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Temporary Tax Law Changes Should Be EASY!

Temporary Tax Law Changes Should Be EASY!

We are in tough times! The pandemic is in it’s second year and the March 13, 2020 disaster declaration is still in effect. The American Rescue Plan Act of 2021 signed into law on March 11, 2021 is the 5th major piece of COVID-19 relief enacted since mid-March 2020. The tax changes in these laws are numerous and complex in terms of new definitions, special rules, confusing interaction with other rules, and more.

The IRS could not even open the 2021 filing season until February 12 – later than usual. The IRS is still processing paper filed 2019 returns.

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Tax Treaties: United States And Denmark

Tax Treaties: United States And Denmark

Quick Summary.  The Kingdom of Denmark is a Nordic country located in Northern Europe.  A Scandinavian country with an archipelago of 443 islands, Denmark consists of five main regions with its capital at Copenhagen.

Denmark is a constitutional monarchy with a parliamentary democracy.  Denmark’s parliament is a unicameral body known as the Folketing, which is vested with legislative power.

Denmark has a civil law system that has been influenced by Germanic law and that is largely based upon customary law.  Denmark’s constitution provides for independence of the judicial power from the government and Parliament.

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U.S. Department Of Justice: The Tax Division Focuses On

United States Department Of Justice

The Tax Division handles or authorizes most civil and criminal litigation that concerns or relates to the internal revenue laws in federal district and appellate courts. Tax Division attorneys seek to secure correct, uniform and fair interpretations of the internal revenue laws and to ensure that uniform standards are applied in criminal tax prosecutions. Tax Division attorneys work closely with the Internal Revenue Service and United States Attorneys’ Offices to develop tax administration policies; handle civil trial and appellate litigation in federal and state courts; pursue federal grand jury investigations; and handle criminal prosecutions and appeals. To the greatest extent possible, the Tax Division coordinates the use of both civil and criminal enforcement tools, to maximize the deterrent effect of its litigation and to enhance collection efforts.

Significant recent Tax Division initiatives include the following:

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U.S. Department Of Justice: Stolen Identity Refund Fraud

U.S. Department Of Justice: Stolen Identity Refund Fraud

The IRS does not send unsolicited email, text messages or use social media to discuss your personal tax issues. If you receive a telephone call from someone claiming to be an IRS employee and demanding money, you should consult the IRS Tax Scams/Consumer Alerts webpage: http://www.irs.gov/uac/Tax-Scams-Consumer-Alerts. If you know you don’t owe taxes or have no reason to believe that you do, report the incident to the Treasury Inspector General for Tax Administration (TIGTA) at 1.800.366.4484 or at www.tigta.gov.

Stolen Identity Refund Fraud (SIRF) Enforcement

One of the Tax Division’s highest priorities is prosecuting people who use stolen identities to steal money from the United States Treasury by filing fake tax returns that claim tax refunds. Working to stop Stolen Identity Refund Fraud, or SIRF, is vital because these schemes threaten to disrupt the orderly administration of the income tax system for hundreds of thousands of law abiding taxpayers and have cost the United States Treasury billions of dollars.

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Tax Treaties: United States And Ukraine

Tax Treaties: United States And Ukraine

Quick Summary.  Ukraine imposes an income tax on worldwide profits earned by Ukrainian entities.  Non-resident entities are subject to Ukrainian income tax on Ukrainian-sourced income.  Resident individuals are subject to tax upon their worldwide income.  Non-resident individuals are subject to tax on their Ukrainian-sourced income.

The Ukrainian Parliament (the Verkhovna Rada of Ukraine) has enacted tax legislation providing for a number of significant changes in 2020, including transfer pricing; tax depreciation; withholding taxes; permanent establishments and 0ther taxes.  In addition, beginning in 2021, legislation implements changes with respect to controlled foreign companies and thin capitalization rules.

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Tax Day For Individuals Extended To May 17: Treasury, IRS Extend Filing And Payment Deadline

Tax Day For Individuals Extended To May 17: Treasury, IRS Extend Filing And Payment Deadline

The Treasury Department and Internal Revenue Service announced today that the federal income tax filing due date for individuals for the 2020 tax year will be automatically extended from April 15, 2021, to May 17, 2021. The IRS will be providing formal guidance in the coming days.

“This continues to be a tough time for many people, and the IRS wants to continue to do everything possible to help taxpayers navigate the unusual circumstances related to the pandemic, while also working on important tax administration responsibilities,” said IRS Commissioner Chuck Rettig. “Even with the new deadline, we urge taxpayers to consider filing as soon as possible, especially those who are owed refunds. Filing electronically with direct deposit is the quickest way to get refunds, and it can help some taxpayers more quickly receive any remaining stimulus payments they may be entitled to.”

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Child Tax Credit Change For 2021 Brings Equity And Complexity

Child Tax Credit Change For 2021 Brings Equity And Complexity

The American Rescue Plan Act of 2021 (P.L. 117-2; H.R. 1319; 3/11/21) provides a variety of financial and other relief for COVID-19 problems. Most of the changes are only for 2021.  At least two are for 2020 and mean that the IRS has to update forms and computer systems and get information out to taxpayers quickly including what to do if you already filed your return.  These two changes for 2020:

  1. $10,200 of unemployment compensation receivd in 2020 is non-taxable if the taxpayer’s AGI is under $150,000 (if MFJ and both spouses received such comp, each get to exclude up to $10,200). [IRS guidance of 3/12/21]
  2. Not having to repay an advance Premium Tax Credit if the individual’s income turns out to be over 400% of the federal poverty line.

Some of the 2021 changes are not solely tied to the pandemic as these changes help low-income families by making the tax system more equitable and have been proposed by President Biden and others. One of these changes is making the $2,000/child tax credit fully refundable and increasing the credit.

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Raising Tax Rates Will Erode International Competitiveness

Corporate Tax Increases

According to an excellent analysis conducted by the Tax Foundation, “Raising the U.S. corporate income tax rate would erode America’s international tax competitiveness, giving us the highest combined corporate tax rate in the OECD. Such a relatively high corporate tax rate would encourage profit shifting abroad and otherwise out of the U.S. corporate sector.”

Furthermore the Tax Foundation states:

President Biden’s proposed tax hike would reduce American economic output during a time when we need to maximize economic growth to reach our country’s pre-pandemic growth trend and return to full employment. We estimate an increase in the corporate tax rate to 28 percent, for example, would reduce long-run economic output by 0.8 percent, eliminate 159,000 jobs, and reduce wages by 0.7 percent. A 25 percent tax rate would reduce output by 0.4 percent and result in about 84,000 fewer full-time equivalent jobs.

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Income From Renting Out A Second Home

Income From Renting Out A Second Home

In general, income from renting a vacation home for 15 days or longer must be reported on your tax return on Schedule E, Supplemental Income and Loss. You should also keep in mind that the definition of a “vacation home” is not limited to a house. Apartments, condominiums, mobile homes, and boats are also considered vacation homes in the eyes of the IRS. Tax rules on rental income from second homes can be confusing, especially if you rent the home out for several months of the year and use the home yourself.

Minimal Rental Use

However, there is one provision that is not complicated; homeowners who rent out their property for 14 or fewer days a year can pocket the rental income tax-free. In other words, if you live close to a vacation destination such as the beach or mountains, you may be able to make some extra cash by renting out your home (principal residence) when you go on vacation as long as it’s two weeks or less. Although you can’t take depreciation or deduct for maintenance, you can deduct mortgage interest, property taxes,and casualty losses on Schedule A (1040), Itemized Deductions.

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When An IRS Tax Lien Arises

When An IRS Tax Lien Arises

The Internal Revenue Code (IRC) governs when and how a federal tax lien arises.  The federal tax lien—sometimes referred to as a “statutory lien” or “silent lien”—is often confused with the notice of the lien’s existence, which is generally filed by the IRS at a later date (i.e. a Notice of Federal Tax Lien or NFTL).

A Notice of Federal Tax Lien is a document that is publicly filed with state and local jurisdictions in order to put other creditors on notice of the IRS’s lien interest.  As a result, the NFTL itself does not actually create the lien—it merely informs others of a lien that already exists by statute.  However, the date of the NFTL filing is important for determining the IRS’s priority against other creditors.

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Tips To Help Taxpayers Spot And Avoid Tax Scams

Tips To Help Taxpayers Spot And Avoid Tax Scams

Tax season is also busy season for savvy criminals. Scammers impersonating the IRS either over-the-phone, by email or in-person can steal money from people. All taxpayers should stay vigilant against these schemes.

Here are some tips to help people recognize and avoid tax-related scams.

Email Phishing Scams
The IRS does not initiate contact with taxpayers by email to request personal or financial information. Generally, the IRS first mails a paper bill to a person who owes taxes. In some special situations, the IRS will call or come to a home or business.

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States Have Benefited From The Wayfair Decision

States Have Benefited From The Wayfair Decision

Over the last several years, the U.S. Supreme Court’s decision in South Dakota v. Wayfair has led to rule changes regarding online sales tax in almost every state in the country.

The ruling, that South Dakota’s economic nexus law was constitutional and that the state could require companies who met certain sales thresholds to collect and remit sales tax on sales to South Dakota customers, even if the company had no physical presence, has impacted states, retailers, online marketplaces and even brick-and-mortar businesses.

In this article, we’ll discuss the positive effects of the Wayfair ruling on states that have implemented Wayfair-related legislation.

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