Tag Archives: Legal Thoughts

Podcast – Update on Covid-19 Relief for Individuals and Businesses | LEGAL THOUGHTS

Coleman Jackson, P.C. | Transcript of Legal Thoughts Podcast
Published January 11, 2021.

Update on Covid-19 Relief for Individuals and Businesses

Legal Thoughts is a podcast presentation by Coleman Jackson, P.C., a law firm based in Dallas, Texas serving individuals, businesses, and agencies from around the world in taxation, litigation, and immigration legal matters.

This particular episode of Legal Thoughts is a podcast where the Attorney, Coleman Jackson is being interviewed by Reyna Munoz, Tax Legal Assistant of Coleman Jackson, P.C.   The topic of discussion is “Update on Covid-19 Relief for Individuals and Businesses” You can listen to this podcast by clicking here:

You can also listen to this episode and subscribe to Coleman Jackson, P.C.’s Legal Thoughts podcast on Apple Podcast, Google Podcast, Spotify, Cashbox or wherever you may listen to your podcast.

TRANSCRIPT:

ATTORNEY:  Coleman Jackson
Legal Thoughts
COLEMAN JACKSON, ATTORNEY & COUNSELOR AT LAW

ATTORNEY:  Coleman Jackson

Welcome to Tax Thoughts

  • My name is Coleman Jackson, and I am an attorney at Coleman Jackson, P.C., a taxation, litigation and immigration law firm based in Dallas, Texas.
  • Our topic for today is: “Update on Covid-19 Relief for Individuals and Businesses.”
  • Other members of Coleman Jackson, P.C. are Yulissa Molina, Tax Legal Assistant, Leiliane Godeiro, Litigation Legal Assistant, Reyna Munoz, Immigration Legal Assistant and Mayra Torres, Public Relations Associate.
  • On this “Legal Thoughts” podcast our immigration legal assistant, Reyna Munoz will be asking the questions and I will be responding to her questions on this important tax topic: “Update on Covid-19 Relief for Individuals and Businesses.”

Reyna Munoz Introduces Herself to the Audience:

  • Good morning everyone. My name is Reyna Munoz, and I am the Immigration Legal Assistant at Coleman Jackson, P.C.  Coleman Jackson, P.C. is a taxation, litigation and immigration law firm based right here in Dallas, Texas.
  • Attorney a lot of folks are receiving bills from the IRS claiming that they owe a “shared responsibility payment for failure to maintain healthcare coverage on members of their household”. I mean some of these bills are for tax periods that are a long time ago, like 2015, 2017 and 2018.  What is this about?
  • Question 1: Just tell me, what is this all about?

Attorney: Coleman Jackson

ANSWER 1:

  • Good morning Reyna.
  • Yes Reyna; Congress recently passed and the President recently signed into law a $900 Billion Covid Relief Package with quite a few tax provisions.  The package includes $600 payments to individual taxpayers with adjusted gross income (AGI) of $75,000 or less or in case of head of households with adjusted gross income (AGI) of $112,500.  The new relief payment for joint return tax filers is $1,200 with AGI of $150,000 or less.  And taxpayers receive $600 for each qualifying child.  The new relief package also extended the weekly federal unemployment compensation of $300 for qualified individuals who lost their jobs due to Covid-19.”.

Interviewer: Reyna Munoz, Immigration Legal Assistant

Question 2:

  • Attorney, who qualifies for the recovery rebate tax credits or stimulus checks?

Attorney: Coleman Jackson

ANSWER 2:

  • Other than the adjusted gross income limitations that I mentioned, the following individuals are eligible to receive stimulus checks unless specifically ineligible:
  • Everyone is eligible other than —
  1. Any nonresident alien individual;
  2. Any individual with respect to whom a deduction under section 151 is allowable to another taxpayer for a taxable year beginning in the calendar year in which the individual’s taxable year begins; and
  3. Any estate or trust.
  • To summarize: Anyone who does not fall into either 1, 2 or 3 above is eligible to receive a stimulus check.

Interviewer: Reyna Munoz, Immigration Legal Assistant

Question 3:

What is the substantial presence test?

 Attorney: Coleman Jackson

ANSWER 3:

  • Reyna; that is an excellent question!
  • In United States Tax Law a nonresident alien is any individual who is not a United States Citizen and does not pass the Green Card Test or Substantial Presence Test.
  • To summarize: A Nonresident is anyone who is not
  1. a United States Citizen; or
  2. a Lawful Permanent Resident or Green Card Holder; or
  • a person who passes the substantial presence test with respect to length of physical presence within the United States. We go into detailed discussions of the substantial presence test in prior blogs which can be found on our website and in prior podcast as well.  So I will not go through this mechanical test again now.

 Interviewer: Reyna Munoz, Tax Legal Assistant

QUESTION 4:

  • Attorney how does an eligible individual apply for a stimulus check?

Attorney: Coleman Jackson

ANSWER 4:

  • Well, taxpayers don’t exactly have to apply for stimulus checks.
  • Taxpayers who are eligible to receive a stimulus check will receive the check by direct deposit to any account to which the taxpayer authorized the IRS to send refunds or federal payments to on or after January 1, 2019. In the event the taxpayer does not authorize the IRS to direct deposit the stimulus check the United States Treasury will mail a paper check or debit card directly to the last known address of the taxpayer.  The law requires the Treasury to send out these payments as rapidly as possible.  Eligible individuals should already have received their stimulus check or should receive them pretty soon.

Interviewer: Reyna Munoz, Tax Legal Assistant

  • That sounds easy enough; but Attorney!

Question 5:

  • How will the United States Treasury know the correct amount of money to send to the taxpayer?

Attorney: Coleman Jackson

ANSWER 5:

  • Excellent question!
  • The stimulus payment computations and eligibilities will be based on tax returns filed by taxpayers for the tax period ending December 31, 2019.

Interviewer: Reyna Munoz, Tax Legal Assistant

Question 6:

  • What should families do if they think they are eligible but they have not received a stimulus check at all or in the wrong amount?

Attorney: Coleman Jackson

ANSWER 6:

  • They should contact the Internal Revenue Service and inquire.

Interviewer: Reyna Munoz, Tax Legal Assistant

  • Covid-19 has killed a lot of people. And also lots of people have died since December 31, 2019; my question is whether their heirs, such as, surviving spouses and children going to receive their deceased relatives stimulus payments. I am kind of wondering about this since the tax refunds or credits are based on tax returns filed for tax periods ending December 31, 2019.  Is that right!

Question 7:

  • Attorney, are the heirs of a deceased individual eligible to receive a stimulus check on behalf of the decedent?

Attorney: Coleman Jackson

ANSWER 7:

  • The “Consolidated Appropriations Act, 2021”. That is the official title of the United States Law that was recently passed by Congress that implemented the tax provisions we have been talking about this morning in this podcast.
  • Under the “Consolidated Appropriations Act, 2021”; any individual who was deceased before January 1, 2020 or in case of joint return, both taxpayers were deceased before January 1, 2020; the heirs of those taxpayers would not receive the stimulus payment.
  • Under the Act, any individual who dies after January 1, 2020 or in case of joint return, both taxpayers die after January 1, 2020, the lawful heirs of those taxpayers should be able to claim the stimulus payment. They might have to specifically make a claim with the IRS like you would normally in a decedent representative case. What I am saying is that I am not sure the U.S. Treasury would know to send the stimulus payment to a decedent’s heir or representative unless they are told of the decedent’s death.

Reyna Munoz’s Concluding Remarks

  • Attorney, thank you for this cogent presentation.
  • I know we have not talked about the $900 Billion Covid Relief Packages’ tax implications for businesses yet. Perhaps we can talk more about this and produce a future podcast or blog.
  • Our listeners who want to hear more podcast like this one should subscribe to our Legal Thoughts Podcast on Apple Podcast, Google Podcast, Spotify or wherever they listen to their podcast. Everybody take care!  And come back in about two weeks, for more taxation, litigation and immigration Legal Thoughts from Coleman Jackson, P.C., which is located right here in Dallas, Texas at 6060 North Central Expressway, Suite 620, Dallas, Texas 75206.
  • English callers: 214-599-0431; Spanish callers:  214-599-0432 and Portuguese callers:  214-272-3100.
  • English callers: 214-599-0431 and Spanish callers:  214-599-0432.

Attorney’s Concluding Remarks:

THIS IS END OF “LEGAL THOUGHTS” FOR NOW

  • Thanks for giving us the opportunity to inform you about “Updates on the Recent $900 Billion Covid Relief Package Recently Enacted Into Law. We talked basically about the Stimulus Payments in this blog; but there are many individual and business tax provisions in the “Consolidated Appropriations Act, 2021”.  We could do several future podcast and blogs on this massive piece of legislation.  If you want to see or hear more taxation, litigation and immigration LEGAL THOUGHTS from Coleman Jackson, P.C.  Stay tune!  Watch for a new Legal Thoughts podcast in about two weeks.  We are here in Dallas, Texas and want to inform, educate and encourage our communities on topics dealing with taxation, litigation and immigration.  Until next time, take care.

Podcast – The Long-Arm of the United States Tax Code | LEGAL THOUGHTS

Coleman Jackson, P.C. | Transcript of Legal Thoughts Podcast
Published November 24, 2020.

The Long-Arm of the United States Tax Code

Legal Thoughts is a podcast presentation by Coleman Jackson, P.C., a law firm based in Dallas, Texas serving individuals, businesses, and agencies from around the world in taxation, litigation, and immigration legal matters.

This particular episode of Legal Thoughts is a podcast where the Attorney, Coleman Jackson is being interviewed by Reyna Munoz, Tax Legal Assistant of Coleman Jackson, P.C.   The topic of discussion is “What does the Long-Arm of the United States Tax Code Mean?” You can listen to this podcast by clicking here:

You can also listen to this episode and subscribe to Coleman Jackson, P.C.’s Legal Thoughts podcast on Apple Podcast, Google Podcast, Spotify, Cashbox or wherever you may listen to your podcast.

TRANSCRIPT:
ATTORNEY:  Coleman Jackson
Legal Thoughts
COLEMAN JACKSON, ATTORNEY & COUNSELOR AT LAW

ATTORNEY:  Coleman Jackson

Welcome to Tax Thoughts

  • My name is Coleman Jackson, and I am an attorney at Coleman Jackson, P.C., a taxation, litigation, and immigration law firm based in Dallas, Texas.
  • Our topic for today is: “What does the Long-Arm of the United States Tax Code Mean?”
  • Other members of Coleman Jackson, P.C. are Yulissa Molina, Tax Legal Assistant, Reyna Munoz, Immigration Legal Assistant, Leiliane Godeiro, Litigation Legal Assistant and Mayra Torres, Public Relations Associate.
  • On this “Legal Thoughts” podcast our law firm’s Immigration Legal Assistant, Reyna Munoz will be asking the questions and I will be giving the answers as she and I will be discussing: “What does the Long-Arm of the United States Tax Code Mean?”

Reyna Munoz Introduces Herself to the Audience:

  • Hi everyone, I am Reyna. I am the Immigration Legal Assistant at the tax, litigation and immigration law firm of Coleman Jackson, P.C.  Right here in Dallas, Texas.
  • Hi Attorney; today we will be discussing the topic: What does the Long-Arm of the United States Tax Code Mean?

Question 1:

  • Well, attorney what does the long-arm of the U.S. Tax Code mean anyway?

Attorney Answers Question 1:

  • Good morning Reyna. I think this is a fascinating topic; so let’s get started!
  • United States citizens and Lawful Permanent Residents (or commonly known as Green Card Holders) are required to pay taxes on their gross income, regardless of where it is earned or how it is earned in the world.  That basic rule is established in United States Code, Section 61(a); and explained in 26 Code of Federal Regulations, Section 1.1-1(b).
  • So, to answer your question, that is why it is often said by tax professionals that the U.S. tax code has long arms.  It can reach U.S. citizens and Green Card holders and their gross income from anywhere in the world.  These are very long-arms indeed!

Interviewer: Reyna Munoz, Tax Legal Assistant

Question 2:

  • That is interesting! How would the United States Government find out about this gross income and these foreign interest of U.S. citizens and Green Card Holders?

Attorney: Coleman Jackson

ANSWER 2:

  • S. citizens and Green Card Holders have a legal duty to voluntarily file appropriate tax returns and other informational materials with the U.S. government reporting their gross income and interests in financial accounts held overseas. Federal tax returns must be filed annually to report gross income (such as, Form 1040 (individuals), Form 1065 (Partnerships), Form 1120 (Corporations), Form 1041 (Estates).  All of these tax forms are filed with the Internal Revenue Service when applicable.  Further U.S. citizens and Green Card Holders with ownership interest or signatory authority of foreign accounts must complete Schedule B, Part III, Line 7 of Form 1040 their individual tax return discussing their interest or signatory authority over any foreign account during the tax period; and moreover, in the event the balance in any single account or combination of foreign accounts is greater than $10,000 during the tax period, the taxpayer must also file an FBAR with the Financial Crimes Network.
  • It will not be hard for the U.S. Department of Treasury to find out about taxpayers reporting obligations today with the technology that is in existence. In fact, it is easier today than ever for information to be shared by business entities, governmental entities and individuals in seconds around the world.
  • The U.S. Treasury has negotiated operating and reporting agreements with governments around the world to share directly or indirectly financial banking information of U.S. citizens and Green Card holders.
  • LET ME JUST SAY, IT IS EXTREMELY UNLIKELY THAT THE U.S. GOVERNMENT WILL NOT LEARN OF THESE EARNINGS AND FOREIGN ASSETS TODAY.

Interviewer: Reyna Munoz, Tax Legal Assistant

Question 3:

  • What can happen if a U.S. Citizen fails to report all of their gross income and fail to report their ownership interest in a foreign bank account?
  • First what is a foreign bank account anyway?

Attorney Answers Question 3:

  • A foreign bank account is an account in a foreign institution, or an institution physically located outside of the borders of the U.S. and its territories. Branches of U.S. domiciled banks located overseas are not classified as a foreign bank for FBAR reporting purposes or IRS purposes.
  • Individuals who fail to comply with U.S. laws can expect there to be a gradation of criminal and civil exposure. What I mean by that is in the United States criminal penalties and civil penalties for violation of the law are graded based on level of culpability.  This is also true with regards to failure to voluntarily comply with the U.S tax laws.  The U.S. tax code imposes varies kinds of penalties for violations, such as tax evasion, failure to file penalties, negligent filing penalties.
  • As for failure to report interest in foreign accounts, the IRS is permitted to assess and collect civil penalties against any individual who fails to report their interest in a foreign account on a timely filed FBAR.
  • I have written numerous blogs with regards to the penalty structure designed to hold tax cheats accountable.

 Interviewer: Reyna Munoz, Tax Legal Assistant

QUESTION 4:

  • Attorney what could you at least explain what you mean by gradation of penalties?

Attorney Answers Question 4:

  • Okay, very well! Let me briefly describe what gradation of penalties means as it relates to failure to file a required FBAR.
  • If an individual’s failure to file an FBAR is deemed willful by the IRS, then the IRS has the discretion to assess a maximum penalty of $100,000 or 50 percent of the balance in the foreign account at the time of the violation. Whichever is higher is the collectable penalty.
  • Willfulness does not require actual knowledge of the duty to report interest in a foreign account. Reckless or careless disregard of their statutory duty to report their ownership or beneficiary interest in the foreign account is enough for the IRS assess and collect the penalty.
  • The IRS has been challenged in Courts around the country, and they have a pretty good betting record on winning the willfulness FBAR cases. Come on, just look; these cases are what lawyers routine call document cases. For example, (1) it’s easy to prove whether someone is a U.S. citizen or Green Card Holder because there is a U.S. birth Certificate or Naturalization  Certificate or Lawful Permanent Resident Card; (2) it’s easy to prove that the account is located outside of the U.S. and its territories because there are bank account statements; and (3) it’s easy to prove that the taxpayer filed a tax return failing to list the foreign bank account because there is Schedule B, Part III, Line 7 of IRS Form 1040.  Hey, three strikes and you are out.  Willfulness to violate the FBAR rules is not a very high burden for the IRS to carry in these FBAR violation cases.

Interviewer: Reyna Munoz, Tax Legal Assistant

Question 5:

  • Okay Attorney that sounds like three strikes. It might be hard to hit the ball.  But what about—
  • If the taxpayer hired a professional tax return preparer to prepare and file, the return? Could the taxpayer now say it was none willful?

Attorney: Coleman Jackson

ANSWER 5:

  • Well it depends on all the facts and circumstances as to whether a skillful negotiated and advocate could make out a defense.
  • But the main thing everyone should take away is this:
  • Taxpayers are deemed to have constructive knowledge of and responsibility for the contents of their tax returns which are signed under penalty of perjury.
  • Where immigrants are involved who lacks the knowledge of the English language, cultural norms in terms of voluntary tax reporting, educational challenges and other capacity factors, in these circumstances skillful advocacy might manage to turn what appears to be a willful violation into a none willful violation of U.S. law. People with foreign gross income and foreign account interest need to do their due diligence in picking tax professionals in preparation of U.S. tax returns and compliance with FBAR requires because the penalties for failing to comply are rough regardless of the gradation of the penalties.

Interviewer: Reyna Munoz, Tax Legal Assistant

Question 6:

  • Okay, I think I understand.
  • Attorney, you mentioned voluntary disclosure. Is there a way a person can get this right even after they failed to property report their gross income or foreign account?

Attorney: Coleman Jackson

ANSWER 6:

  • Yes, the IRS has voluntary disclosure programs. But the Offshore Voluntary Disclosure Program or OVDP has ended and the IRS is no longer accepting taxpayers’ disclosures for failing to report foreign accounts under that program.
  • The various Streamlined Procedures Programs are still viable; but only if the violation is non willful. I have written blogs on this in the past and will not go into any more details here; other than, the taxpayer must make sure their actions were none willful because the IRS audits these submissions and if the IRS deems the actions of the taxpayer were willful violations rather than none willful violations, they could make a referral to IRS Criminal Investigations for possible referral to the U.S.  Justice Department.
  • The IRS also still have a FBAR only disclosure program that might be used by some taxpayers under appropriate circumstances.
  • Mayra, thanks for your questions on this topic. We have numerous blogs on foreign accounts on our law firm’s blog site.   We must go for now.

Attorney’s Concluding Remarks:

THIS IS END OF “LEGAL THOUGHTS” FOR NOW

  • Thank you for giving us the opportunity to inform you about What does the Long-Arm of the United States Tax Code Mean?”
  • We might discuss other aspects of this topic on gross income and foreign accounts matters in follow up podcasts or blogs in the near future.  If you want to see or hear more taxation, litigation and immigration LEGAL THOUGHTS from Coleman Jackson, P.C., subscribe to our podcast and stay tune!  We are here in Dallas, Texas and want to inform, educate, and encourage our communities on topics dealing with taxation, litigation, and immigration.  Until next time, take care.

Podcast – Foreign Investments and U.S. Income Tax? | LEGAL THOUGHTS

Coleman Jackson, P.C. | Transcript of Legal Thoughts Podcast
Published September 02, 2020.

Foreign Investments and U.S. Income Tax

Legal Thoughts is a podcast presentation by Coleman Jackson, P.C., a law firm based in Dallas, Texas serving individuals, businesses, and agencies from around the world in taxation, litigation, and immigration legal matters.

This particular episode of Legal Thoughts is a podcast where the Attorney, Coleman Jackson is being interviewed by Mayra Torres, the Public Relations Associate of Coleman Jackson, P.C.   The topic of discussion is “Foreign Investments and U.S. Income Tax?” You can listen to this podcast by clicking here:

You can also listen to this episode and subscribe to Coleman Jackson, P.C.’s Legal Thoughts podcast on Apple Podcast, Google Podcast, Spotify, Cashbox or wherever you may listen to your podcast.

TRANSCRIPT:
ATTORNEY:  Coleman Jackson
LEGAL THOUGHTS
COLEMAN JACKSON, ATTORNEY & COUNSELOR AT LAW

ATTORNEY:  Coleman Jackson

Welcome to Tax Thoughts

  • My name is Coleman Jackson and I am an attorney at Coleman Jackson, P.C., a taxation, litigation, and immigration law firm based in Dallas, Texas
  • Our topic for today is: “Foreign Investments and U.S. Income Tax?”
  • Other members of Coleman Jackson, P.C. are Yulissa Molina, Tax Legal Assistant, Reyna Munoz,Immigration Legal Assistant and Mayra Torres, Public Relations Associate.
  • On this “Legal Thoughts” podcast our public relations associate, Mayra Torres will be asking the questions and I will be responding to her questions on this important tax topic: “Foreign Investments and U.S. Income Tax”

Interviewer:  Mayra Torres, Public Relations Associate

  • Good morning everyone. My name is Mayra Torres and I am the public relations associate at Coleman Jackson, P.C. Coleman Jackson, P.C. is a taxation, litigation and immigration law firm based right here in Dallas, Texas. We help businesses, individuals and everyone with sales taxes,income taxes, gift and estate taxes and contracts drafting and negotiations and disputes and immigrants on a variety of business and family immigration matters from around the world.
  • Today Attorney we are discussing foreign investments and U.S. Income Tax Law. My first question is basic:

Question 1:

Are foreign corporations ever subject to U.S. income tax laws?

Attorney Answers Question 1:

Mayra, the simple answer is YES, SOMETIMES FOREIGN CORPORATIONS ARE SUBJECT TO U.S.INCOME TAX LAWS!

Interviewer:  Mayra Torres, Public Relations Associate

QUESTION 2:

  • Okay then, let me just change my question a little.
  • When are foreign corporations subject to U.S. income tax?

Attorney Answers Question 2:

A foreign corporation is taxed on its taxable income which is effectively connected with the conduct of a trade or business within the United States under Internal Revenue Code Section 882.

Interviewer:  Mayra Torres, Public Relations Associate

Question 3:

  • Attorney what do you mean by the term “effectively connected with the conduct of a trade or business within the U.S.”?

Attorney Answers Question 3:

  • That is a very astute question! Think in terms of source of the increment or decrement of wealth of the foreign entity. What I mean is the term effectively connected with a trade or business in the United States means income, gain or loss incurred during a tax year from sources within the United States. The key to understanding the meaning of this term is the source of the income, gain or loss incurred by the foreign corporation. If the source of the income, gain or loss for the year is in the U.S., then the foreign corporation is engaged in a trade or business effectively connected with the conduct of a trade or business within the U.S. and are subject to federal income taxation under Internal Revenue Code Section 882.
  • The application of this Code Section does not mean that the income, gain or loss have to come from a trade or business being conducted in the U.S. If the source of the income, gain or loss is in the U.S., Code Section 882 applies and the income, gain or loss is taxable.

Interviewer:  Mayra Torres, Public Relations Associate

Question 4:

  • Does the foreign corporation have to operate a business within the United States during the tax year in order for these rules to apply to income, gains or losses under Code Section 882?

Attorney Answers Question 4:

  • Yes, that is exactly right. In order for Code Section 882 to apply, the foreign corporation must be engaged in a trade or business within the United States during the particular tax year where the determination is being made whether income, gain or loss is effectively connected with the conduct of a trade or business within the United States under Internal Revenue Code Section 882.
  • The Code Section 882 determination is made at the close of each tax year. If a foreign corporation has income, gain or loss at any time during a tax year from a source within the U.S. and its engaged in a trade or business within the U.S. whether it be in a joint venture or partnership or limited liability company or similar affiliation with a U.S. entity, it is taxable income effectively connected with the conduct of a trade or business within the U.S. under IRC 882.

Interviewer:  Mayra Torres, Public Relations Associate

Question 5:

  • Wow! Attorney that is a lot to digest; can we continue this conversation in another podcast because I have a lot more questions? For example, are there any categories of income, gain or loss considered effectively connected to the United States even if its earned overseas by a foreigner?

Attorney Answers Question 5:

Yes, there are categories of foreign source income that are subject to U.S. income taxation as effectively connected with the conduct of a trade or business within the U.S. But you are right Mayra that is enough to ponder for now. We can continue this topic in a later podcast in about two weeks. Please subscribe to our podcast.

Mayra’s Concluding Remarks

  • I am looking forward to continuing this topic in about two weeks!
  • Anyone interested in hearing more about foreign investments and U.S. Taxation should subscribe to our podcast on Apple Podcast, Google Podcast, Spotify or wherever they listen to their podcast.We also have a lot of blogs going deep into the details of U.S. tax law, litigation and immigration law topics on Coleman Jackson, P.C.’s website at cjacksonlaw.com.

 Coleman Jackson, Attorney’s concluding remarks:

THIS IS THE END OF “LEGAL THOUGHTS” FOR NOW

  • Thanks for giving us the opportunity to inform you about foreign investments and U.S. taxation. If you want to see or hear more taxation, litigation and immigration LEGAL THOUGHTS from Coleman Jackson, P.C. Stay tune! Watch for a new Legal Thoughts podcast in about two weeks.We are here in Dallas, Texas and want to inform, educate and encourage our communities on topics dealing with taxation, litigation and immigration. Until next time, take care.

Podcast – The Earned Income Tax Credit | LEGAL THOUGHTS

Coleman Jackson, P.C. | Transcript of Legal Thoughts Podcast
Published September 28, 2020.

 

The Earned Income Tax Credit - Podcast - Legal Thoughts

Legal Thoughts is a podcast presentation by Coleman Jackson, P.C., a law firm based in Dallas, Texas serving individuals, businesses, and agencies from around the world in taxation, litigation, and immigration legal matters.

This particular episode of Legal Thoughts is a podcast where the Attorney, Coleman Jackson is being interviewed by Mayra Torres, the Public Relations Associate of Coleman Jackson, P.C.   The topic of discussion is “The Earned Income Tax Credit “. You can listen to this podcast by clicking here:

You can also listen to this episode and subscribe to Coleman Jackson, P.C.’s Legal Thoughts podcast on Apple Podcast, Google Podcast, Spotify, Cashbox or wherever you may listen to your podcast.

 

TRANSCRIPT:

ATTORNEY:  Coleman Jackson
LEGAL THOUGHTS
COLEMAN JACKSON, ATTORNEY & COUNSELOR AT LAW

ATTORNEY:  Coleman Jackson

Welcome to Tax Thoughts

  • My name is Coleman Jackson and I am an attorney at Coleman Jackson, P.C., a taxation, litigation, and immigration law firm based in Dallas, Texas
  • Our topic for today is: “The Earned Income Tax Credit.”
  • Other members of Coleman Jackson, P.C. are Yulissa Molina, Tax Legal Assistant, Leiliane Godeiro, Litigation Legal Assistant, Reyna Munoz, Immigration Legal Assistant and Mayra Torres, Public Relations Associate.
  • On this “Legal Thoughts” podcast our public relations associate, Mayra Torres will be asking the questions and I will be responding to her questions on this important tax topic: “The Earned Income Tax Credit.”

Interviewer:  Mayra Torres, Public Relations Associate

  • Good afternoon everyone. My name is Mayra Torres and I am the public relations associate at Coleman Jackson, P.C.  Coleman Jackson, P.C. is a taxation, litigation and immigration law firm based right here in Dallas, Texas.
  • Attorney many families’ household income during this dreadful Covid-19 pandemic has been terribly cut to the core. I mean folks are struggling financially just to pay their bills, keep a roof over their heads and buy basic food and necessities.  Besides killing way too many people, this virus has destroyed people’s livelihoods.  Folks can hardly make a fraction of the amount of money they were making before this dreadful disease happened.
  • This is a general question and I’m not sure even how to ask this question:
  • Question 1:

I recently heard some families talking about something called earned income tax credit.  What is an earned income tax credit, who qualifies and how do they apply?

Attorney Answers Question 1:

  • Good afternoon Mayra.
  • Internal Revenue Code Section 32 allows an earned income tax credit for certain eligible individuals who work and meet certain criteria established under Section 32. The income tax credit is a refundable tax credit based on earned income that is available to certain low to modest wage earners.  IRC Section 32 applies to individuals not corporations, partnerships, or any other form of business entity.  The earned income credit is designed to offset some of the cost of living expenses for low to modest income taxpayers to ease the economic strain and rigor on them and their families.

Interviewer:  Mayra Torres, Public Relations Associate

Question 2:

  • Other than the work requirement and being an individual, what are the other qualifying criteria for the earned income credit?

Attorney Answers Question 2:

  • In order to qualify the individual taxpayer must meet a number of different requirements. Different sets of rules apply in determining the earned income credit for taxpayers with qualifying children and taxpayers without qualifying children.  If an individual is the qualifying child of more than one taxpayer, only one taxpayer can claim that person as a qualifying child for purposes of the earned income credit.  Internal Revenue Code Section 32 also establishes certain qualifying income levels and provide phase out provisions blocking high income individuals from benefiting from the earned income tax credit.

Interviewer:  Mayra Torres, Public Relations Associate

Question 3:

  • Attorney could you explain in more details the following distinctions:
    1. What are the qualifying criteria for taxpayers with children?
    2. What are the qualifying criteria for the earned income credit for taxpayers without children?

Attorney Answers Question 3:

  • Mayra, that is an excellent idea to hopefully help our listeners to understand this better. Let metake these in the order that you have suggested:
  • First: The Taxpayer who have a qualifying child for the tax year is eligible for the earned income tax credit if she meets the following seven requirements in addition to the earned income criteria –
    1. the taxpayer has taxable income for the tax year;
    2. the taxpayer’s adjusted gross income does not exceed a specified ceiling amount;
    3. the taxpayer does not have more than a specified ceiling amount for investments;
    4. the taxpayer is a United States Citizen or Resident for the entire year and if married, the taxpayer is married to a United States Citizen or Resident or, if taxpayer is married to a nonresident, the taxpayer must file an election for the nonresident to be taxed as a Resident. In this event the nonresident’s worldwide income is subject to U.S. taxation;
    5. the taxpayer must use the filing status of married filing jointly, single, head of household, or widower with children. Taxpayer cannot qualify for the earned income tax credit filing married filing separate;
    6. the taxpayer has a valid social security number; and
    7. the taxpayer does not claim the foreign earned income tax credit or the foreign housing tax credit
  • Second: The Taxpayer who does not have a qualifying Child during the tax year is eligible for the earned income tax credit only if the taxpayer meets all four of the following requirements in addition to the earned income criteria:
    1. The taxpayer and spouse; if any, are between the ages of 25 and 64. Note that the couple can meet this particular requirement if either the taxpayer or the taxpayer’s spouse is within these age requirements;
    2. The taxpayer resided in the United States for more than half the tax year;
    3. The taxpayer was not claimed as a dependent on another taxpayer’s tax return for the tax year; and
    4. The taxpayer is not a qualifying child of another taxpayer for the tax year.

 Interviewer:  Mayra Torres, Public Relations Associate

Question 4:

  • Attorney what is a qualifying child for the purpose of the earned income tax credit?

Attorney Answers Question 4:

  • A qualifying child is defined in Internal Revenue Code Section 32 as someone who meets four tests:
    1. The child must be the taxpayer’s son, daughter, stepchild, adopted child, foster child, or a descendant of such person or the taxpayer’s brother, sister, half brother or sister, stepbrother or stepsister, or a descendant of such person;
    2. The child must be under 19 years of age at the end of the tax year and the child must be younger than the taxpayer or the taxpayer’s spouse if the couple is filing a joint tax return. There are special rules that applies to students and disabled individuals when it comes to the earned income credit age requirements;
    3. The child must live in the taxpayer’s home within the United States for more than six months out of the tax year. There are certain temporary absences rules that applies in calculating the residency requirement under Internal Revenue Regulations Section 1.152-2(a)(2)(ii);
    4. The married child of the taxpayer cannot be a qualifying child of the taxpayer  if the married child of the taxpayer files a tax return with their spouse; except, solely for the purpose of filing a claim for refund and the married child is the taxpayer’s dependent.

Interviewer:  Mayra Torres, Public Relations Associate

Question 5:

  • That That is a lot to digest! I mean what types of income is included to determine whether the taxpayer meets the earned income criteria in the first place?
  • And what happens if the taxpayer misunderstands these tax rules and claims the earned income tax credit by mistake or something?

Attorney Answers Question 5:

  • For clarity purposes Mayra; let me answer your two questions step by step:
  • First:
  • What types of income is included to determine whether the taxpayer meets the earned incomecriteria in the first place?
  • Earned income typically consists of-
    1. Wages, tips, and other types of employee compensation;
    2. Net earnings from self-employment;
    3. And certain taxable disability payments received by a taxpayer prior to reaching the minimum retirement age;
    4. Extra pay earned by active duty soldiers in a military combat zone pursuant to Internal Revenue Code Section 112;
    5. There might be other types of income, but, these are the basic categories of income that are included in computing the earned income tax credit. I might add that some categories of income are specifically excluded from income for purposes of computing the earned income tax credit, such, investment income, social security income, welfare benefits, unemployment compensation, community property income and any other income exclusions specifically mentioned in Internal Revenue Code Section 32(c)(2)(a)(i).
  • What was your second question Mayra? Could you repeat it again?

Interviewer:  Mayra Torres, Public Relations Associate

Question 6:

  • Oh, sure I would be glad to attorney. My question was-
  • What happens if the taxpayer misunderstands these tax rules and claims the earned income tax credit on their filed tax return by mistake or something?

Attorney Answers Question 6:

  • Taxpayers are responsible for the accuracy of any tax return that they file or someone else files on their behalf with the Internal Revenue Service and there can be civil and criminal consequences for filing inaccurate returns. Detailed Earned Income Computation Worksheets are contained in IRS Publication No. 596.  The taxpayer should read this publication very carefully, especially, if they prepare their own tax return and are contemplating claiming the earned income credit.
  • In the event the taxpayer is using a paid tax return preparer to prepare their return and claim an earned income tax credit, they must perform their due diligence in selecting a qualified tax return preparer. The tax return preparer who is a paid tax return preparer of a tax return claiming the earned income credit must sign the return and complete and sign Form 8867, Paid Preparer’s Earned Income Credit Checklist and attach it to each return filed with the IRS claiming the earned income tax credit.  Form 8867 also applies to returns filing head of household, child tax credit and additional child tax credit.  The taxpayer must make sure Form 8867 is properly completed and filed with their tax return; so that, they can demonstrate that they possibly acted in good faith and reasonable in claiming an earned income credit for the tax year.  This could form the basis for a reasonable cause defense in the event the IRS challenges the earned income tax credit position on the tax return; or these due diligence steps could form the basis for a tax preparer negligence claim.  There is an inflation adjusted preparer penalty of $500 which applies when the tax preparer fails to complete Form 8867.
  • If a taxpayer claims the earned income credit in a previous year though they were not eligible and the IRS determines that the error was due to reckless or intentional disregard of the earned income credit rules, the taxpayer could be prohibited from claiming the credit on subsequent tax returns for two years pursuant to Internal Revenue Code Section 32(k)(1)(B)(ii).

Mayra’s Concluding Remarks

  • Attorney, thank you for very clear responses to all my questions concerning the Earned Income Credit.
  • I understand the earned income tax credit better now than when we first began discussing it this afternoon.
  • Our listeners who want to hear more podcast like this one should subscribe to our Legal Thoughts Podcast on Apple Podcast, Google Podcast, Spotify or wherever they listen to our podcast. Everybody take care!  And come back in about two weeks, for more taxation, litigation and immigration Legal Thoughts from Coleman Jackson, P.C., which is located right here in Dallas, Texas at 6060 North Central Expressway, Dallas, Texas 75206.
  • English callers: 214-599-0431 and Spanish callers:  214-599-0432.

Coleman Jackson, Attorney’s concluding remarks:

 THIS IS THE END OF “LEGAL THOUGHTS” FOR NOW

  • Thanks for giving us the opportunity to inform you about the earned income tax credit. If you want to see or hear more taxation, litigation and immigration LEGAL THOUGHTS from Coleman Jackson, P.C.  Stay tune!  Watch for a new Legal Thoughts podcast in about two weeks.  We are here in Dallas, Texas and want to inform, educate and encourage our communities on topics dealing with taxation, litigation and immigration.  Until next time, take care.

Podcast – Why Foreign Investors Consider the EB-5 Visa? | LEGAL THOUGHTS

Coleman Jackson, P.C. | Transcript of Legal Thoughts Podcast
Published October 23, 2020

Podcast - Why Foreign Investors Consider the EB-5 Visa? | LEGAL THOUGHTS

Legal Thoughts is a podcast presentation by Coleman Jackson, P.C., a law firm based in Dallas, Texas serving individuals, businesses, and agencies from around the world in taxation, litigation, and immigration legal matters.

This particular episode of Legal Thoughts is a podcast where the Attorney, Coleman Jackson is being interviewed by Reyna Munoz, Tax Legal Assistant of Coleman Jackson, P.C.   The topic of discussion is “Why Foreign Investors Consider the EB-5 Visa?” You can listen to this podcast by clicking here:

You can also listen to this episode and subscribe to Coleman Jackson, P.C.’s Legal Thoughts podcast on Apple Podcast, Google Podcast, Spotify, Cashbox or wherever you may listen to your podcast.

TRANSCRIPT:

ATTORNEY:  Coleman Jackson
Legal Thoughts
COLEMAN JACKSON, ATTORNEY & COUNSELOR AT LAW

ATTORNEY:  Coleman Jackson

Welcome to Immigration Thoughts

  • My name is Coleman Jackson, and I am an attorney at Coleman Jackson, P.C., a taxation, litigation, and immigration law firm based in Dallas, Texas.
  • Our topic for today is: “Why Foreign Investors Consider the EB-5 Visa?
  • Other members of Coleman Jackson, P.C. are Yulissa Molina, Tax Legal Assistant, Reyna Munoz, Immigration Legal Assistant, Leiliane Godeiro, Litigation Legal Assistant and Mayra Torres, Public Relations Associate.
  • On this “Legal Thoughts” podcast our law firm’s Public Relations Associate, Mayra Torres will be asking the questions and I will be giving the answers as she and I will be discussing: “Why Foreign Investors Consider the EB-5 Visa?”

Reyna Munoz Introduces Herself to the Audience:

  • Hi everyone, I am Reyna. I the Tax Legal Assistant at the tax, litigation and immigration law firm of Coleman Jackson, P.C.  Right here in Dallas, Texas.
  • Hi Attorney; today we will be discussing the EB-5 Foreign Investor’s Visa:
    • Its history;
    • Its application process, procedure, and processing times; and
    • its advantages to the foreign investor in coming to the U.S. to start a business and bring their families to live and work in the United States permanently.

Question 1:

  • Attorney could you give a brief history and description of the EB-5 Investor’s Visa?

Attorney Answers Question 1:

  • Good morning Reyna. Thanks for your question.
  • EB-5 Investor Visa is the fifth employment-based preference visa enacted into U.S. Immigration Law in 1990 and is codified in 8 U.S.C. That is the Immigration and Nationality Act of the United States.   The fundamental purpose of the EB-5 Investor Visa Program stated by Congress when it became law in the 1990s were to grow or spur economic growth within the United States.  The fifth employment-based preference visa is designed to afford wealthy foreign investors the opportunity to live and raise their families in the U.S. in return for building a new commercial for-profit enterprise or invest in an existing U.S. for-profit enterprise employing up to ten additional full-time employees.   Let me repeat, the EB-5 Investor’s Visa category is aimed at qualified wealthy foreigners seeking to obtain permanent legal residence in the United States, investing in a new for-profit commercial enterprise that will benefit the United States economy and create at least 10 full-time jobs in the United States per investor. The program is currently administered by USCIS. The at-risk capital investment required per EB-5 investor is currently $1.8 million, but the at-risk capital investment amount is reduced to $900,000 if the investment is made in a rural community or high unemployment area, known as a Target Employment Area (TEA). These minimum EB-5 Visa investment amounts came into force in 2019. This in a nutshell is the stated Congressional purpose the fifth employment-based preference visa which is commonly known as the EB-5 foreign investors visa and anecdotally known in some circles as the “Gold Visa”.

Interviewer: Reyna Munoz, Tax Legal Assistant

Question 2:

  • What are the qualifications for obtaining the EB-5 Visa and have there been any significant changes these qualification since Congress enacted the Statute?

Attorney: Coleman Jackson

ANSWER 2:

  • Yes, absolutely there are very strident criteria that the foreign investor must meet. The immigration statute sets forth strict guidelines as to:
    1. What constitutes an at-risk investment,
    2. What constitutes a commercial for-profit enterprise,
    3. What constitutes employment of full-time employees,
    4. What constitutes a capital investment to begin with; and
    5. What constitutes a minimum required capital investment.
  • The Immigration Nationality Act (INA) defines all of these terms in excruciating detail. And yes, there have been changes in the implementation of the Statute since it became law in 1990.

Interviewer: Reyna Munoz, Tax Legal Assistant

  • Attorney, that sounds a little complex. I hope you can explain some of those technical terms more fully.
  • Question 3:

But for now, this is my next question:

You mentioned that changes have occurred in the law since 1990.  It might be best to describe those changes first; I mean, when did these changes occur, what were the changes to the EB-5 Visa,  and what impact did these changes have on the EB-5 Visa program?

Attorney Answers Question 3:

  • That is very good. Yes, I can talk about the changes to the EB-5 Program before drilling down on some of these technical terms.
  • On November 21, 2019, the EB-5 Program underwent its first major change since the program began in 1990. In July 2019, the Department of Homeland Security published changes to the EB-5 Investor Visa Program in the Federal Register. The modifications or changes were dubbed the, “EB-5 Modernization Regulations for the Immigrant Investor Program (or the regulations)”. The new regulations increased the minimum investment amount from $1,5 million to $1.8 million and to $900,000 from $500,000 in a TEA designated area.  Moreover, the regulations switched the TEA designation authority or designation decision making process from the individual states and gave it exclusively to the United States Citizenship and Immigration Services, (USCIS).  The policy aim given for making these regulation changes to the EB-5 implementation regulations was to get back to the true Congressional intent for enacting the immigration statute in the first place; that is, the goal was to grow the U.S. economy and create American jobs through foreign investors investing substantial at-risk capital in return for a clear path to U.S. citizenship. Some thought the program had gotten away from its original Congressional goal.

 Interviewer: Reyna Munoz, Tax Legal Assistant

  • QUESTION Attorney can you now circle back and explain these terms that you mentioned earlier:
    1. What constitutes an at-risk investment,
    2. What constitutes a commercial for-profit enterprise,
    3. What constitutes employment of full-time employees,
    4. What constitutes a capital investment to begin with; and
    5. What constitutes a minimum required capital investment.
  • Question 4:

What does these terms mean as they relate to the EB-5 Foreign Investor Visa Program?

Attorney Answers Question 4:

  • Okay, very well! I will briefly describe each of these terms:
  • The term commercial for-profit enterprise under the Statute is understood to mean any lawful for-profit business enterprise. The business cannot be a hobby or non-profit enterprise of any kind.  The goal of the enterprise must be to make money!  The legality of the business enterprise will be determined under federal law and not merely state or local law.  For example, some types of business activities could be lawful in a state and unlawful under federal law.  For example, a commercial for-profit marijuana enterprise; which is a lawful business enterprise in some States, is currently unlawful under federal law.
  • The commercial for-profit enterprise is structured under the applicable state law where it organizes in the form of a partnership, or limited liability company, corporation, joint venture; and even, a sole proprietorship. Let me point out here that for tax purposes a corporation owned by none-United States citizens cannot make a Chapter S Corporation election because it’s not permitted under U.S. tax law. But otherwise, the commercial enterprise may be structured under State law in whatever for-profit business structure that suits the foreign investors requirements or goals.
  • Full-time employments as defined in the EB-5 Visa Statute means is the employment by the enterprise of U.S. workers who are U.S. citizens, Green Card Holders, or workers otherwise authorized to work in the United States. The workers cannot be members of the foreign investors family or otherwise related to the foreign investor. The workers must work at least 35 hours per week to be considered full-time employees.  There are certain particulars, such as, temporary, and seasonal workers, and such transient workers that I won’t go into right now.
  • Basically, what I have briefly described is how the term full-time employment has been interpreted by USCIS adjudicators
  • I am going to combine my answer to the terms “at risk investment” and  “capital investment” together since they are both dealing with the foreign investor’s investment and what it means to make an investment  under the EB-5 Visa Statute.
  • The foreign investor must make a capital investment in the minimum amount required by USCIS. USCIS has implemented rules defining a capital investment as the contribution of-
    • cash;
    • plant, property and equipment;
    • inventory;
    • stocks, bonds, and other securities owned by the foreign investor;
    • tangible personal property; and
    • At risk debt to the foreign investor
  • This is what is meant by at-risk capital investment. Intangible property, such as, patents, trademarks,  knowledge and know-how are not considered capital assets for EB-5 investment purposes.
  • Let me turn to the last technical term that I originally mentioned; which is ‘required minimum capital investment’ under the EB-5 Statute. What does it mean?
  • The new regulations that I mentioned before that were implemented by DHS in 2019, increased the minimum investment amount from $1.5 million to $1.8 million and to $900,000 from $500,000 in a TEA designated area. That means each foreign investor must make a minimum at-risk capital investment in these minimum amounts in a new enterprise within the United States which either creates or saves 10 U.S. jobs to qualify for the EB-5 visa.
  • The required minimum investment must be converted into United States Dollars and valuated at fair market value. It must meet the statutory minimum capital investment thresholds in U.S. dollars after any currency valuations and conversions.

Interviewer: Reyna Munoz, Tax Legal Assistant

  • Question 5:

Attorney can the foreign investor execute a letter of intent to contribute the required minimum capital investment contingent upon approval of the EB-5 application?  After all, USCIS might not approve the application.

Attorney: Coleman Jackson

ANSWER 5:

  • I mentioned before the statute requires that the foreign investor invest at-risk capital into the new enterprise. The investor must go beyond a mere expression of intent to invest the required capital.  Actual commitment of the capital is required; for example, indicial needs to be sent to the USCIS that the foreign investor has deposited the monies into a bank account exclusively controlled by the business (this could also be accomplished by putting the money in a trust account on behalf of the business); the foreign investor could also show the USCIS actual commitment of capital to the new business by title transfers of assets into the business for the exclusive use of the business.  The idea is that commitment of the capital to the new enterprise must be legally enforceable and either in the ownership and control of the business or a trustee with instructions to turn the money over to the business.  The at-risk requirement simply means that the investor must be exposed to a possible lost of the committed capital; there can be any guarantees made by the business to return the capital investment in the event the business stumbles and fails.

Interviewer: Reyna Munoz, Tax Legal Assistant

Question 6:

  • What if the USCIS denies the petition? Can the foreign investor insist return of invested capital if the EB-5 petition is denied?

Attorney: Coleman Jackson

ANSWER 6:

  • I mentioned that the capital could be placed in the hands of a trustee. If this approach is used the trustee must be a bank or some form of financial institution that is unrelated to either party to the transaction.  The terms and conditions of that relationship would be governed by the escrow agreement that the parties entered into. The parties to the escrow agreement could agree to return some or all of the committed capital in the event the EB-5 petition is denied by USCIS.  The escrow agreements or other agreements that the investor might execute with other parties in the transaction must all be arms-length and compliant with the EB-5 Statute.  Let me just leave it here for now; the investor must strictly comply with the Statute and be aware of how USCIS field adjudicators are instructed in the USCIS Field Manual when evaluating EB-5 visa applications.

Interviewer: Reyna Munoz, Tax Legal Assistant

Question 7:

  • Well okay Attorney; sounds like it’s very technical and requires a lot of due diligence on the part of the foreign investor and all parties involved in the process.
  • Question 7:

My last question is this!  How does a foreign investor actually request an EB-5 visa?

Attorney: Coleman Jackson

ANSWER 7:

  • The foreign investor files USCIS Form I-526 to request classification under the fifth employment-based preference category. Currently the Form I-526 is filed at the Dallas, Texas USCIS lock box regardless of the actual location of the new commercial enterprise.  The USCIS from time to time changes the actual filing location depending upon workload and other factors.
  • Reyna, thanks for these questions this morning with respect to why foreign investors might want to consider the EB-5 visa. There are many other relevant factors at play with respect to operating a business in the United States that we have not addressed here. In addition to the immigration laws discussed, there are also federal taxation and foreign assets and account laws that might be implicated as well in foreigners immigrating to the United States.
  • I have written numerous blogs on the EB-5 foreign investor’s visa, International Taxation Issues and Foreign Assets and Accounts over the past several years. Anyone interested in knowing more about these topics should visit our blog site

Attorney’s Concluding Remarks:

THIS IS END OF “LEGAL THOUGHTS” FOR NOW

  • Thank you for giving us the opportunity to inform you about “Why Foreign Investors Consider the EB-5 Visa?”
  • We might discuss other aspects of the EB-5 foreign investor’s visa, its requirements, and international tax issues affecting foreign investors in follow up podcasts or blogs in the near future.  If you want to see or hear more taxation, litigation and immigration LEGAL THOUGHTS from Coleman Jackson, P.C.  Subscribe to our podcast and stay tune!  We are here in Dallas, Texas and want to inform, educate, and encourage our communities on topics dealing with taxation, litigation, and immigration.  Until next time, take care.

Podcast – Exclusion from Gross Income | LEGAL THOUGHTS

Coleman Jackson, P.C. | Transcript of Legal Thoughts Podcast
Published October 7, 2020

Exclusion from Gross Income

Legal Thoughts is a podcast presentation by Coleman Jackson, P.C., a law firm based in Dallas, Texas serving individuals, businesses, and agencies from around the world in taxation, litigation, and immigration legal matters.

This particular episode of Legal Thoughts is a podcast where the Attorney, Coleman Jackson is being interviewed by Mayra Torres, the Public Relations Associate of Coleman Jackson, P.C.   The topic of discussion is “Income from Discharge of Indebtedness.” You can listen to this podcast by clicking here:

You can also listen to this episode and subscribe to Coleman Jackson, P.C.’s Legal Thoughts podcast on Apple Podcast, Google Podcast, Spotify, Cashbox or wherever you may listen to your podcast.

TRANSCRIPT:

ATTORNEY:  Coleman Jackson
LEGAL THOUGHTS
COLEMAN JACKSON, ATTORNEY & COUNSELOR AT LAW

ATTORNEY:  Coleman Jackson

Welcome to Tax Thoughts

  • My name is Coleman Jackson and I am an attorney at Coleman Jackson, P.C., a taxation, litigation, and immigration law firm based in Dallas, Texas
  • Our topic for today is: “Income from Discharge of Indebtedness.”
  • Other members of Coleman Jackson, P.C. are Yulissa Molina, Tax Legal Assistant, Leiliane Godeiro, Litigation Legal Assistant, Reyna Munoz, Immigration Legal Assistant and Mayra Torres, Public Relations Associate.
  • On this “Legal Thoughts” podcast our public relations associate, Mayra Torres will be asking the questions and I will be responding to her questions on this important tax topic: ““Income from Discharge of Indebtedness.”

Interviewer:  Mayra Torres, Public Relations Associate

  • Good morning everyone. It is a pretty chilly Autumn morning today! My name is Mayra Torres and I am the public relations associate at Coleman Jackson, P.C. We are a taxation, litigation and immigration law firm based right here in Dallas, Texas.
  • Question 1:  Attorney:  Is all income taxable in the United States?

Attorney Answers Question 1:

  • Good morning Mayra. Wow that is a broad question this morning! Let me begin with Internal Revenue Code Section 61 where gross income is defined in U.S. Tax Law. That is where we must begin our discussion of taxable income in U.S. tax law. Gross income is defined in Internal Revenue Code Section 61 as all income from whatever source derived.
  • The Internal Revenue Code contains a laundry list of types of income that are taxable, but IRC Section 61 specifically states that the list is not intended to be exhaustive or complete. The types of income specifically included on the gross income laundry list are:
    1. Compensation for services, including fees, commissions, fringe benefits, and similar items;
    2. Gross income derived from business;
    3. Gains derived from dealings in property;
    4. Interest;
    5. Rents;
    6. Royalties;
    7. Dividends
    8. Alimony and separate maintenance payments;
    9. Annuities;
    10. Income from life insurance and endowment contracts;
    11. Pensions;
    12. Income from discharge of indebtedness;
    13. Distributive share of partnership gross income;
    14. Income in respect of a decedent; and
    15. Income from an interest in an estate or trust
  • Repeat: This list of taxable gross income is not exhaustive. Gross income under U.S. Tax Law is extremely broad and envision taxation of increments of wealth constituted in whatever shape or form.

Interviewer:  Mayra Torres, Public Relations Associate

  • Attorney that is a lot. Let me see whether we can narrow down our discussion to this!
  • QUESTION 2: Is any income excluded from gross income for U.S. tax purposes?

Attorney Answers Question 2:

  • Mayra, that indeed is a good strategy because as I have said the concept of gross income in U.S. tax law is a global concept. Gross income includes income derived from whatever source derived.
  • As for income that is excluded from gross income for tax purposes. Let me just limit our discussions to income from discharge of indebtedness since this could potentially be a looming problem as the economic impact of Covid-19 continues to hammer many families in their pocketbooks. Internal Revenue Code Section 108(a) states that gross income does not include any amount which would otherwise be includible in gross income by reason of the discharge of indebtedness of the taxpayer if
    1. The discharge occurs in a title 11 bankruptcy case;
    2. The discharge occurs when the taxpayer is insolvent;
    3. The indebtedness discharged is qualified farm indebtedness;
    4. In the case of a taxpayer other than a C corporation, the indebtedness discharged is qualified real property business indebtedness; or
    5. The indebtedness discharged is qualified principal residence indebtedness which is discharged-
      • Before January 1, 2021 , or
      • Subject to an arrangement that is entered into and evidenced in writing before January 1,2021.

Interviewer:  Mayra Torres, Public Relations Associate

  • Okay, you have listed about five categories there. Right now, could you please explain the last one you mentioned in the list in more detail.
  • Question 3: Explain what qualified principal residence indebtedness is and how it works and all?

Attorney Answers Question 3:

  • Mayra, the term principal residence indebtedness means the debt financing the taxpayer’s principal residence or place where the taxpayer resides most of the time. This is the main residence of the taxpayer.
  • The mortgage on the taxpayer’s main residence must meet both of these prongs or conditions:
    1. the mortgage must have been taking out to purchase, build, or substantially improve the taxpayer main home; and
    2. the mortgage must secure the taxpayer’s main home
    3. Let me just add that the taxpayer cannot have but one main residence which turns on all the facts and circumstances. The debt can be a second mortgage obligation if it meets requirements one and two.

Interviewer:  Mayra Torres, Public Relations Associate

  • Question 4:
  • Attorney how much of this qualified principal residence indebtedness is eligible for exclusion from the gross income of the taxpayer?

Attorney Answers Question 4:

  • Well, first of all let me say, the list of exclusions have a pecking order that taxpayers must be aware of; for example, the discharge of debt in a Chapter 11 Bankruptcy proceeding preempts all other exclusions under Code Section 108. And the insolvency exclusion that I mentioned awhile ago takes precedence over the farm debt exclusion and the qualified real property exclusion; and the principal residence indebtedness exclusion takes precedence over the insolvency exclusion unless the taxpayer makes the proper elections.
  • Now, let’s go back to your original question Mayra; please repeat your question again so that we can be clear on this.

Interviewer:  Mayra Torres, Public Relations Associate

  • Sure, no problem, Attorney! Thanks for pointing out the pecking order of the various exclusions.My original question was…
  • Question 5: How much of the qualified principal residence indebtedness that is forgiven by the lender is excluded from the gross income of the taxpayer?

Attorney Answers Question 5:

  • Okay, let me make four very important points as it relates to the amount of the exclusion of cancellation of debt income of certain qualified principal residence indebtedness:
    • Number 1: the exclusion of residence indebtedness only applies, for the most part, to debt discharged after 2006 and before 2021 or at least the taxpayer needs to have a written discharge agreement in place by December 31, 2020
    • Number 2: the maximum amount of forgiven debt that the taxpayer can treat as qualified principal residence indebtedness is $2 million dollars or $1 million if filing married filing separate; and
    • Number 3: The discharged debt must be directly related to decline in the market value of the taxpayer’s main home or directly due to the taxpayer’s disrupted or poor financial condition.
    • Number 4: The exclusion amount is limited to the part of the discharged loan that is qualified principal residence indebtedness. That simply means that the exclusion is limited to the portion of the discharged debt that meets the definition of qualified principal residence indebtedness that I discussed at the beginning of this discussion.

Interviewer:  Mayra Torres, Public Relations Associate

  • Question No. 6: Attorney, how does a taxpayer actually take the qualified principal residence debt exclusion? I mean is this on the tax return they file or what?

Attorney Answers Question 6:

  • Yes, the taxpayer must attach tax Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness to their annual income tax return filed with the IRS and comply with appropriate instructions explaining their tax position.
  • Mayra, do you have any further questions with respect to types of income excluded from gross income? So far, we mostly have talked about qualified principal residence debt exclusion. And there are many aspects of this topic that we have not explored. I mean we could talk more about debt extinguished through repossessions and foreclosures. Any specific additional questions at this time on this debt cancellation topic?

Mayra’s Concluding Remarks

  • Attorney,Attorney thank you for answering my questions. I do have more questions involving the exclusion of canceled debt from U.S. taxation, but I can put them off to some other time.
  • Our listeners who want to hear more podcast like this one should subscribe to our Legal Thoughts Podcast on Apple Podcast, Google Podcast, Spotify or wherever they listen to our podcast. Everybody take care!  And come back in about two weeks, for more taxation, litigation and immigration Legal Thoughts from Coleman Jackson, P.C., which is located right here in Dallas, Texas at 6060 North Central Expressway, Dallas, Texas 75206.
  • English callers: 214-599-0431 and Spanish callers:  214-599-0432.

 Coleman Jackson, Attorney’s concluding remarks:

 THIS IS THE END OF “LEGAL THOUGHTS” FOR NOW

  • Thanks for giving us the opportunity to inform you the exclusions of cancellation of debt income from U.S. taxes. If you want to see or hear more taxation, litigation and immigration LEGAL THOUGHTS from Coleman Jackson, P.C.  Stay tune!  Watch for a new Legal Thoughts podcast in about two weeks.  We are here in Dallas, Texas and want to inform, educate, and encourage our communities on topics dealing with taxation, litigation and immigration.  Until next time, take care.

Podcast – Who is a Resident Alien Under United States Tax Law? | LEGAL THOUGHTS

Published July 9, 2020

Podcast - Who is a Resident Alien Under United States Tax Law? | LEGAL THOUGHTS

Legal Thoughts is a podcast presentation by Coleman Jackson, P.C., a law firm based in Dallas, Texas serving individuals, businesses, and agencies from around the world in taxation, litigation, and immigration legal matters.

This particular episode of Legal Thoughts is a podcast where the Attorney, Coleman Jackson is being interviewed by Mayra Torres, the Public Relations Associate of Coleman Jackson, P.C.   The topic of discussion is “Who is a Resident Alien Under United States Tax Law?” You can listen to this podcast by clicking here:

You can also listen to this episode and subscribe to Coleman Jackson, P.C.’s Legal Thoughts podcast on Apple Podcast, Google Podcast, Spotify, Cashbox or wherever you may listen to your podcast.

TRANSCRIPT:

ATTORNEY:  Coleman Jackson
Legal Thoughts
COLEMAN JACKSON, ATTORNEY & COUNSELOR AT LAW

ATTORNEY:  Coleman Jackson

Welcome to Tax Thoughts

  • My name is Coleman Jackson and I am an attorney at Coleman Jackson, P.C., a taxation, litigation, and immigration law firm based in Dallas, Texas.
  • Our topic for today is: “Who is a Resident Alien Under United States Tax Law?”
  • Other members of Coleman Jackson, P.C. are Yulissa Molina, Tax Legal Assistant, Reyna Munoz, Immigration Legal Assistant and Mayra Torres, Public Relations Associate.
  • On this “Legal Thoughts” podcast our public relations associate, Mayra Torres will be asking the questions and I will be responding to her questions on this important tax topic: “Who is a Resident Alien Under U.S. Tax Law?”

Interviewer:  Mayra Torres, Public Relations Associate

Question 1:

Good morning, Coleman. This is Mayra. I do have a couple of questions for you when it comes to umm… a resident alien under U.S. tax law. Who or what is considered a Resident Alien under U.S. Tax Law?

Attorney Answers Question 1:

  • S. tax law defines the term Alien in the following ways:
    1. Nonresident Alien; and
    2. Resident Alien
  • I am going to go into further details on both; but our main focus in this podcast will be on the Resident Alien. Anyone who is interested to learn more about how a nonresident alien is impacted by U.S. tax law can subscribe to our Legal Thoughts Podcast on Apple Podcast, Google Podcast, Spotify or wherever they get their podcasts.
    1. Nonresident Alien is defined in Internal Revenue Code Section 7701(b)(1)(B) as any individual who is not a citizen of the United States and who do not meet either the Green Card Test or the Substantial Presence Test for Resident Alien.
    2. Internal Revenue Code Section 7701(a)(9) includes only the 50 States and the District of Columbia in determining whether an alien is a nonresident alien. The law does not include U.S. possessions, territories, or U.S. airspace. For example, Guam is not included in making the determination as to whether an alien is a nonresident alien.
    3. I am now going to focus this podcast strictly on the question: Who is a Resident Alien in U.S. Tax law?
    4. There are two test or measures used in U.S. tax law to determine whether an alien is a resident alien under U.S. tax laws as follows:
      • Green Card Test: Under this test an individual is a Resident Alien (should be simply U.S. Resident, but as I mentioned the law still says resident alien, nevertheless) Under the Green Card test an individual is a U.S. resident if the individual was a lawful permanent resident of the United States at any time during the calendar year.
      • An individual is a Green Card Holder if they have become a Lawful Permanent Resident under the immigration laws of the United States 8 United States Code.
      • For U.S. tax purposes lawful permanent residence status continues unless the status is rescinded administratively or rescinded by a U.S. federal Court, such as, in a deportation proceeding by an Immigration Court.
      • An LPR can also abandon their Green Card Status by following the appropriate procedures or any Consular Officer or Border Protection Officer possibly could argue that the LPR status has been abandoned under circumstances described in U.S. Immigration Laws. U.S. tax regulations Section 301.7701(b) sets forth the Internal Revenue Codes positions concerning the Green Card test in determining whether an Alien is a Resident of the United States based on the Green Card test.
  • Now let us turn to the second test used by the IRS in determining whether an alien is a Resident Alien of the United States. The second test is known as the Substantial Presence Test. Under the substantial presence test, an individual is a Resident Alien or U.S. Resident if they are physically present within the United States on at least:
    1. 31 days during the current calendar year; and
    2. a total of 183 days during the current year and the two preceding years, counting each day of physical presence in the current year as one whole day, each day of presence in the first preceding year as one-third of a day., and each day of presence in the second preceding year as one-sixth of a day. Fractional days derived from these computations are not counted towards substantial presence.
  • I know this may sound very complicated to non-tax lawyers or Certified Public Accountants; the Substantial Presence Test is explained in excruciating detail in Internal Revenue Regulation Section 301.7701(b)-1(c)(1). And both the Green Card Test and Substantial Presence Test is codified in 26 United States Code Section 7701.

Interviewer:  Mayra Torres, Public Relations Associate

Question No 2:

I am just curious, are there any exceptions to this Substantial Presence Test. I mean, you are always saying the law is complicated and that there are often exceptions to the rules. What about now… are there any folks exempt from the Substantial Presence Test?

Attorney Answers Question 2:

  • The following individuals are exempt from the Substantial Presence Test pursuant to Internal Revenue Code Section 7701:
    1. International Students
    2. Professional Athletes
    3. Diplomats and their immediate family members
    4. Teachers on the J Visa immigration status and their immediate family members.
    5. Full time Employees of international organizations and their families that have been appropriately designate by the Secretary of the Treasury in consultation with the Secretary of State of the United States.
    6. Regular commuters from Mexico and Canada are not generally considered meeting the substantial presence test.
    7. There might be a few other exceptions; but these are the ones I can recall right now. I might add that even within these exceptions there are further particulars that I am just not going to get into right now.
    8. The actual application of the substantial presence test is very complex, and anyone impacted by these issues should consult with qualified tax professionals in their area.

Interviewer:  Mayra Torres, Public Relations Associate

Question 3:

Well alright then. What are some of the United States tax consequences to an individual meeting either the Green Card Test or the Substantial Presence Test?

Attorney Answers Question 3:

  1. S. residents who meet either the Green Card Test or the Substantial Presence Test must comply with all U.S. tax laws (I am using this term for resident aliens because I think it sounds more humane and welcoming).
  2. S. residents are generally taxed in the same manner as U.S. citizens. They are taxed on their worldwide income the same as U.S. citizens.
  3. S. residents must report their income by filing the appropriate federal tax return complying with all the reporting requirements applicable to U.S. citizen taxpayers.
  4. S. residents are allowed exclusions from gross income with respect to certain income earned, such as, certain compensation paid by foreign employers, nontaxable dividends, gains from sale of home and other types of income specifically excluded from gross income for U.S. taxation purposes.

Interviewer:  Mayra Torres, Public Relations Associate

Question No. 4

  • S. residents are taxed just like U.S. Citizens pretty much. I get that. But what about that $600 per week people are receiving under the CARES Act?
  • Can resident aliens (foreigners who satisfy the Green Card Test or Substantial Presence Test) receive that $600 per week too? And what about people who don’t have their papers? How and where do resident aliens apply.

Attorney Answers Question 4:

  • Yes, individuals who satisfy the Green Card Test or the Substantial Presence Test can qualify to receive the weekly $600 emergency increase in unemployment compensation benefits under the CARES Act because Subtitle B Section 6428.2020(2)(b)(d) says that nonresident alien individuals do not qualify.
  • Remember I spoke earlier about an alien can be either (1) a nonresident alien or (2) a resident alien for U.S. tax purposes. If an alien satisfies the Green Card test or the Substantial Presence Test they are classified as Resident Aliens (I like to use the term U.S. Resident) for tax purposes. And yes, undocumented individuals can satisfy the Substantial Presence Test and be treated as Resident Aliens for tax purposes. They typically should apply for an Individual Tax Identification Number otherwise called an ITIN to comply with U.S. tax laws.
  • There is no mention of Resident Aliens being unqualified to receive the $600 emergency increase in unemployment compensation benefits in the CARES Act. In Texas, these individuals (U.S. Residents) apply for this federal emergency increase of $600 with the Texas Workforce Commission at the same time they file an Unemployment claim based on loss of employment as the result of Covid-19. I think Resident Aliens or U.S. Residents qualifies to receive the weekly $600 under the CARES Act.

Attorney’s Concluding Remarks:

This is the end of Legal Thoughts for now!

  • Thanks for giving us the opportunity to inform you about who is a resident alien of the United States under U. S. tax law. If you want to see or hear more taxation, litigation and immigration LEGAL THOUGHTS from Coleman Jackson, P.C. Subscribe on Apple Podcast, Google Podcast, Spotify or wherever you listen to your podcast. Stay tune! We are here in Dallas, Texas and want to inform, educate, and encourage our communities on topics dealing with taxation, litigation, and immigration. Until next time, take care.

Podcast – Liability of Remote Sellers to Collect, Remit and Report Texas Sales Taxes After Wayfair? | LEGAL THOUGHTS

Published June 29, 2020

Podcast - Liability of Remote Sellers to Collect, Remit and Report Texas Sales Taxes After Wayfair? | LEGAL THOUGHTS

Legal Thoughts is a podcast presentation by Coleman Jackson, P.C., a law firm based in Dallas, Texas serving individuals, businesses, and agencies from around the world in taxation, litigation, and immigration legal matters.

This particular episode of Legal Thoughts is a podcast where the Attorney, Coleman Jackson is being interviewed by Mayra Torres, the Public Relations Associate of Coleman Jackson, P.C.   The topic of discussion is “Liability of Remote Sellers to Collect, Remit and Report Texas Sales Taxes After Wayfair?” You can listen to this podcast by clicking here:

You can also listen to this episode and subscribe to Coleman Jackson, P.C.’s Legal Thoughts podcast on Apple Podcast, Google Podcast, Spotify, Cashbox or wherever you may listen to your podcast.

TRANSCRIPT:

ATTORNEY:  Coleman Jackson
Legal Thoughts
COLEMAN JACKSON, ATTORNEY & COUNSELOR AT LAW

ATTORNEY:  Coleman Jackson

Welcome to Tax Thoughts

  • My name is Coleman Jackson and I am an attorney at Coleman Jackson, P.C., a taxation, litigation and immigration law firm based in Dallas, Texas.
  • Our topic for today is: “Liability of Remote Sellers to Collect, Remit and Report Texas Sales Taxes After Wayfair?”
  • Other members of Coleman Jackson, P.C. are Yulissa Molina, Tax Legal Assistant, Reyna Munoz, Immigration Legal Assistant and Mayra Torres, Public Relations Associate.
  • On this “Legal Thoughts” podcast our public relations associate, Mayra Torres will be asking the questions and our Immigration Legal Assistant, Reyna Munoz will be reading answers that I previously wrote in response to the questions on this important tax topic: “Liability of Remote Sellers to Collect, Remit and Report Texas Sales Taxes After Wayfair?”

Interviewer:  Mayra Torres, Public Relations Associate

Question 1:

Hello, Good morning Coleman. My name is Mayra Torres, for everyone who hasn’t met me yet, I am the Public Relations Associate at Coleman Jackson, P.C. Umm… todays first question is regarding Wayfair. What Businesses Located Outside of Texas are Required to Collect and Remit Sales Taxes to the State of Texas after Wayfair. Who is “Wayfair”?

Attorney Answers Question 1:

Wayfair refers to a united states supreme court decision decided by the court on June 21, 2018 in a case that is called south Dakota vs Wayfair, Inc. The case involved a sales tax dispute between south Dakota and Wayfair, Inc.

Interviewer:  Mayra Torres, Public Relations Associate

Question 2:

Well what was the dispute about?

Attorney Answers Question 2:

Wayfair, Inc. Was not located in south Dakota and had no physical presence within The state.

Wayfair, Inc. Sold goods from its remote location to customers who lived in South Dakota. The question in this case was: “when can an out-of-state seller be required to Collect and remit sales tax to a state where they have no physical presence.”

Interviewer:  Mayra Torres, Public Relations Associate

Question 3:

So, why was that even in doubt that South Dakota could make Wayfair an out-of-state Seller collect taxes on purchases of goods and services by south Dakota Residents?

Attorney Answers Question 3:

  • That is an excellent question. I am going to explain the concerns with respect to States imposing legal duties on out of state residents as it relates to sales Taxation: the issue here is the free flow of interstate commerce!
    1. The constitution of the united states gives congress the power to regulate Commerce in article 1, section 8, clause 3.
    2. The concern of the framers of the constitution was division within the United states where states are fighting among themselves imposing economic Burdens on the free flow of commerce.
    3. The commerce clause limits the states regulation of commerce
  • The U.S. Supreme Court will allow a State tax on Commerce so long as it meets all of these conditions:
    1. The tax applies to an activity with a substantial nexus with the taxing State;
    2. The tax is fairly apportioned;
    3. The tax does not discriminate against interstate commerce; and
    4. The tax is fairly related to the services the State provides.
  • Condition Number 1 is the only one in question in the Wayfair Case: the tax applies to an activity with a substantial nexus with the taxing State:
  • In those states that have a sales tax statute, before Wayfair, sellers had to have a physical presence within a state in order for that state to impose a liability on a merchant to collect sales taxes on purchases of goods and services. That is known as the Quill physical presence test from the U.S. Supreme Court decision in 1992 called Quill Corporation vs. North Dakota.
  • After Wayfair, which involves South Dakota, out-of-state sellers can be held responsible for collection and payment of sales taxes to a state by selling a product or service to customers within the state. The Court said that physical presence in a State can be established merely by selling goods and services to customers in the State. No employees or offices or other physical presence is required in order to establish substantial nexus in the taxing state. So now mere shipping goods and services into a state may bring remote sellers within the scope of out-of-state sales tax statutes. The Supreme Court in Wayfair said that imposing this sales tax collection, remittance and reporting requirement in some circumstances did not violate the Commerce Clause of the United States Constitution, Article 1, Clause 3.

Interviewer:  Mayra Torres, Public Relations Associate

Question 4:

Okay…. What Texas… Who is a remote seller selling goods and services to people who live in Texas? Are they liable to collect, remit, report, and keep records of Texas taxable sales?

Attorney Answers Question 4:

  1. A remote seller is defined in Texas Tax Code Rule 3.286(a)(4)(l) and (J) as any seller whose only activities in Texas are the remote solicitation of sales, which includes activities such as solicitation by catalogs, flyers, radio, television, telephone or internet.
  2. Sellers outside of Texas who sell goods and services to Texas residents are required to collect, remit and report Texas sales and use tax effective October 1, 2019 if they made total sales of $500,000 into Texas for a prior 12-month period. If the appropriate sales tax is not properly collected the Use tax must be submitted to the Texas Comptroller of Public Accounts.
  3. And yes, remote sellers must keep proper books and records of all Texas taxable sales transactions and have them available for inspection and examination in compliance with 34 Texas Tax Code Section 3.281. The TAC specifically identifies the types of records that all sellers of taxable goods and services must maintain for 4 years.
  4. Texas Comptroller Auditors are permitted to estimate taxable sales in the event a seller fails to maintain and present the required records for inspection at the request of the Texas Comptroller.

Interviewer:  Mayra Torres, Public Relations Associate

Question 5:

What are the Texas Sales and Use Tax Rate?

Attorney Answers Question 5:

  1. The current sales tax rate is 6.25 percent State rate and each local taxing authority can charge up to 2.0 percent. The maximum allowable sales tax rate in Texas is 8.25 percent.
  2. As for remote sellers, Texas permits them to charge a flat rate of 1.75 percent instead of the local rate which changes from county to county, city to city and school district to school district throughout the State. Remote sellers make this election by filing form 01-799, Remote Seller’s Intent to Elect or Revoke Use of Single Local Use Tax Rate with the Comptroller’s Office. If the remote seller does not make this election, they must compute, collect and remit the local tax based on the local tax applicable to the location to which they shipped the goods or performed the service.

Interviewer:  Mayra Torres, Public Relations Associate

Question 6:

So, who administers the Limited Sales, Use and Excise Tax laws in Texas?

Attorney Answers Question 6:

The Texas Comptroller of Public Accounts.

Interviewer:  Mayra Torres, Public Relations Associate

Question 7:

Are all remote sellers required to do this now?

Attorney Answers Question 7:

  • No; these requirements do not apply to all remote sellers.
  • A remote seller whose total Texas revenue from sales into Texas in the preceding 12 calendar months are less than $500,000 is not required to obtain a sales tax permit and they are not required to collect and remit any sales tax to Texas. The sales are computed on gross revenue not net revenue.
  • As of April 1, 2020, remote sellers must combine sales made through all mediums with delivery into Texas to determine whether they must collect, remit and report Texas Sales.

Interviewer:  Mayra Torres, Public Relations Associate

Question 8:

Wow, it seems like a somewhat complex issue.

Attorney Answers Question 8:

  • Yes, we have just a brief outline here of the issues and sales tax laws applicable to remote sellers since the Wayfair decision of the U.S. Supreme Court.
  • Listeners should stay tune and follow our podcast and read our blogs as we might revisit this topic in the future.

Attorney’s Concluding Remarks:

This is end of “legal thoughts” for now!

  • Thanks for giving us the opportunity to inform you about how the Texas Tax Code requires remote sellers to collect, remit and report sales taxes on sales made to Texas residents to the Texas Comptroller. If you want to see or hear more taxation, litigation and immigration LEGAL THOUGHTS from Coleman Jackson, P.C. Stay tune! We are here in Dallas, Texas and want to inform, educate, and encourage our communities on topics dealing with taxation, litigation and immigration. Until next time, take care.