door: Audits

The IRS examines or audits tax returns to verify that what the taxpayer reported is correct. This doesn’t mean that the taxpayer has made an error or been dishonest. In fact, some examinations result in a refund to the taxpayer or acceptance of the return without change.

There are various reasons the IRS may telephone or visit a taxpayer at home during an audit, but at that point the taxpayer would be well aware of the audit.

Audit Contacts

IRS employees conducting audits may call taxpayers, but not without having first attempted to notify them by mail. After mailing an official notification of an audit, an auditor/tax examiner may call to discuss items pertaining to the audit. We may visit the taxpayer’s home or business without notification to the taxpayer if attempts to communicate with the taxpayer in other ways, such as letters or phone calls, are not successful. An audit may include an interview with the taxpayer or his or her Power of Attorney, if one is appointed, and sometimes include a tour of the taxpayer’s business operation.
Read More

Written by IRS | Posted in IRS Audit

23 Feb 2021

If You Lost Your Job In 2020, A New Tax Rule Could Help You Get Valuable Tax Credits

A new rule may help you if you experienced job loss or change in income in 2020. To qualify for earned income tax credit, people must have earned income. Generally, earned income includes taxable employee compensation and net earnings from self-employment, as well as certain disability payments.

You can use your 2019 earned income to figure your EITC, if your 2019 earned income was more than your 2020 earned income. The same is true for the additional child tax credit.

For details, see the instructions for Form 1040 PDF.

What is Earned Income?

Written by IRS | Posted in Earned Income Tax Credit

19 Feb 2021

Tax Court In Brief: Freeman Law

The Tax Court In Brief

Freeman Law’s “The Tax Court in Brief” covers every substantive Tax Court opinion, providing a weekly brief of its decisions in clear, concise prose.

The Week of February 8 – February 12, 2021

BM Construction v. Comm’r, T.C. Memo. 2021-13 | February 8, 2021 | Urda, J. | Dkt. No. 24352-17L

Opinion

Short Summary: The IRS initiated an examination of the tax liabilities associated with Mr. Bernotas and his sole proprietorship, BM Construction. After issuing an initial report on May 7, 2014, the examination officer issued two Letters 950-D: (1) to Mr. Bernotas with respect to his income taxes on June 6, 2014; and (2) to BM Construction with respect to backup withholding tax liabilities on June 13, 2014. The examination officer detailed these actions in the file’s activity log and noted that neither of the mailed letters were returned. At more than one subsequent in-person meeting, Mr. Bernotas was notified of his appeal rights—particularly that he had 30 days from the date of Letter 950-D.

Written by Jason Freeman | Posted in IRS Examination • IRS Note Of Intent To Levy

19 Feb 2021

Social Security Benefits And Taxes: The Facts

Social Security benefits include monthly retirement, survivor, and disability benefits; they do not include Supplemental Security Income (SSI) payments, which are not taxable.

Generally, you pay federal income taxes on your Social Security benefits only if you have other substantial income in addition to your benefits. Examples include wages, self-employment, interest, dividends, and other taxable income that must be reported on your tax return.

Your income and filing status affect whether you must pay taxes on your Social Security. An easy method of determining whether any of your benefits might be taxable is to add one-half of your Social Security benefits to all of your other income, including any tax-exempt interest.

If you receive Social Security benefits you should receive Form SSA-1099, Social Security Benefit Statement, showing the amount.

Written by TaxConnections Admin | Posted in TaxConnections

19 Feb 2021

What Is The Premium Tax Credit (PTC)?

Premium Tax Credit (PTC)

The PTC is a tax credit for certain people who enroll, or whose family member enrolls, in a qualified health plan. The credit provides financial assistance to pay the premiums for the qualified health plan offered through a Marketplace by reducing the amount of tax you owe, giving you a refund, or increasing your refund amount. You must file Form 8962 to compute and take the PTC on your tax return.

Advance payment of the premium tax credit (APTC)

APTC is a payment during the year to your insurance provider that pays for part or all of the premiums for a qualified health plan covering you or an individual in your tax family. Your APTC eligibility is based on the Marketplace’s estimate of the PTC you will be able to take on your tax return. If APTC was paid for you or an individual in your tax family, you must file Form 8962 to reconcile (compare) this APTC with your PTC. If the APTC is more than your PTC, you have excess APTC and you must repay the excess, subject to certain limitations. If the APTC is less than the PTC, you can get a credit for the difference, which reduces your tax payment or increases your refund.

Changes in circumstances

Written by IRS | Posted in Premium Tax Credit

18 Feb 2021

But, Your Honor, There’s A Coronavirus Pandemic—Higa & McGrath

While Texas was being pelted by snow and freezing temperatures and rolling blackouts, I decided to catch up on a little light reading related to tax crimes. Who doesn’t like good reading material when the house is pitch black and all you have is the glow from your phone’s display to light up the page? Nevertheless, I came across two recent court decisions—one in Hawaii, one in Ohio—whereby each defendant was serving prison time related to tax crimes and each defendant filed a motion for compassionate release under Section 3582(c)(1)(A) and each defendant invoked the COVID-19 pandemic. Two cases with similar backgrounds/fact situations are always interesting for comparison purposes. In this case, one court granted the defendant’s motion, while the other court denied the defendant’s motion.

Modification of Prison Terms, Generally

Written by Zachary Montgomery | Posted in Tax Crime Story

18 Feb 2021

U.S. Department Of Treasury: FATCA Agreements With Other Countries

FATCA requires foreign financial institutions (FFIs) to report to the IRS information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest. FFIs are encouraged to either directly register with the IRS to comply with the FATCA regulations (and FFI agreement, if applicable) or comply with the FATCA Intergovernmental Agreements (IGA) treated as in effect in their jurisdictions. For access to the FATCA regulations and administrative guidance related to FATCA and to learn about taxpayer obligations please visit the IRS on FATCA.

Scroll down below the Table of FATCA Agreements and Understandings in Effect by Jurisdiction to find a list of Model Intergovernmental Agreements and assorted additional statements related to FATCA and its implementation.

FATCA Agreements And Understandings In Effect By Jurisdiction

Written by IRS | Posted in FATCA Agreements Around The World

18 Feb 2021

Request For Transcript Of Tax Return: Form 4506-T

Use Form 4506-T to request tax return information. Taxpayers using a tax year beginning in one calendar year and ending in the following year (fiscal tax year) must file Form 4506-T to request a return transcript.

Current Revision

Form 4506-T PDF

Recent Developments

There is a new transcript format that better protects taxpayer data. This new format partially masks personally identifiable information. Financial data will remain fully visible to allow for tax preparation, tax representation or income verification. Because the full SSN is masked, the IRS has created an entry for a Customer File Number. A 10-digit Customer File Number is selected by the requester and entered on a new Line 5b of Form 4506-T and 4506T-EZ. Learn more at About the New Tax Transcript and Customer File Number.