September 2019 - Tax, Litigation, Immigration Law Blog

By Coleman Jackson, Attorney, Certified Public Accountant
September 16, 2019

Texas imposes a 6.25 percent state sales tax and use tax on all retail sales, leases and rentals of most goods and some services that are either sold in Texas or used in Texas. Cities, Counties and Transit Authorities can charge up to 2% sales tax on taxable goods and services. This local sales tax varies from city to city, county to county and transit authority to transit authority throughout the state of Texas. The maximum sales and use tax in Texas is 8.25 percent.

Remote sellers are required to begin sales and use tax collection on October 1, 2019 on their Texas sales. The remote seller must collect the correct tax by using the Sales Tax Rate Locator. For example if a remote seller sales a chest of imported cigars to a person residing in Dallas, Texas; they must collect 8.25 percent tax on the gross sale at the time of the sale. If this same sale is made in another city of Texas the total collected tax could be lower. It would not be higher because 8.25% is the maximum sales and use tax in Texas. However, other types of tax obligations could be implicated in this hypothetical, such as, tobacco taxes and fees. Remote sellers doing business in Texas must register with the Texas Comptroller of Public Accounts before October 1, 2019 to fulfill their Texas tax responsibilities. First, remote sellers must apply for a Sales Tax Permit pursuant to the Texas Tax Code.

Once the remote seller is properly registered with the Texas Comptroller of Public Account and receive their sales tax permit, they will be advised by the Texas Comptroller as to whether they must report their taxable sales and use taxes on a monthly basis, quarterly basis or annual basis. Monthly sales and use tax reports are due on the 20^th day of each month following the reporting month. Quarterly filers must file their sales and use tax reports on April 20^th, July 20^th October 20^th and January 20^th. Annual filers must report taxable Texas sales and use taxes on January 20^th for the previous year.

Out of State sellers or remote sellers are required to begin collecting sales and use tax from their Texas customers on October 1, 2019. If the remote seller fails to register and report Texas Sales and Use Tax they will be subjected to the penalties, administrative actions, and judicial options available under the Texas Tax Code in enforcing the tax laws. The TTC provides for civil and criminal sanctions against businesses doing business in Texas and not in compliance with their tax responsibilities.

Businesses, who run afoul of the Texas Tax Code and desire to comply with Texas tax laws, whether they are in Texas or someplace else in the world, could possibly qualify to voluntarily disclose under the Texas Voluntary Disclosure Agreement Process (VDA). A company representative must initiate the process on behalf of an anonymous client who meets the threshold requirements by contacting the Business Activity Research Team (BART) in writing. If the business has already been contacted by the Texas Comptroller regarding non-compliance with Texas Tax laws, the business cannot voluntarily disclose. It should be noted that the VDA process is available for all types of taxes administered by the Texas Comptroller of Public Accounts. Some of the types of taxes that the Texas Comptroller is responsible for administering under the Texas Tax Code are as follows:

Sales and Use Tax
Hotel Tax
Franchise Tax
Tobacco Taxes and Fees
Battery Sales Fees
Cement Production
Boat and Boat Motor Taxes
Insurance Taxes
Manufactured Housing
Controlled Substances

This law blog is written by the Taxation | Litigation | Immigration Law Firm of Coleman Jackson, P.C. for educational purposes; it does not create an attorney-client relationship between this law firm and its reader. You should consult with legal counsel in your geographical area with respect to any legal issues impacting you, your family or business.

Coleman Jackson, P.C. | Taxation, Litigation, Immigration Law Firm | English (214) 599-0431 | Spanish (214) 599-0432

By Coleman Jackson, Attorney, Certified Public Accountant
September 10, 2019

The Earned Income Tax Credit or EITC is designed to assist working class families with children by putting money in their pockets. The EITC is a tax credit, not, a tax deduction. The difference is huge! A tax credit is a dollar for dollar reduction in the taxes owed. Tax credits generally will result in refunds and money in the taxpayers’ pockets. EITC often results in refunds to the taxpayer; although the IRS cannot issue refund checks for the Earned Income Tax Credit before mid-February.

The rules for qualifying and claiming the Earned Income Tax Credit are complicated. An excerpt from IRS Publication 596 reads as follows:

Table 1. Earned Income Credit in a Nutshell: First, you must meet all the rules in this column.

Chapter 1. Rules for Everyone

1. Your adjusted gross income (AGI) must be less than: • $49,194 ($54,884 for married filing jointly) if you have three or more qualifying children, • $45,802 ($51,492 for married filing jointly) if you have two qualifying children, • $40,320 ($46,010 for married filing jointly) if you have one qualifying child, or • $15,270 ($20,950 for married filing jointly) if you don’t have a qualifying child.

2. You must have a valid social security number by the due date of your 2018 return (including extensions).

3.Your filing status can’t be married filing separately.

4. You must be a U.S. citizen or resident alien all year.

5. You can’t file Form 2555 or Form 2555-EZ (relating to foreign earned income).

6. Your investment income must be $3,500 or less. 7.You must have earned income.

Second, you must meet all the rules in one of these columns, whichever applies.

Chapter 2. Rules If You Have a Qualifying Child

Chapter 3. Rules If You Do Not Have a Qualifying Child

8. Your child must meet the relationship, age, residency, and joint return tests.

9. Your qualifying child can’t be used by more than one person to claim the EIC.

10. You can’t be a qualifying child of another person.

11. You must be at least age 25 but under age 65.

12. You can’t be the dependent of another person.

13. You can’t be a qualifying child of another person.

14. You must have lived in the United States more than half of the year.

Third, you must meet the rule in this column.

Chapter 4.Figuring and Claiming the EIC

15. Your earned income must be less than: • $49,194 ($54,884 for married filing jointly) if you have three or more qualifying children, • $45,802 ($51,492 for married filing jointly) if you have two qualifying children, • $40,320 ($46,010 for married filing jointly) if you have one qualifying child, or • $15,270 ($20,950 for married filing jointly) if you don’t have a qualifying child.

If a taxpayer claims the Earned Income Tax Credit, the IRS may send a letter to them asking that they send the IRS information to verify the EITC claim. An appropriate and timely response to the request for substantiation of the EITC is very important because failure to do so could prohibit the taxpayer from claiming the Earned Income Tax Credit (EITC) for subsequent tax periods. The EITC substantiation may be in the form of the child’s birth certificate, health records, school records and other evidence in substantiation that the taxpayers’ meet all of the qualifications listed above to claim the EITC. In the event the taxpayers improperly claim the EITC, the taxpayer is banded for two years from claiming the credit. Internal Revenue Code Section 32(k)(1) permits the IRS to enforce the rules regulating the Earned Income Tax Credit by banding violators from claiming the EITC up to two years. Recently the IRS Office of Chief Counsel issued an advisement that essentially states that where a taxpayer improperly claim (or fail to substantiate) their EITC claim for one child and continues to claim the EITC in subsequent years for that child, the taxpayers are prohibited from claiming the EITC for that child and all other children even though they may qualify for the EITC in subsequent years. Claiming the child tax credit when under the two year band for any child has grave consequences.

Taxpayers can use the EITC Assistant on the IRS website to see if they qualify for the EITC. Again claiming the EITC improperly has grave financial consequences. Working people with low to moderate incomes must follow all the EITC rules so that they don’t run afoul of them and be stopped from claiming the Earned Income Tax Credit even when they otherwise qualify for this working family tax benefit.

Coleman Jackson, P.C. | Taxation, Litigation, Immigration Law Firm | English (214) 599-0431 | Spanish (214) 599-0432

Tax, Litigation, Immigration Law Blog

Monthly Archives: September 2019

Remote Sellers Must Register in Texas before October 1, 2019

The Earned Income Tax Credit Two Year Band