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Episode Three- Failure to Comply -Potential Consequences for Paid Tax Return Preparers and their Customers

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LEGAL THOUGHTS – Failure to Comply-Potential Consequences for Paid Tax Return Preparers and their Customers

COLEMAN JACKSON, ATTORNEY & LEGAL COUNSEL | Transcription of Legal Thoughts

Posted on July 17, 2024

Topic: Tax Return Preparer Due Diligence

Welcome to Legal Thoughts my name is Coleman Jackson, and I am an attorney at Coleman Jackson, P.C., a taxation, contracts, litigation and immigration law firm based in Dallas, Texas.

In addition to myself, we have Legal Assistant, Leiliane Godeiro, Law Clerks, Ayesha Jain and Mlaah Singh, and Administrative Assistant, Michelle Gutierrez.

On today’s “Legal Thoughts” podcast, our Law Clerk, Mlaah Singh, will continue interviewing me in a new Legal Thoughts podcast series that we have entitled : “Tax Return Preparer Due Diligence and Preparer Penalties. ” This is episode three in this series of Legal Thoughts podcasts. We urge our audience to follow our podcast and invite all their neighbors, friends and acquaintances to please tune in to this series of Legal Thoughts Podcasts on Apple Podcast, Google Podcast, Spotify or wherever you listen to podcasts.

The intended five episodes in our Tax Return Preparer Penalty Case Series are as follows:

Attorney’s Key Take Aways
Navigating Due Diligence Requirements by Paid Tax Return Preparers
Failure to Comply – Potential Consequences for Paid Tax Return Preparers and the Taxpayers
Managing IRS Due Diligence Investigations
Strategies for Compliance and Risk Mitigation

Interviewer Introduction:

Hi everyone, my name is Mlaah Singh and I am a Law Clerk at the tax, business structuring, contracts, litigation and immigration law firm of Coleman Jackson, Professional Corporation. Our law firm is located at 6060 North Central Expressway, Suite 620, right here in Dallas, Texas, 75206. Our English phone number is 214-599-0431 and our dedicated Spanish language line is 214-599-0432.

Good afternoon Attorney; thank you for allowing me to interview you once again for Episode 3 of our Paid Tax Return Preparer Diligence Requirements and this apparent uptick in IRS examinations and investigations of Paid Tax Return Preparers. Today, I hope to ask a couple of questions designed to navigate our way through these tax preparation procedures or requirements and potential consequences for tax preparers and their customers (the taxpayers).

Interviewer Question No 1: What are the potential penalties and consequences for paid tax return preparers who fail to comply with IRS due diligence requirements?

Interviewee: Coleman Jackson, Lawyer

ATTORNEY ANSWER – QUESTION 1

Comment: Good morning Mlaah.

Attorney’s Answer: Your question gets right to the heart of the matter— how much is it going to cost a paid tax return preparer if they get this wrong.

Let me start by restating your question; which is an excellent one: “What are the potential penalties and consequences for paid tax return preparers who fail to comply with IRS due diligence requirements?”

First of all, the Internal Revenue Code at Section 7701(a)(36) defines the term “paid tax preparer” as any person who prepares for compensation, or who employs one or more persons to prepare for compensation, any return of tax imposed by 26 United States Code. So lets first make it clear who we are talking about here. We are not talking about self-filers or taxpayers preparing their own returns with one of the tax software programs widely on the market today.
With that out of the way. Paid tax preparers are subject to essentially three types of penalties:
1. Internal Revenue Code Section 6695(a) imposes several due diligence requirements on paid preparers with respect to the determination of the taxpayer’s eligibility to take certain federal tax positions, such as, the Earned Income Tax Credit, Head of Household Filing Status, Child Tax Credit and a couple of other tax positions I discussed in detailed in Episode 1 and 2 of this Series of Podcast. Paid preparer is subject to an inflation-adjusted penalty in the amount of $635 for 2024 for each violation; which means that their could be multiple $635 penalties assessed on a single tax return. The penalty was $600 for 2023 and $560 for 2022. So the potential penalties and consequences could be 10,000 and even 100,000 of thousands of dollars. It is not uncommon to see return preparers being assessed these gigantic due diligence penalties.
2. In addition, Internal Revenue Code Sections 6694(a) and (b) permits the Internal Revenue Service to assess penalties against paid preparers for the understatement of a tax liability due to unreasonable tax positions. These penalties are based on a percentage of the understatement and can run as high as 75% of the understatement of tax liability.

I am limiting this discussion to the civil penalties; but, I want to remind everyone that the Internal Revenue Code is also a criminal tax statute where intentional violation of the Internal Revenue Code could lead paid return preparer and customer being investigated by the Criminal Investigation Division of the IRS for potential criminal prosecution.

INTERVIEWER: Mlaah Singh, Tax Law Clerk

Interviewer Comment:

Interviewer Comments: Thank you for outlining the potential penalties and consequences for paid tax preparers who fail to comply with IRS due diligence requirements. It’s clear these implications are significant and can escalate quickly, especially with the inflation-adjusted penalties you mentioned.

Interviewer Question No 2: Can you explain how a paid tax return preparer’s failure to comply with due diligence requirements might impact their clients? What would happen if even a clients hired tax return preparer does something incorrectly?

Interviewee: Coleman Jackson, Lawyer

ATTORNEY ANSWER – QUESTION 2

Oh, I kind of touched on the implications briefly in passing just now with potential criminal tax investigation by CI. The taxpayer could obviously get caught up in CI’s investigating paid preparers. Taxpayers must do their due diligence when choosing their paid tax preparer because taxpayers are responsible for the accuracy of their annual tax returns or refund claims.

As for implications on the taxpayer when their paid preparer runs afoul of the paid preparer due diligence requirements—

When a paid preparer is being examined in a Paid Preparer Due Diligence Exam, most, if not all of the returns prepared during the exam period will likely be audited for accuracy and entitlement to claim the tax positions. So the taxpayer is likely to be audited. The Taxpayer is likely to incur a tax adjustment if the IRS examiner finds errors; therefore the taxpayer may have to pay more taxes, penalties and interest due to actions of their paid preparer.
Erroneous tax positions could lead a taxpayer from being banned from claiming certain credits in the future, even though, they may otherwise qualify for the tax position in the future. For example, Internal Revenue Code Section 32(k)(1) (A) has two disallowance periods:
1. Taxpayers who claimed these earned income tax credit is banned from claiming the EITC for two subsequent tax periods if the IRS examiner determines that the taxpayer’s EITC claim is due to reckless or intentional disregard of the federal income tax laws; and
2. Taxpayers who claimed the earned income tax credit is banned form claiming the EITC for ten subsequent tax periods if the IRS examiner determines that the taxpayer’s EITC claim is due to fraud.

Note that very similar bans apply when taxpayers erroneously claims the Child Tax Credit, Additional Child Tax Credit and the Other Dependent Credits. Word to the wise: Paid tax return preparers must strictly comply with the eligibility and computational rules governing all of the tax positions on Form 8867, Paid Preparer’s Due Diligence Checklist because not only are they subject to huge preparer penalties as I discussed in the previous question but the taxpayer could be banned from taking perfectly legitimate tax positions but for the errors or omissions of their paid preparer. There may be other consequences to the taxpayer as well, such as, credit damage, tax liens, lost of job due to IRS Collections.

INTERVIEWER:Mlaah Singh, Tax Law Clerk

Interviewer Comment:

Interviewer Comment: Moreover, the prospect of being barred from claiming certain credits for extended periods due to preparer errors highlights the long-term consequences that taxpayers may face. This not only impacts immediate financial obligations but also limits future tax benefits that the taxpayer may otherwise be entitled to.

Interviewer Question No 3: What specific actions or omissions by paid tax return preparers are most likely to result in penalties for non-compliance? What are common mistakes made by taxpayers?

Interviewee: Coleman Jackson, Lawyer

ATTORNEY ANSWER – QUESTION 3

Let me take your second question first. Taxpayer’s make mistakes when they fail to wisely select their paid tax preparer. Often time that unwise selection decision is followed by failing to review their return before its filed with the IRS. The third big mistake I have seen them make over the years is either go right back to the paid return preparer upon receipt of the IRS proposed adjustment notice or quite often ignoring the IRS letter all together which is generally disastrous because IRS letter typically have certain deadlines to take actions to challenge the liability.

Let me now turn to your first question: What specific actions or omissions by paid tax return preparers are most likely to result in penalties for non-compliance? Let me keep this general; I am not going to discuss any specific cases:

Failure to obtain and preserve contemporaneous documentation.
Failure to make proper inquiry in situations where a seasoned well-informed paid preparer would have sought additional facts.
Failure to know the facts with regards to business taxpayers. Schedule C examinations of self-employed taxpayers is a huge part of paid preparer due diligence examinations and often times paid preparers has failed to ascertain the facts with respect to income and deduction items on the return.
Failure to keep organized business records. The Internal Revenue Code requires that paid preparers keep a copy of Form 8867, Paid Preparer Due Diligence Checklist and the contemporaneous records for each taxpayer for three years.
Failure to properly compute the credits based on the facts. Sometimes it appears paid preparers make lots of assumptions about how well they personally know the taxpayer without actually obtaining objective facts.

These are a few basic actions or omissions that I can think of right now that I have seen in Paid Preparer Due Diligence Examinations. Paid preparers have to (1) obtain the facts at the time they are preparing the return, (2) accurately complete Form 8867, (3) accurately compute the credits, and (4) maintain Form 8867 and the contemporaneous records for three years

INTERVIEWER:Mlaah Singh, Tax Law Clerk

Interviewer Comment:

Interviewer Comment: Thank you, Mr. Jackson. These guidelines not only uphold professional standards but also safeguard taxpayers’ interests by ensuring accurate reporting. By emphasizing the importance of obtaining and verifying factual information during preparation, paid preparers play a pivotal role in maintaining the integrity of tax filings and minimizing the risk of penalties due to non-compliance.

Interviewer Question No 4: What steps can paid tax return preparers take to ensure they are meeting all due diligence requirements and avoid potential penalties?

Interviewee: Coleman Jackson, Lawyer

ATTORNEY ANSWER – QUESTION 4

Paid preparers have to (1) obtain the facts at the time they are preparing the return, (2) accurately complete Form 8867, (3) accurately compute the credits, and (4) maintain Form 8867 and the contemporaneous records for three years
Finally, Paid preparer’s must annually complete federal tax courses from a credible continuing education provider to ensure they are up to date on federal tax law. Most CPE providers offer a comprehensive Form 1040 course with annual updates. Likewise CPE providers provide courses on Partnership taxation, corporate taxation, trust and estate taxation and many more tax topics. Bottom line, paid tax preparers must keep themselves knowledgeable to competently prepare their customers tax returns each year.
And if they receive that knock on their door.. The IRS Examiner seeking to perform a Paid Preparer Due Diligence Investigation- they should seek help because the consequences for them and their customers are extremely high.

INTERVIEWER WRAP-UP: MlaahSingh, Tax Law Clerk

Attorney, thank you for sitting with me today in our second podcast on this very important topic: “Tax Return Preparer Due Diligence Requirements & IRS Paid Preparer Penalty Cases” I surely hope our audience will benefit from this Legal Thoughts series on tax preparer due diligence requirements and due diligence penalty cases. Attorney in this Episode you have clearly explained how regular, hardworking, innocent taxpayers can also suffer grave financial lost when they erroneously claim credits or take tax positions for which they are not entitled. Thanks Attorney for navigating us through this! Folks, stay tune for upcoming Legal Thoughts Podcasts on this important federal tax topic! We intend to publish Episode three in this series of podcast in about two weeks.

Our audience can send us inquires at www.cjacksonlaw.com if they have questions or wish to comment on our podcasts in this series or any of our Legal Thoughts podcasts, blogs, or Law Watch Videos posted on our U-tube Channel. You can send an email directly to attorney at cj@cjacksonlaw.com and suggest other tax topics that you want us to discuss in future Legal Thoughts Podcast. We are open to your ideas for topics in tax and business law.

Our listeners who want to hear more podcasts like this one please subscribe to our Legal Thoughts Podcast on Apple Podcast, Google Podcast, Spotify or wherever you listen to your podcast. Everybody take care! And come back in about two weeks, for more taxation, business structuring, contracts litigation and immigration Legal Thoughts from Coleman Jackson, P.C., 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 |Portuguese callers: 214-272-3100

ATTORNEY’S CLOSING REMARKS:

This is the end of “LEGAL THOUGHTS” for now

By the way, another important topic our law firm has been talking about since last year is this one: All our small business owners must listen to our earlier podcasts on the Corporate Transparency Act’s Beneficial Ownership Information Reporting Requirements because the Initial BOI reports are due on or before January 1, 2025 for most small and medium sized businesses structured under any State Business Structuring Laws. Such as, Limited Liability Companies, Corporations and so forth. These initial BOI reports are required to be filed with the Financial Crimes Enforcement Network by January 1, 2025. Small Business Owners and those who substantially control them must educate themselves and comply with the CTA because the penalties are up to $500 per day and up to 2 years in federal prison upon conviction for willful failure to comply with this new federal law.

Until next time, take care.

If you want to see or hear more taxation, business structuring and contracts litigation and immigration LEGAL THOUGHTS from Coleman Jackson, P.C. Subscribe to our Legal Thoughts Podcast on Apple Podcast, Google Podcast, Spotify or wherever you listen to your podcast. Stay tuned! 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.

Episode One- Attorney’s Observations When Dealing with IRS Representatives

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LEGAL THOUGHTS – Attorney’s Observations When Dealing with IRS Representatives

COLEMAN JACKSON, ATTORNEY & LEGAL COUNSEL | Transcription of Legal Thoughts Posted on June 10, 2024

Topic: Attorney’s Key Take Aways Preparer Due Diligence

Attorney Introduction:

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. In addition to myself, we have a Legal Assistant, Leiliane Godeiro, Law Clerks, Ayesha Jain and Mlaah Singh, and Administrative Assistant, Michelle Gutierrez.

On today’s “Legal Thoughts” podcast, our Law Clerk, Mlaah Singh, will be interviewing me in a brand new Legal Thoughts podcast series that we have entitled : “Tax Return Preparer Due Diligence and Preparer Penalties. ” We urge our audience to follow our podcast and invite all their neighbors, friends and acquaintances to please tune in to this series of Legal Thoughts Podcasts on Apple Podcast, Google Podcast, Spotify or wherever you listen to podcasts. The four episodes in our Tax Return Preparer Penalty Case Series are as follows:

Attorney’s Observations from Dealing with an Uptick in Return Preparer Penalty Cases
Navigating Due Diligence for Tax Preparers
Managing IRS Due Diligence Investigations
Strategies for Compliance and Risk Mitigation

Interviewer Introduction:

Good afternoon Attorney; thank you for allowing me to interview you regarding what appears to be an uptick in IRS examinations and investigations of Paid Tax Return Preparers.

Mr. Jackson, thank you for joining me to discuss this matter. Over your career within tax law for over 35+ years, you must have quite an understanding of what it is like to work with IRS representatives on international and federal tax matters, as well as your representation of taxpayers with matters before the Financial Crimes Enforcement Network. In fact we have an ongoing series of Legal Thoughts Podcast on the Corporate Transparency Act’s Beneficial Ownership Information Reporting Requirements estimated to impact over 42 million small and medium sized businesses all over the country.

Perhaps this new series of podcast dealing with IRS’s Due Diligence Examinations is just as important and is likely to address impacts on paid tax return preparers and their customers due to IRS Paid Preparer Due Diligence Investigations. So, I believe our Legal Thoughts Podcast’s listeners absolutely must hear your perspective on this apparent uptick in Paid Tax Return Preparer Due Diligence Investigations. My first question is this one:

Question Number One: What are some of your key takeaways gleaned while representing tax return preparers in IRS exams regarding paid tax return preparer due diligence requirements?

Interviewee: Coleman Jackson, Lawyer

ATTORNEY ANSWER – QUESTION 1

Thanks Mlaah for this question. I will not talk about any specifics here; in general I will share my general observations with respect to IRS Paid Preparer Due Diligence Investigations. Some key takeaways are as follows:

My first take away: there appears to be an uptick in IRS examinations of paid tax return preparers since 2023 under Internal Revenue Code Section 6695(a) which imposes the duty for preparers to annually determine a taxpayer’s eligibility to take the following tax positions on their individual federal tax returns:

Head of Household Status

Child Tax Credit

Additional Child Tax Credit

The American Opportunity Credit, and

The Earned Income Tax Credit

My second take away is that it appears that this uptick is impacting low and medium income taxpayers to a greater extent because they are more likely to take these types of tax positions since most of these tax credits have income caps. That means, high income earners do not qualify for these types of tax credits.

My third take away is that it appears that immigrant families are more impacted by this uptick in preparer examinations than other American households. The reason for this can be difficult to pinpoint for sure, but it looks like it could be due to the following- Immigrants may have a tendency to use paid preparers who do not have traditional licensures, such as, certified public accountants, enrolled agents or attorney credentials. Generally the preparers and their customers are from the same country or speak the same native language. Typically these preparers charge less for return preparation than Certified Public Accountants or Enrolled Agents. These preparers may be perceived as having less education and therefore Artificial Intelligence could kick out the returns for human examination (but note that if this occurs; it is probably not intentional targeting of immigrant tax returns). From my observation, the practical effect creates this result.

Artificial intelligence algorithms could carry the bias and blindness of those who create them thereby kicking out a higher degree of tax returns that does not conform to some standard pattern. For example, African languages, Latin Languages, family traditions where children does not have their father’s surname. Immigrants can reside in multigenerational households that consist or grand-parents, parents, children and even nieces and nephews on very little household income. AI algorithms might simply kick these returns out as abnormal household patterns. IRS examiners who lack foreign language skills and social awareness of cultural traditions other than western traditional expressions or practices might be quite alarmed when they review these algorithm flagged abnormalities. This could lead to heightened review after algorithms flags a bunch of the tax preparer’s returns for human review.

All of these factors and more could explain why there is a higher incidence of immigrant taxpayers being impacted by paid preparer due diligence examinations by the IRS in recent years. Again, this is the practical effect; but it does not necessarily mean immigrant tax returns are targeted. Nor does it mean that low income taxpayers are being intentionally targeted by the IRS for audit examination either. It is simply the practical effect and, again, this perceived uptick in paid preparer exams could be driven by computer algorithms that have no conscience, no soul and no humanity. They just see a life or family pattern that does not fit perceived norms.

My fourth takeaway is that Internal Revenue Code Section 6695(g) allows the IRS to impose a very high penalty if a paid tax return preparer fails to meet four precise due diligence requirements. The penalty for tax periods ending in 2023 was $560 for each violation. The practical implication of these penalties is that paid tax return preparers can come in with high proposed tax penalties in the tens of thousands to hundreds of thousands of dollars depending usually upon the number of returns they do and how many penalties they have been assessed.

Mlaah, we can talk more about the four due diligence requirements imposed on paid tax return preparers in a later podcast in this series or right now. I will let you direct our path through this series by the questions you ask. What do you think our Legal Thoughts Podcast audience should know now. Keep in mind, we don’t have to tell them everything they need to know about this topic all at once.

INTERVIEWER: Mlaah Singh, Tax Law Clerk

Interviewer Comment:

Thank you for your insightful answer Mr. Jackson, it seems as though there are many requirements and qualifications to satisfy in order to avoid sizable penalties. As you mentioned, it is important for our listeners who represent low and medium sized businesses or identify as an Immigrant to pay close attention to what is expected of them for respective annual federal tax return preparation and reporting.

Question Number Two: So, my next question is, how do paid tax return preparers ensure they comprehend the intricate eligibility criteria for tax credits such as the Earned Income Credit, Child Tax Credit, Additional Child Tax Credit, and Head of Household filing status?

Interviewee: Coleman Jackson, Lawyer

ATTORNEY ANSWER – QUESTION 2

Excellent Mlaah! Very astute question.

First: Paid Tax Return Preparers must know the four tax positions where these due diligence requirements are applicable:

Taxpayer’s eligibility to claim head of household tax filing status;
Taxpayer’s eligibility to claim the American Opportunity Tax Credit;
Taxpayer’s eligibility to claim the Child Tax Credit; and
Taxpayer’s eligibility to claim the Earned Income Credit

Second: Paid Tax Return Preparers must know the four due diligence requirements for determining whether a taxpayer is eligible for these tax benefits:

Due diligence requirement number 1 requires that the tax return preparer complete an eligibility checklist or have alternative eligibility records based on information provided by the taxpayer or information reasonably known by the preparer. Practical Note: from myexperience in representing tax return preparers in IRS Tax Return Preparer Cases– it is absolutely best practice to document these eligibility on Form 8867, Paid Preparer’s Due Diligence Checklist. Also it is critical that this checklist be attached to the taxpayer’s return and a copy maintained in the files of the return preparer with all documentation used to establish the taxpayer’s eligibility to take the tax position.
Due diligence requirement number 2 requires that the tax return preparer completion of Form 8867 be based on information provided by the taxpayer or based on information otherwise reasonably known by the return preparer. Under this second due diligence requirement the tax return preparer must accurately compute the credit amount and must maintain a copy of the computation worksheets. Again from representing return preparers over the years in these matters; it is critical that the return preparer keep contemporaneous files on all this. IRS Due Diligence Examinations can be a surprise knock on the tax return preparer’s business door.
Due diligence requirement number 3 requires that the tax return preparer do some contemporaneous reasonable inquiries whenever the tax return preparer either knows, or have a reason to know that any of the information used by them in preparation of the taxpayer’s return looks inconsistent, incorrect or incomplete or otherwise raise the eyebrows of a reasonable and well informed tax return preparer knowledgeable in tax law. This is an objective standard, meaning what would a “reasonable well informed tax professional” think about the information supplied to the tax return preparer. Practice Note: the tax return preparer must make contemporaneous notes of any inquiry they make to establish eligibility of the tax position and they can expect to have to produce these contemporaneous notes in the event they receive a knock on their door from an IRS Agent seeking to conduct a Paid Preparer Due Diligence Examination. Word to the wise— the knowledge and inquiry must be documented, it is insufficient that the tax return preparer has knowledge of taxpayer’s in their head, for example family members, church members or other people the return preparer knows or thinks they know.
Due Diligence Requirement Number 4 requires that the paid tax return preparer to retain a copy of all of the eligibility materials used in establishing eligibility for the tax positions on the return for three years after the June 30th following the date the return or claim for refund was given to the taxpayer. Practice Note: This material should be kept in normal business records for at least three or four years from when the tax return is filed with the IRS.

Let me just say this– from experience in representing tax return preparer’s, another common area that comes under review is tax returns where the tax return contains a Schedule C. Often times we have seen the IRS examiner query the return preparer regarding tax positions taken on Schedule C using the same knowledge, need to inquire rules and documentation standards as those used for the CTC, AOTC, EIC, and Head of Household Filing Status. Word for the wise: Know your schedule C filers and document their business tax positions contemporaneously. Keep a copy of this contemporaneous documentation in your business files. A return preparer cannot simply take a customer’s word for business receipts and deductions. They must make reasonable inquiries and keep evidence of it in their books and records.

INTERVIEWER:Mlaah Singh, Tax Law Clerk

Interviewer Comment:

Thank you for breaking down your answer in such a way. In summation, Mr. Jackson has pointed out that in order for Due Diligence to be satisfied, a taxpayer must first conduct an eligibility checklist or at least have alternative eligibility records. Next in summary, the attorney has said that a taxpayer must complete Form 8867. Then, a taxpayer must address any inconsistencies that they discover while performing their tax return preparation duties. And finally, in summary the attorney has warned about the need for the paid tax return preparer to create contemporary records and maintain those records in their normal course of business. So moving forward, my next question is,

Question Number Three: What are the frequent challenges that tax return preparers encounter when navigating the due diligence requirements for common tax positions?

Interviewee: Coleman Jackson, Lawyer

ATTORNEY ANSWER – QUESTION 2

Tax return preparers navigating Paid Preparer Due Diligence Eligibility Requirements are confronted with challenges such as:

They must maintain current knowledge of all relevant tax laws and changes. So they will have to incur the cost of going to continuing tax education courses to make sure that they a knowledgeable about the tax positions that they might confront during tax season;

They must know their clients. For example, I know some Certified Public Accountants who refuse to accept any client that they don’t know through credible referrals. This may present the challenge of growing a vibrant tax preparation practice. They must complete due diligence checklists and do reasonable inquiries. All of this could be time consuming and expensive. Maybe their clients do not want to pay a reasonable fee for tax preparation work because they think it is easy or simple.

These are a few of the challenges that I have heard about when talking to tax return preparers. There are likely many more challenges presented to preparer’s who must comply with due diligence eligibility requirements.

Perhaps in our next podcast in this series, we can talk about specific types of challenges experienced by tax return preparers facing penalties for failure to be diligent in determining eligibility for EITC, AOTC, CTC/ACTC and HOH. We can do that in a future podcast episode in this Preparer Due Diligence Requirements Series if you like. We are going to have to go for now because I have to get to an appointment.

INTERVIEWER WRAP-UP: MlaahSingh, Tax Law Clerk

Attorney, thank you for sitting with me today in our 1st podcast on this very important topic: “Tax Return Preparer Due Diligence Requirements” I surely hope our audience will benefit from this Legal Thoughts series on tax preparer due diligence requirements and due diligence penalty cases. Folks, stay tuned to upcoming Legal Thoughts Podcasts on this important federal tax topic!

Our audience can send us inquiries at www.cjacksonlaw.com if they have questions or wish to comment on our podcasts in this series or any of our Legal Thoughts podcasts, blogs, or Law Watch Videos posted on our YouTube Channel. You can send an email directly to attorney at cj@cjacksonlaw.com and suggest other tax topics that you want us to discuss in future Legal Thoughts Podcast. We are open to your ideas for topics in tax and business law.

English callers: 214-599-0431 | Spanish callers: 214-599-0432 |Portuguese callers: 214-272-3100

ATTORNEY’S CLOSING REMARKS:

Thank you all for giving us your ear today as we started our new Legal Thoughts Podcast Series dealing with the Paid Tax Return Preparer Due Diligence Requirements for Determining Eligibility for Certain Tax Benefits. This was our first Episode in this series of podcast. We are basically talking about issues that can benefit our audience; especially, paid tax return preparers in our audience that frequently come up in IRS Paid Tax Preparer Penalty Cases. Stay tune for future episodes in this series.

Until next time, take care.

If you want to see or hear more taxation, business structuring and contracts litigation and immigration LEGAL THOUGHTS from Coleman Jackson, P.C. Subscribe to our Legal Thoughts Podcast on Apple Podcast, Google Podcast, Spotify or wherever you listen to your podcast. Stay tuned! 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.

How to lawfully hire temporary non-agricultural workers on a H-2B Visa? | Legal Thoughts

Coleman Jackson, P.C. | Transcript of Legal Thoughts
Published October 5, 2022

Overview:

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 episode of Legal Thought is a podcast where the Attorney, Coleman Jackson is being interviewed by Gladys Marcos, Immigration Legal Intern at Coleman Jackson, P.C. The topic of discussion is “How to lawfully hire temporary non-agricultural workers on a H-2B 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 Podcasts, Google Podcast, Spotify, or wherever you may listen to your podcast.

TRANSCRIPT:

ATTORNEY: Coleman Jackson

Legal Thoughts. Coleman Jackson, Attorney and Counselor at Law

“How to lawfully hire temporary non-agricultural workers on a H-2B Visa”

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 today is: “How to lawfully hire temporary non-agricultural workers on an H2-B visa? Other members of Coleman Jackson, P.C. are Johanna Powell, Tax Legal Assistant, Leiliane Godeiro, Litigation Legal Assistant, Alexis Brewer, Tax Legal Assistant, and Gladys Marcos, Immigration Legal Assistant.

On this “Legal Thoughts” podcast our immigration legal assistant, Gladys Marcos will be asking the questions and I will be responding to her questions on this important immigration topic, “How to lawfully hire temporary non-agricultural workers on an H-2B Visa?”

INTERVIEWER: Gladys Marcos, Immigration Legal Assistant

Hello everyone. My name is Gladys Marcos and I am the immigration legal assistant at Coleman Jackson, P.C. Coleman, P.C. is a taxation, litigation and immigration law firm based right here in Dallas, Texas.

My first question for you attorney is with the U.S. in constant need of workers, is there any immigration program that allows U.S. employers or U.S. agents to bring foreign nationals into the United States to temporarily fill non-agricultural positions.

ATTORNEY: Coleman Jackson

Good morning Gladys

Yes, the H-2B program allows United States employers to fill temporary non-agricultural jobs by filing Form I-129 with USCIS. Non-agricultural jobs include, but are not limited to, the following job categories: construction, landscaping, waiters, waitresses and cooks, retail store clerks, inventory stockers and cashiers, cleaning, repairs, pest control, debris removal, maintenance, hospitality, and similar unskilled labor occupations.

INTERVIEWER: Gladys Marcos, Immigration Legal Assistant

Okay and how does an employer determine whether they are eligible to participate in the H2-B Temporary Non-Agricultural Worker’s Visa?

ATTORNEY: Coleman Jackson

An employer must demonstrate to the Department of Labor (DOL) with credible evidence that:

There are not enough U.S. workers who are able, willing, qualified, and available to do the temporary work;

Hiring H-2B workers will not adversely affect the wages and working conditions of similarly employed U.S. workers; and

That the need for foreign workers is temporary. Temporary is measured in the terms of: (1) a one -time occurrence; (2) a seasonable need; (3) a peak load need; or (4) an intermittent need

INTERVIEWER: Gladys Marcos, Immigration Legal Assistant

Thank you for sharing the eligibility criteria. My next question is what are the steps a U.S. employer must take to petition to bring in foreign nationals under the H2-B temporary Non-Agricultural Workers Visa?

ATTORNEY: Coleman Jackson

There are three steps that an employer must take to apply an H-2B Visa:

Step 1: Submit a temporary labor certificate application to the DOL

Step 2: Submit a Form I-129 to USCIS

Step 3: Upon receiving an approval notice from USCIS, the employer must notify the prospective worker to apply for an H2-B, non-agricultural visa at the U.S. embassy in their home country

INTERVIEWER: Gladys Marcos, Immigration Legal Assistant

And who eligible to receive a H-2B non-agricultural worker’s visa?

ATTORNEY: Coleman Jackson

That is an excellent question, Gladys. Not every country is eligible to participate in the H-2B non-agricultural visa program. Let me explain, every year, the Department of Homeland Security updates the lost of eligible H2-B visa countries. Employers seeking to hire H2-B unskilled workers in their establishment must review this DHS list to determine which foreign nationals are currently eligible to participate in the H2-B Non-Agricultural Visa Program.

INTERVIEWER: Gladys Marcos, Immigration Legal Assistant

Okay and can workers who are already in the United States receive a H-2B Non-Agricultural Workers Visa?

ATTORNEY: Coleman Jackson

If the foreign national is in the U.S. on a non-immigrant employment visa, and a U.S. employer desires to hire the foreign national on a H2-B agriculturalist workers visa, the employer must file Form I-129, Petition for a Non-immigrant Worker.

Once the I-129 is approved, the employee must file a form I-539 that means that a foreign national must file a I-539 Non-immigrant Change of Status Application to change their non-immigrant visas.

Per DHS’s March 2021 announcement (pandemic related): Employers will also be able to hire workers who are already lawfully present in the United States in H-2B status without waiting for approval of the new petition, subject to certain conditions that we won’t go into in this particular podcast. We often go into much more detail on topics discussed in our law firm’s blogs; which can be found on our website at www.cjacksonlaw.com. Our blogs are free of charge.

Finally, if the foreign national is in the U.S. without documents, they cannot be hired as an H2-B non-agricultural worker, nor can foreign nationals who are here on student visas be hired by an American employer under the H2-B Visa Program. Employers cannot hire individuals here on visitor visas or here on a visa waiver program as an H2-B Non-agricultural Visa. These visa categories that I just mentioned cannot be changed to an H2-B non-agricultural worker visa.

INTERVIEWER: Gladys Marcos, Immigration Legal Assistant

How long can H-2B workers stay in the United States. Additionally, are they able to bring their families?

ATTORNEY: Coleman Jackson

Once a worker has been granted an H-2B visa they can remain in the United States for 3 years. When their H-2B Visa expires it cannot be extended or used to change status. During these 3 years, they can bring their spouse and children with them. Reminder: immigration law considers a person a child if they are unmarried and under 21 years of age.)

INTERVIEWER: Gladys Marcos, Immigration Legal Assistant

How is obtaining workers through the H2-B Visa program better than hiring workers as independent contractors?

ATTORNEY: Coleman Jackson

This is a very interesting and complex question, but only theoretically because in practice federal and state labor laws are extremely clear on this subject. So let me first of all say that federal and state law define whether a worker is an employee or an independent contractor. Whether a worker is properly classified as an employee or independent contractor does not depend on what the parties call the worker. In both federal labor law and Texas labor law, the critical question is whether the worker is under the direction and control of the employer. This is commonly referred to as the ‘direction and control’ test or common law test. In both federal law and Texas law the test consist of about 20 factors. I will not go into further details, but the significant point that I am making is that workers must be classified in accordance with the law. Classification of workers as employees or independent contractors is not a decision left to an employer.

The second point I would like to make at this time is this one:

Employers have federal tax filing requirements, deposit requirements and withholding requirements for all workers classified as employees. Employers must withhold income taxes from each payment paid to the worker, they must timely deposit withheld funds to the IRS, generally using the EFTPS payment system, and the employer must file timely Form 941 (quarterly payroll tax form) and Form 940 (annual payroll tax form) with the IRS. Employers must also give employees Form W2 by its due date, and they must file W4 transmittal documents with the Social Security Administration each year. Moreover all employers must complete and maintain Form I-9 within days of hiring a new worker as an employee where they identify the worker and review the workers eligibility to work lawfully in the United States. Completed Form I-9 must be kept by the employer and are subject to request for examination by the federal government. There can be severe civil penalties accessed for failure to withhold federal taxes, failure to deposit federal payroll taxes, and failure to file required tax returns. Likewise severe penalties can be accessed for misclassification of workers.

As for employer’s responsibilities in Texas; Texas employers must register with the Texas Work Force Commission. They must file quarterly Unemployment Tax Reports with the TWC and they must otherwise comply with the Texas Labor Code as it relates to employing workers in Texas. I might note that TWC periodically perform audit examinations in search for misclassification of workers by employers in Texas. There can be steep cost for misclassification of workers in Texas.

Employers properly classifying workers as independent contractors are not responsible for their tax liabilities or their tax reporting. Employers give the independent contractor a Form 1099 at the end of each year. Employers do not have to report payments to independent contractors to the TWC or any other state or local agency within the state of Texas.

So to summarize my first point: classification of workers is not a decision employers get to pick out of thin air by simply choosing to classified their workers as employees or independent contractors depending upon whether or not the classification makes them more or less competitive in their marketplace or industry. As I previously mentioned in awhile ago, misclassification of workers can catch up with you and have severe federal and state consequences if you get caught. Intentional misclassifications of workers and intentionally hiring workers who are not authorized to work in the United States could expose the organization and individual decision makers within the violating companies in serious legal jeopardy, including criminal prosecution.

My second point is that hiring unskilled workers in the H2-B program is lawful whereas hiring workers who are not authorized to work in the United States is a violation of I-9 rules and could subject violators to ICE investigations and examinations; and sometimes repeating what has already been said previous might be clarifying. Like this point; misclassification of workers could have significant federal tax consequences, such as, denial of labor cost during an IRS examination, or huge tax adjustments by TWC examiners during Texas Workforce Commission audits of the employer. Under some circumstances the IRS and/or TWC could refer the offending employer to each other and/or for prosecution on tax fraud, tax evasion or similar federal and state crimes.

So to summarize in a nutshell my answer to your question number 5 is this: the H2-B non-agricultural workers program can be used to lawfully hire workers in non-agricultural jobs in America. It’s a way of hiring the workers you need to successfully operate your business within the bounds of federal and state law. Law breakers are responsible for their actions and should be held accountable.

INTERVIEWER: Gladys Marcos, Immigration Legal Assistant

Thank you for that insight. My last question is this one: Are there any other things an employer should consider when thinking of using the H2B Visa Program?

ATTORNEY: Coleman Jackson

Well I cannot begin to think of everything any particular employer should think of when hiring or considering hiring foreign workers under the H2-B Non-Agricultural Workers Program because it depends on all the facts and circumstances that is not knowable to me right now. Employers would need to ask precise questions pertaining to them individually.

With that said, let me just say yes employers do need to know this point in any regardless of what their particular facts or circumstances might be: the USCIS sets a limit on how many H-2B visas available each fiscal year (October 1-September 30). The USCIS has recently increased this cap to meet the needs of the H-2B program, but even still, there are more employers applying for workers under the H2-B visa program than visas available each year.

Its important to keep processing times front of mind whenever you are considering filing an I-129 to hire H-2B workers. Plan well ahead of when you will actually need these temporary workers.

INTERVIEWER: Gladys Marcos, Immigration Legal Assistant

Attorney thank you for this clear and very important presentation on the H2-B temporary non-agricultural worker visa. Many American business owners looking for unskilled laborers and foreign nationals interested in coming to the United States to work temporarily are likely to find this information useful. For now, thanks for sitting with me today and answering my questions concerning how U.S. employers can lawfully hire temporary non-agricultural workers on a H-2B non-agricultural workers visa.

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 where ever they listen to their podcast. Everybody take care! And come back in about two weeks, for more taxation, litigation and immigration Legal Thoughts Podcast 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 |Portuguese callers: 214-272-3100

ATTORNEY: Coleman Jackson

This is the end of Legal Thoughts for now.

Thanks for giving us the opportunity to inform you about : “How to lawfully hire temporary non-agricultural workers on an H-2B Visa?”

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

Federal Tax Obligations of Gig Workers | Legal Thoughts

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Coleman Jackson, P.C. | Transcript of Legal Thoughts
Published July 25, 2021

Legal Thoughts is an audiocast 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 episode of Legal Thoughts is an audiocast where the Attorney, Coleman Jackson is being interviewed by Alexis Brewer, Tax Legal Assistant of Coleman Jackson, P.C. The topic of discussion is “Federal Tax Obligations of Gig Workers”. You can listen to this podcast by clicking here:

If you enjoy this podcast, make sure to stay tuned for more episodes from the taxation, litigation, and immigration Law Firm of Coleman Jackson, P.C. Be sure to subscribe. Visit the taxation, litigation and immigration law firm of Coleman Jackson, P.C. online at www.cjacksonlaw.com.

TRANSCRIPT:

ATTORNEY: Coleman Jackson

LEGAL THOUGHTS

COLEMAN JACKSON, ATTORNEY & COUNSELOR AT LAW

ATTORNEY: Coleman Jackson

Welcome to Legal 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.

In addition to myself, we have Alexis Brewer – Tax Legal Assistant, Leiliane Godeiro – Litigation Legal Assistant, Gladys Marcos – Immigration Legal Assistant, and Johanna Powell – Tax Legal Assistant.

On today’s “Legal Thoughts” podcast, our Tax Legal Assistant, Alexis Brewer, will be interviewing me on the important topic of: “Federal Tax Obligations of Gig Workers.”

INTERVIEWER: Alexis Brewer, Tax Legal Assistant

Hi everyone, my name is Alexis Brewer and I am a Tax Legal Assistant at the tax, litigation and immigration law firm of Coleman Jackson, Professional Corporation. Our law firm is located at 6060 North Central Expressway, Suite 620, right here in Dallas, Texas.

Good afternoon, Attorney; thank you for agreeing to sit with me as I interview you with respect to this hot tax topic: “Federal Tax Obligations of Gig Workers.”

Let’s jump right in,

Question 1: What is gig work and who classifies as a gig worker?

Attorney Answer – Question 1:

Hello Alexis.

The IRS defines gig work as “any activity where people earn income providing on-demand work, services or goods. Often, it’s through a digital platform like an app or website.” Since the COVID-19 pandemic, we’ve seen an increase in gig workers.

Gig work includes jobs like:

Driving for ride-sharing apps or deliveries (for example: Uber, Amazon, DoorDash)
Running errands or completing tasks (for example: Instacart or TaskRabbit)
Selling goods online or renting equipment (for example: Etsy or online shops)
Renting out property or part of it (for example: Airbnb or Turo)
Providing creative or professional services (for example: Upwork or Handy.com)
Any other temporary, on-demand or freelance work

INTERVIEWER: Alexis Brewer, Tax Legal Assistant

Question 2: What do gig workers need to know about their federal tax obligations?

Attorney Answer – Question 2:

First and foremost, Alexis, Gig workers must know that gig work is taxable under the Internal Revenue Code!

Whether it’s a full-time job or just a side hustle, taxpayers must report gig income on their federal tax return. Under the 2021 American Rescue Act, the reporting threshold for gig workers was reduced to $600 with no minimum transaction requirement. That means regardless of how many “jobs” or transactions you do, if you made more than $600, you are required to pay taxes on that income.

INTERVIEWER: Alexis Brewer, Tax Legal Assistant

Well, what taxes are gig workers responsible for?

Attorney Answer – Question 3:

This is a very complex question, and requires a nuanced answer since it depends on whether the gig worker is properly classified as an employee or as an independent contractor.

The IRS defines an employee as “anyone who performs work when an employer has the right to control what will be done and how it will be done. Even if the employer gives freedom of action.” This is the most intuitive classification because it is the normal employee/employer relationship we’re used to.

When a gig worker is classified as an employee, their employer withholds required taxes from the employee’s paycheck; such as, Income Taxes, Social security taxes & Medicare. Let me point out that Texas does not have a state income tax. As with typical employee-employer jobs, gig employees who are properly classified as an employee will receive a standard w-2, and includes their gig earnings reported on their W-2 on their annual Form 1040 tax return.

The more difficult or complex situation occurs when a gig worker is properly classified as an independent contractor. The general rule is that a worker is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done. For example, independent contractors normally have the freedom to hire others to complete their work.

Unlike employees, independent contractors do not have withholdings taken out of their paychecks before they receive them. This means independent contractors will receive annually a Form 1099 instead of a Form W-2. Independent Contractors are responsible for paying self-employment taxes. Self-employment taxes consist of the same two parts: Social security & Medicare. Unlike when the worker is an employee and employers pay one-half of these taxes, independent contractors are required to pay the entire amount of these taxes.

INTERVIEWER: Alexis Brewer, Tax Legal Assistant

How will gig workers know if they are employees or independent contractors?

Attorney Answer – Question 4:

It is the employer/business owner who will make this classification because they are ultimately responsible for withholding taxes if the worker is an employee. (If the employer cannot decide, Form SS-4 can be filed with the IRS, and the IRS will make the determination. Form SS-4 can be filed by the employer or the worker. Currently the IRS may take up to 6 months to process Form SS-4).

To determine if a worker is an employee or an independent contractor the employer will examine the relationship between the worker and the business.

Employers (or the IRS, if necessary) will need to consider all evidence of the degree of control and independence in this relationship. The facts that provide this evidence fall into three categories – Behavioral Control, Financial Control, and Relationship of the Parties.

Behavioral Control covers facts that show if the business has a right to direct and control what work is accomplished and how the work is done, through instructions, training, or other means.
Financial Control covers facts that show if the business has a right to direct or control the financial and business aspects of the worker’s job. This includes:
1. The extent to which the worker has unreimbursed business expenses
2. The extent of the worker’s investment in the facilities or tools used in performing services
3. The extent to which the worker makes his or her services available to the relevant market
4. The extent to which the worker can realize a profit or incur a loss, and
5. How the business pays the worker
Relationship of the Parties covers facts that show the type of relationship the parties had. This includes:
1. Written contracts or oral agreements describing the relationship the parties intended to create
2. Whether the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation pay, or sick pay
3. The permanency of the relationship, and
4. The extent to which services performed by the worker are a key aspect of the regular business of the company

Employers will need to consider the entire relationship with the worker when determining whether to classify the worker as an employee or independent contractor. Proper classification of workers is governed by federal and state labor laws and misclassification of workers can carry huge federal and state consequences.

INTERVIEWER: Alexis Brewer, Tax Legal Assistant

Okay, so let’s say a gig worker is classified as an independent contractor and is responsible for the self-employment tax you referenced.

QUESTION 5:
What does this mean?

Attorney Answer – Question 5:

If a gig worker is classified as an independent contractor, they are responsible for self-employment taxes. The United States tax system is a pay-as-you-go system, which means that gig workers classified as independent contractors who earned over $600 during the tax period are required to pay quarterly estimated tax payments.

The general rule is that everyone is required to pay federal taxes as they earn/receive income. Again, a pay-as-you-go system. Estimated tax payments are required when earned income is not subject to automatic withholdings (as with employees) and taxpayers expect to have tax liability at the end of the year.

Estimated taxes are calculated at the beginning of the year and are paid on a quarterly basis, typically due on April 15, June 15, and September 15 of the tax year, and the final payment is made on January 15 of the following year. Failure to pay estimated tax could result in a tax penalty assessment by the IRS.

INTERVIEWER: Alexis Brewer, Tax Legal Assistant

Attorney, thank you for such clear and thorough answers to my questions this afternoon. We’ve discussed a lot in a very short period of time, so let me wrap up my questions regarding the gig worker and federal income taxes with this one final question.

QUESTION 6:
What are the big takeaways for gig workers?

Attorney Answer – Question 6:

Thank you, Alexis for your excellent questions on this very important tax topic, because you are right, the gig economy took off during the pandemic. Let me summarize like this—

The main takeaway is that gig work is taxable!
The next big takeaway is that gig workers tax reporting responsibilities are based on how their company/employer classifies them… either as an employee or as an independent contractor:
1. If a gig worker is classified as an employee, taxes will be withheld from their paycheck, and they will receive a standard Form W-2.
2. If a gig worker is classified as an independent contractor, no taxes are withheld, and they are responsible for paying self-employment taxes for earnings over $600.
Finally, the last major takeaway is that if a gig worker is an independent contractor and is responsible for self-employment taxes, they may also be required to make quarterly estimated income tax payments directly to the IRS. I cannot overemphasize the importance of keeping up with estimated tax payments if required.

Interviewer Wrap-Up

Attorney, thank you for siting with me today to explain how U.S. law:

Defines what the term, “gig workers” even means,
Splits gig workers into two broad classifications as either employees or independent contractors, and
How U.S. tax law imposes varying federal tax obligations and responsibilities upon gig workers depending upon how they are classified by their employers – as either employees or independent contractors.

It seems like the overall idea here is that gig workers need to be aware of how their employers are classifying them, especially if they are independent contractors. And a general takeaway here is that surprises are not good where federal tax obligations and responsibilities are concerned.

To our listeners who want to hear more podcast like this one please subscribes to our Legal Thoughts Podcast on Apple Podcast, Google Podcast, Spotify or where ever you listen to your podcast. Take care, everyone! And come back in about two weeks, for more taxation, litigation and immigration Legal Thoughts from Coleman Jackson, P.C., 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 |Portuguese callers: 214-272-3100

Attorney Closing Remarks

This is the end of today’s Legal Thoughts!

Thank you all for giving us the opportunity to inform you about: “Federal Tax Obligations of the Gig Worker.”

If you want to see or hear more taxation, litigation and immigration LEGAL THOUGHTS from Coleman Jackson, P.C. Subscribe to our Legal Thoughts Podcast on Apple Podcast, Google Podcast, Spotify or wherever you listen to your podcast.

Stay tuned! 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.

Immigration Matters You Ought to Know About: USCIS Reverting back to 2008 US Citizenship Test | LEGAL THOUGHTS

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Coleman Jackson, P.C. | Transcript of Legal Thoughts Podcast
Published March 5, 2021.

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, Immigration Legal Assistant of Coleman Jackson, P.C. The topic of discussion is “Immigration Matters You Ought to Know About: USCIS Reverting back to 2008 US Citizenship Test”. 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: Immigration Matters You Ought to Know About: USCIS Reverting back to 2008 US Citizenship Test. 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 immigration legal assistant, Reyna Munoz, will be asking the questions and I will be providing the answers to the questions on this very important immigration topic: Immigration Matters You Ought to Know About: USCIS Reverting back to 2008 US Citizenship Test.

Interviewer: Reyna Munoz, Immigration Legal Assistant

Question 1:

Good morning Attorney, as you know we will be discussing a very important topic this week to keep our listeners informed on Immigration Matters that they ought to know about. Our topic of interest is the new United States Citizenship Test that has been announced by USCIS. Can you tell me what this is about?

Attorney Answers Question 1:

Good morning Reyna.
On February 22, 2021, the United States Citizenship and Immigration Services (USCIS) announced that it will go back to the 2008 version of the naturalization test. This will begin on March 1, 2021.

Interviewer: Reyna Munoz, Immigration Legal Assistant

Question 2:

Attorney, why did USCIS decide to revert to the 2008 U.S. Citizenship test?

Attorney Answers Question 2:

Well Reyna, this is due to an executive order that the Biden Administration released on February 02, 2021 titled “Restoring Faith in Our Legal Immigration Systems.” USCIS determined that the revised naturalization civics test that was implemented on December 1, 2020 may inadvertently create potential barriers to the naturalization process. Reverting back to the 2008 civics test will eliminate barriers and make the process more accessible to all eligible individuals.

Interviewer: Reyna Munoz, Immigration Legal Assistant

Wow attorney, it’s good to see that these barriers will be eliminated by reverting back to the 2008 naturalization civics test!

Question 3:

Who can take this test, attorney?

Attorney Answers Question 3:

Reyna, the civics test is given to applicants that are applying for United States Citizenship, it is also a requirement for naturalizing.

Interviewer: Reyna Munoz, Immigration Legal Assistant

This test is incredibly important then, for those who wish to become naturalized US Citizens!

Question 4:

What sort of topics does the test contain?

Attorney Answers Question 4:

That’s a good question, Reyna!
The people taking the test must demonstrate knowledge and understanding of the fundamentals of the history, principles, and form of government of the United States.

Interviewer: Reyna Munoz, Immigration Legal Assistant

Question 5:

Attorney, does USCIS provide any study guides or any assistance in helping applicants study for the test??

Attorney Answers Question 5:

Yes, test items and study guides can be found on the Citizenship Resource Center on WWW.USCIS.GOV/CITIZENSHIP

Interviewer: Reyna Munoz, Immigration Legal Assistant

Thank you for sharing this helpful website!

Question 6:

Attorney, you’ve answered a lot of important questions! My final question is, what about the people that have been studying for the 2020 test? How will they be affected by this new order?

Attorney Answers Question 6:

Good question, Reyna
Those that filed their application for naturalization on or after December 1, 2020 and before March 1, 2021 will be given the option by USCIS to take either the 2020 civics test or the 2008 civics test. There will also be a transition period where both tests are being offered. On April 19, 2021, the 2020 test will be phased out for those taking the test for the first time and those applicants that are filing on or after March 1, 2021 will take the 2008 civics test.
Reyna, I hope this answered your question. Do you have any more questions?

Reyna Munoz’s Concluding Remarks:

That answered my question perfectly! Those are all my questions for now, Attorney, thank you! This information is incredibly helpful for those that are going to take the United States Citizenship test!
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! Follow us 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. Portuguese callers: 214-272-3100.

Attorney’s Concluding Remarks:

THIS IS THE END OF “LEGAL THOUGHTS” FOR NOW

Thanks for giving us the opportunity to inform you about “Immigration Matters You Ought to Know About: USCIS Reverting back to 2008 US Citizenship Test.” If you want to see or hear more taxation, litigation and immigration LEGAL THOUGHTS from Coleman Jackson, P.C. Stay tuned! 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 United States Citizenship Act of 2021 | LEGAL THOUGHTS

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Coleman Jackson, P.C. | Transcript of Legal Thoughts Podcast
Published February 25, 2021.

This particular episode of Legal Thoughts is a podcast where the Attorney, Coleman Jackson is being interviewed by Reyna Munoz, Immigration Legal Assistant of Coleman Jackson, P.C. The topic of discussion is “The United States Citizenship Act of 2021”. You can listen to this podcast by clicking here:

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: The United States Citizenship Act of 2021
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 immigration legal assistant, Reyna Munoz, will be asking the questions and I will be providing the answers to the questions on this very important immigration topic: “The United States Citizenship Act of 2021.

Interviewer: Reyna Munoz, Immigration Legal Assistant

Question 1:

Attorney, I have been hearing a lot about President Biden’s Immigration Bill proposal. Can you tell me what this is all about?

Attorney Answers Question 1:

Yes, Reyna. On January 20, 2021, the Biden Administration released a statement that states his immigration bill named the United States Citizenship Act of 2021 has been sent to Congress. This immigration bill creates a road map to citizenship for undocumented people, it keeps families together, embraces diversity, promotes immigrant and refugee integration and citizenship. Not only that, but it also includes growing the economy, it protects workers from exploitation and improves the employment verifications process.
This immigration bill also discusses border protection by supplementing existing border resources with technology and infrastructure, manages the border and protects border communities, cracks down on criminal organizations, addresses the root cause of migration, improves immigration courts, and supports asylum seekers and other vulnerable populations.
We are not sure if this bill will get through Congress, but we believe it is important to educate the public on the contents of this immigration bill proposal.

Interviewer: Reyna Munoz, Immigration Legal Assistant

Question 2:

Attorney, if this bill passes, who benefits from it?

Attorney Answers Question 2:

If this bill passes undocumented people will be able to apply for temporary legal status. After five years, if they pass a criminal and National security background check and pay their taxes, they will be able to apply for a green card.
Furthermore, dreamers, TPS holders, and immigrant farmworkers who meet specific requirements are eligible for green cards immediately under this legislation.
Keep in mind that this is an administration proposal. It must be negotiated and approved by both the U.S. House of Representatives and the U.S. Senate and signed by the President in order to become law. There could be many modifications and compromises along the way. And this comprehensive immigration proposal may never become law.

Interviewer: Reyna Munoz, Immigration Legal Assistant

Question 3:

Attorney, what about US citizenship? Will undocumented people be able to apply for citizenship at any point?

Attorney Answers Question 3:

Yes, Reyna. As a matter of fact, all green card holders who pass additional background checks and demonstrate knowledge of English and U.S. civics can apply to become United States citizens.

Interviewer: Reyna Munoz, Immigration Legal Assistant

That is amazing news!

Question 4:

What about the people that have an approved family-sponsorship petition outside of the United States?

Attorney Answers Question 4:

This comprehensive immigration bill proposal provides a section on keeping families together. Those that have an approved family-sponsorship petition will be allowed to join their family in the United States on a temporary basis while they wait for green card to become available.

Interviewer: Reyna Munoz, Immigration Legal Assistant

Question 5:

Attorney, does the bill state anything on integration for immigrants and refugees?

Attorney Answers Question 5:

Yes, the bill provides funding for state and local governments, private organizations, educational institutions,community-based organizations, and not for profit organizations. This funding is to expand programs and promote integrations and inclusion. It will also increase English-language instructions and provide assistance to individuals seeking to become citizens.

Interviewer: Reyna Munoz, Immigration Legal Assistant

That is great to hear, attorney!

Question 6:

How will this immigration bill help grow the United States economy?

Attorney Answers Question 6:

This bill will give the Department of Homeland Security the authority to adjust green cards based on macroeconomic conditions and it will incentivize higher wages for non-immigrant, high-skilled visas to prevent unfair competition with American workers. It will also provide dependents of H-1B visa holders work authorizations and children will be prevented from aging out of the system.

Interviewer: Reyna Munoz, Immigration Legal Assistant

Question 7:

How will this immigration bill protect undocumented people in the workplace?

Attorney Answers Question 7:

This bill will protect migrant and seasonal workers by increasing the penalties for employers who violate labor laws. It also grants greater access for U-Visa for workers who suffer serious labor violations and cooperate with worker protection agencies.
Also, DHS and the Department of Labor will be required to establish a commission involving labor, employer, and civil rights organization to make recommendations for improving the employment verification process.

Interviewer: Reyna Munoz, Immigration Legal Assistant

Question 8:

Attorney, if this bill passes it will be very helpful for the undocumented community that meet certain requirements. However, what does this bill have to say in regards to border security and crime?

Attorney Answers Question 8:

Reyna, you are right. If this bill passes it will be a great help for a lot of undocumented people. However, it will also provide more robust border security. This bill will provide funding for training and continuing education to promote agent and officer safety and professionalism. It will also provide budget to deploy technology to expedite screening and enhance the ability to identify narcotics and other contraband at every land, air, and seaport of entry. This bill also gives the ability to prosecute individuals that are involved in smuggling and trafficking networks.

Interviewer: Reyna Munoz, Immigration Legal Assistant

Question 9:

It’s good to hear that this bill also addresses border security and targets criminal activity. Does the bill say anything about finding the root source of migration?

Attorney Answers Question 9:

Yes Reyna. This immigration bill will also dedicate funds to find the underlying cause of migration. It will also increase assistance to El Salvador, Guatemala, and Honduras. It will also re-establish the Central American Minors program which will reunite children with U.S. relatives.

Interviewer: Reyna Munoz, Immigration Legal Assistant

Question 10:

Thank you, Attorney, for that information. What else does the bill say about protecting vulnerable individuals that are undocumented?

Attorney Answers Question 10:

Well Reyna, this bill will reduce immigration court backlogs and will expand training for immigration judges. It will also restore fairness and balance to the immigration system. The bill will also eliminate one year deadline for filing asylum claims and will raise the cap on visas from 10,000 to 30,000.
The U.S. Citizenship Act of 2021 sent to Congress by the President is in the first steps of the legislative process. Again, in order for this bill to become law, it must be passed by the U.S. House of Representatives and the U.S. Senate. There might be many changes along the way as this bill goes through the legislative process. Its fate in the legislative process is unknown. People should stay tune for further updates.
Reyna, do you have any additional questions regarding the United States Citizenship Act of 2021 proposed by President Biden?

Reyna Munoz’s Concluding Remarks:

No, I think those are all my questions for now Attorney. Thank you for explaining this important bill that if passed will change the lives of so many people that are undocumented.
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! Follow us 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.
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Attorney’s Concluding Remarks:

THIS IS THE END OF “LEGAL THOUGHTS” FOR NOW

Thanks for giving us the opportunity to inform you about “The United States Citizenship Act of 2021.”If you want to see or hear more taxation, litigation and immigration LEGAL THOUGHTS from Coleman Jackson, P.C. Stay tuned! 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 – Did Your Families ITINs Expire In 2019? | LEGAL THOUGHTS

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Published July 14, 2020

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 “Potentially Over 2 Million ITINs Expired at the End of 2019: Did your families ITINs expire in 2019.” You can listen to this podcast 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 where ever 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: “Potentially Over 2 Million ITINs Expired at the End of 2019: Did your families ITINs expire in 2019.”
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: “Potentially Over 2 Million ITINs Expired at the End of 2019: Did your families ITINs expire?”

Interviewer: Mayra Torres, Public Relations Associate

Question 1:

What is an ITIN and who uses an ITIN?

Attorney Answers Question 1:

Individual Taxpayer Identification Numbers or ITINs are used by people who have federal tax filing or federal tax payment obligations under U.S. federal tax law who are not eligible for a Social Security number.
ITINs are used by many Texans who are not authorized to work in the United States because they do not have work authorizations issued by the Department of Homeland Security; therefore, these workers cannot obtain a Social Security number from the Social Security Administration. I point out that an ITIN cannot be used for work authorization purposes; it is solely to be used for tax compliance purposes.
Many undocumented individuals who live and work in the United States use ITINs which are issued by the United States Treasury for tax purposes. Whole families quite often use ITINs to fulfill their tax obligations and many undocumented children also use ITIN’s so that their parents can take the child tax credit, earned income credit and other benefits offered to taxpayers in the Internal Revenue Code.

Interviewer: Mayra, Public Relations Associate

Question No. 2

Oh, I see; thanks for giving me a full answer to my questions.
I have a few more questions…: Are ITINs like a Social Security Number; I mean Social Security Numbers issued by the Social Security Administration are assigned to a person for life, right? How about the ITIN issued by the U.S. Department of Treasury? Is an ITIN issued to a person for life too?

Attorney Answers Question No. 2

Those are extremely good questions, Mayra.
A Social Security Number issued to a person by the Social Security Administration is issued to them for life. That means a person receives only one social security number that they use their entire lives. Most social security numbers are assigned when U.S. citizens are children. They keep that number for life.
No, the ITIN is not issued for the life of the recipient. The U.S. Congress passed a law called “Protecting Americans from Tax Hikes Act of 2015 (PATH Act) which became law on December 18, 2015.
The PATH Act modified U.S. Tax law, 26 U.S.C. Section 6109 as it pertains to ITINs in two major ways:
Number 1: ITINs that have not been used on a tax return for 3 tax periods expire. For example, ITINs not used on a tax return in 2014, 2015, or 2016 expired December 31, 2017. ITINs not used on a tax return for 2015, 2016 or 2017 expired December 31, 2018. And ITINs not used on a tax return for 2016, 2017, and 2018 expired on December 31, 2019.
WARNING: Filing delinquent tax returns are extremely problematic because household ITINs expire by 3 years of none use automatically. This is a major development regarding ITINs since the PATH Act became law in the United States.
Now, let me discuss the second major change to tax law by enactment of the PATH Act:
The PATH Act of 2015 authorized the Internal Revenue Service to develop and implement an annual rolling middle digit expiration schedule for all ITINs in circulation.
Under this rolling middle digit expiration schedule, the IRS makes an annual announcement listing the middle digits of ITINs which will expire end of that calendar year. This list of expiring ITINs is usually posted on IRS.gov and possibly in financial newspapers.
Since publishing the list of expiring ITINs over the years since the PATH Act, the IRS has announced that the following middle digit ITINs would expire if not properly renewed by the holder of the ITIN:
All ITINs with middle digits of 70, 71, 72 or 80 expired on December 31, 2017 if not properly renewed.
All ITINs with middle digits of 73, 74, 75, 76, 77, 81, or 82 expired on December 31, 2018.
All ITINs with middle digits of 83, 84, 85, 86 or 87 expired on December 31, 2019.
Let me just say that the IRS announced on October 10, 2019 that these ITINs can be renewed if the holder files a Form W-7 with the proper paperwork. Moreover, the IRS also said that ITINs with middle digits of 70 through 82 that expired in 2016, 2017 and 2018 can also be renewed if the proper paperwork is filed. So people should understand that they can renew an expired ITIN.

Interviewer: Mayra, Public Relations Associate

Question 3:

Wow that is a lot! It’s good to know that ITIN users can renew their expiring and expired ITINs. So how are ITINs renewed? I mean what does an ITIN user have to do to renew their ITIN?

Attorney Answers Question No. 3

Those are good questions, Mayra.
The ITIN holder should have received an IRS Notice CP-48 alerting them to the fact that their ITIN was about to expire. This notice would have given them detailed instructions as to how to renew their ITIN. This Notice however could have been sent to the address where they lived at the time they originally applied for their ITIN.
If they did not receive the notice and instructions, they can still renew their ITIN by filing IRS Form W-7 and complying with all the instructions listed in the W-7 Instructions.
I might add that ITIN users should check all of the ITINs used by the members of their household and renew all the ITINs in the household even though only one or two of them have expired. The renewal can be filed for all ITINs in a household; and what I mean about household, is mom, dad and minor children who all use ITINs because they are not eligible for social security numbers.

Interviewer: Mayra, Public Relations Associate

Question No. 4:

This has been informative. One last question Attorney:
What can happen if an ITIN expires and is not timely renewed?

Attorney Answers Question No. 4:

Bad things are all but certain to happen:
Tax Refunds could very likely to be delayed
The family could be denied the child tax credit with all the potential year-after-year tax difficulties that could arise from falsely claiming the child tax credit
The earned income credit could be denied with all the potential long term implications from falsely claiming the earned income credit
Accuracy Penalties and interest could be assessed by the IRS for filing inaccurate tax returns.
To summarize: A taxpayers failing to renew an ITIN could lead to all kinds of difficulties with the Internal Revenue Service’s Exam Unit and Collections division. Taxpayers who use these ITINs must remain vigilant annually and check to see whether any of the ITINs used in their households are set to expire either because of expiration under the 3 year of none use rule or expiration under the IRS rolling middle digit expiration schedule.

Attorney’s Concluding Remarks:

This is the end of Legal Thoughts for now!

Thanks for giving us the opportunity to inform you about expiration of ITINs: It’s time to check Your ITINs because they might be expired or expiring soon. 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.