Category Archives: Taxation

The Heavy Highway Vehicle Use Tax – Upcoming Deadline August 31, 2022 | Legal Thoughts

Coleman Jackson, P.C. | Transcript of Legal Thoughts
Published August 15, 2022

The Heavy Highway Vehicle Use Tax - Upcoming Deadline August 31, 2022

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: The Heavy Highway Vehicle Use Tax — Upcoming Deadline August 31, 2022. 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: The Heavy Highway Vehicle Use Tax — Upcoming Deadline August 31, 2022.

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: The Heavy Highway Vehicle Use Tax and its upcoming deadline of August 31, 2022.

Let’s get started.

Question 1: Attorney, who in America is required to the pay heavy highway use tax?  How does a driver determine whether they must pay this heavy highway use tax? I mean, many of us commute from home to our places of work on a daily basis!

Attorney Answer – Question 1:

Good afternoon, Alexis.

First of all, let me address your concerns regarding the average commuter: the Heavy Highway Use Tax does not apply to the average commuter.

Now that I have removed that fear, let me address your question in earnest.

Alexis, the Heavy Highway Use Tax applies to those highway drivers who drive America’s highways with any self-propelled vehicle designed to carry a load regardless of whether or not their motor vehicle is also designed to perform other functions. The key focus addressed by Congress is not on heavy highway use, generally, but rather focus is on the wear and tear on our interstate highway system by motor vehicles like tractor trailer trucks and the like pulling and carrying bulk cargo over the highways.

The focus is on highway use by heavy vehicles, such as, massive trucks, truck tractors, and commercial buses. Generally, vans, pickup trucks, panel trucks, box trucks and similar vehicles are not subject to the heavy highway use tax because they have a taxable gross weight of less than 55,000 pounds.

The answer to the second part of your question, Alexis, as to what drivers need to know in making a determination as to whether the heavy highway use tax applies to them is as follows:

  1. What is the taxable gross weight of your vehicle? Is it 55,000 pounds or not?
  2. What is the month the vehicle was first used during the tax period? A tax period starts on July 1 of one year and ends on June 30 of the following year.

INTERVIEWER: Alexis Brewer, Tax Legal Assistant

That leads me right into my next question –

Question 2: What does the term taxable gross weight mean?

Attorney Answer – Question 2:

That’s a great question, Alexis.
The Internal Revenue Code addresses two concepts when defining the term taxable gross weight:
First Concept:  Actual unloaded weight is the empty weight of the truck, truck-tractor, or bus, fully equipped for service.
What does it mean that a vehicle is “fully equipped for service”?

  1. With respect to trucks and truck-tractors, fully equipped for service includes the body of the vehicle, accessories, equipment attached to or carried on such truck or truck-tractor for use in connection with the movement of the vehicle by means of its own motor or for use in the maintenance of the vehicle; and a full complement of lubricants, fuel, and water. Fully equipped for service does not include the driver, any equipment (not including the body) attached to or carried on the vehicle for use in handling, protecting, or preserving cargo, or any special equipment (such as an air compressor, crane, specialized oilfield machinery, etc.) mounted on the vehicle for use on construction jobs, in oilfield operations, etc.
  2. With respect to buses, fully equipped for service includes body, accessories, equipment attached to or carried on such bus for use in connection with the movement of the vehicle by means of its own motor, for use in the maintenance of the vehicle, or for the accommodation of passengers or others, and a full complement of lubricants, fuel, and water. It does not include the bus driver.

Second Concept: The taxable gross weight of a highway motor vehicle is determined by using the following mathematical formula:
1. the sum of the actual unloaded weight of the vehicle fully equipped for service, plus
2. the actual unloaded weight of any semitrailers or trailers fully equipped for service customarily used in combination with the vehicle, plus
3. the weight of the maximum load customarily carried on the vehicle and on any semitrailers or trailers customarily used in combination with the vehicle.
In summary, the taxable gross weight of a vehicle is the sum of: the actual unloaded weight of the vehicle that is fully equipped for service, the actual unloaded weight of trailers or semi-trailers fully equipped for service typically used in combination with the vehicle, and the weight of maximum load typically carried on the vehicle and on trailers or semi-trailers.

INTERVIEWER: Alexis Brewer, Tax Legal Assistant

Question 3: What are the weight categories and the tax rate that the owners must pay?

Attorney Answer – Question 3:

The weight is very straightforward. Vehicles that weigh 55,000 tons and above must pay the heavy highway use tax.

The heavy highway use tax rate is between $100 and $550 using the mathematical formula that I just finished explaining.

INTERVIEWER: Alexis Brewer, Tax Legal Assistant

Well, are there any exemptions to the heavy highway use tax?

Attorney Answer – Question 4:

Yes, in fact there are several exemptions to the Heavy Highway Use Tax. Exemptions from this excise tax require that a highway motor vehicle be used and actually operated by:

  • The Federal Government,
  • The District of Columbia
  • A state or local government,
  • The American National Red Cross,
  • A nonprofit volunteer fire department, ambulance association, or rescue squad,
  • An Indian tribal government but only if the vehicle’s use involves the exercise of an essential tribal government function, or
  • A mass transportation authority if it is created under a statute that gives it certain powers normally exercised by the state.

Also exempt from the tax (not required to file Form 2290) are:

  • Qualified blood collector vehicles (see below) used by qualified blood collector organizations, and
  • Mobile machinery that meets the specifications for a chassis as described under Specially designed mobile machinery for non-transportation functions.

INTERVIEWER: Alexis Brewer, Tax Legal Assistant

Alright, Attorney, I have a cluster of final questions:

  1. When is the deadline for filing Form 2290, the Heavy Highway Use Tax Return?
  2. What happens if the Heavy Highway Use Tax return is not timely filed??

Attorney Answer – Question 5:

Section 41.6011(a)1 of the Income Tax Regulations requires each person that is liable for the tax imposed by Internal Revenue Code Section 4481 to file for each taxable period. The taxable period begins July 1 and extends through June 30 the following year. Form 2290, the Heavy Highway Use Tax Return is due by August 31st of each year. For drivers of first use vehicles after July 1st, the filing deadline is the last day of the month following the month of first use.

Let me point out that the return due date and the payment due date is the same; August 31st. The deadline for this year, is Wednesday, August 31, 2022. Once completed, Form 2290, the Heavy Highway Use Tax Return is filed with the Internal Revenue Service.

Possible tax penalties for failure to file a required Form 2290, Heavy Highway Use Tax Return, include failure to file penalties or accuracy penalties in the event the computations are wrong.  These are 20% penalties that are imposed by the IRS in addition to the taxes originally due. Heavy highway truck drivers are likely to receive notices of noncompliance from the IRS.

Let me just add this warning: sometimes oversight of these excise tax areas, like The Heavy Highway Use Tax, result in audit examinations of taxpayers entire Form 1120 (corporate tax returns), 1065 (partnership returns), and 1040 (individual) tax returns of parties who fail to comply with Internal Revenue Code Section 4481 and the related Internal Revenue Regulations.

Interviewer Wrap-Up

Attorney, thank you for siting with me today to explain this information about the Heavy Highway Vehicle Use Tax and its upcoming deadline of August 31, 2022.

The takeaway seems to be that it’s better to file these excise taxes (like the Heavy Highway Vehicle Use Tax) on time to avoid penalties that later could bring bad consequences for the taxpayer’s household and business.

To our listeners who want to hear more podcast like this one please subscribe 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: the Heavy Highway Vehicle Use Tax and its upcoming deadline of August 31, 2022.

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.

Federal Tax Obligations of Gig Workers | Legal Thoughts

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

Federal Tax Obligations of Gig Workers

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:

  1. Driving for ride-sharing apps or deliveries (for example: Uber, Amazon, DoorDash)
  2. Running errands or completing tasks (for example: Instacart or TaskRabbit)
  3. Selling goods online or renting equipment (for example: Etsy or online shops)
  4. Renting out property or part of it (for example: Airbnb or Turo)
  5. Providing creative or professional services (for example: Upwork or Handy.com)
  6. 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.

  1. 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.
  2. 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
  3. 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—

  1. The main takeaway is that gig work is taxable!
  2. 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.
  3. 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:

  1. Defines what the term, “gig workers” even means,
  2. Splits gig workers into two broad classifications as either employees or independent contractors, and
  3. 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.

Pandemic-Related Changes to the Child Tax Credit That Are Likely to End | Legal Thoughts

Coleman Jackson, P.C. | Transcript of Legal Thoughts
Published June 27, 2022

Pandemic-Related Changes to the Child Tax Credit That Are Likely to End

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 Alexis Brewer, Tax Legal Assistant of Coleman Jackson, P.C. The topic of discussion is “Pandemic-Related Changes to the Child Tax Credit That Are Likely to End”. 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: “The Child Tax Credit,” specifically, the “Pandemic-Related Changes to the Credit That Are Likely to End.”

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: “Pandemic Related Child Tax Credit Changes Are Likely to End”.

Let’s jump right in,

Question 1: What is the Child Tax Credit and why was it created by the U.S. Congress?

Attorney Answer – Question 1:

Hello Alexis.

The Child Tax Credit (CTC) is a tax credit granted to taxpayers with qualifying children. The Child Tax Credit was implemented almost 30 years ago, and was designed to provide assistance to lower-income and middle-income families raising children.

The credit aims to reduce tax liability and, in some cases, entitles taxpayers to claim a tax refund despite otherwise not being required to file a tax return.

This Refundable portion of the Child Tax Credit is known as the “Additional Child Tax Credit”

INTERVIEWER: Alexis Brewer, Tax Legal Assistant

That leads me right into my next question –

Question 2: What are tax credits and why are they beneficial to American taxpayers?

Attorney Answer – Question 2:

That’s a great question.

Tax credits are used to benefit taxpayers by reducing dollar-for-dollar the amount of federal income taxes owed.

Tax credits are beneficial because they directly reduce American taxpayers’ federal income tax burden.

  • For example, assume a taxpayer owes $4,000 before applying tax credits of $3,000; after applying the $3,000 tax credit, the taxpayer owes only $1,000 in federal income taxes.

Tax credits can also be refundable, and in those situations, taxpayers are entitled to a tax refund if their credit exceeds the total amount of taxes they owed.

  • So in our example above, if taxpayer started out owing only $2,000 before applying the $3,000 tax credit, his tax liability would be covered, and he would be able to claim a $1,000 refund.

This, in a nutshell, is the beneficial use of tax credits in the Internal Revenue Code.

Now let’s compare a tax credit to a tax deduction. Tax deductions are applied to reduce taxpayer’s income before calculating taxes owed.

Remember credits are applied after determining income & directly reduce taxes owed

  • For example, assume the taxpayer has income for the year of $50,000 and will receive a $3,000 deduction for mortgage interest paid on their home during the tax period. The deduction is applied to reduce the taxpayer’s taxable income down to $47,000. Taxpayer will then calculate taxes owed based on their specific tax bracket, and later apply tax credits to reduce their ultimate tax burden.

INTERVIEWER: Alexis Brewer, Tax Legal Assistant

Okay, that makes sense.

Question 3: Who qualifies for the Child Tax Credit and how is the benefit claimed?

Attorney Answer – Question 3:

The child tax credit can be claimed by parents and guardians for each qualifying child.

The term qualifying child is defined in the Internal Revenue Code. The term qualifying child means a dependent that meets all of the following requirements:

  1. Be under the age of 18 at the end of the tax year
  2. Be the taxpayer’s son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of one of these (for example, a grandchild, niece or nephew)
    1. Qualifying Child includes adopted children
  3. Provide no more than half of their own financial support during the year
  4. Have lived with you for more than half the year
  5. Be properly claimed as your dependent on your tax return
  6. Not file a joint return with their spouse for the tax year or file it only to claim a refund of withheld income tax or estimated tax paid
  7. Have been a U.S. citizen, U.S. national or U.S. resident alien
    1. Qualifying child must have a social security number, ITIN not valid.

To receive the full credit amount, taxpayer’s annual income must not surpass:

  • $150,000 if you are married and filing a joint return, or if you are filing as a qualifying widow or widower;
  • $112,500 if you are filing as a head of household; or
  • $75,000 if you are a single filer or are married and filing a separate return.

As annual income increases, phaseout amounts are triggered to reduce the additional credit amounts received per child.

Taxpayers claim the child tax credit by listing dependents on their annual 1040 tax return when filing their individual tax return.

INTERVIEWER: Alexis Brewer, Tax Legal Assistant

Attorney, now that you have given a brief overview of the child tax credit; namely-

  1. The congressional policy implementing the child tax credit was to give tax relief to low- and middle-income families with children;
  2. Who qualifies for the child tax credit is defined in the internal revenue code, and
  3. The child tax credit is claimed by taxpayers with a qualified child on their annual 1040 tax return.

Question no. 4: Attorney, can you explain how much taxpayers might receive in the form of a Child Tax Credit?

Attorney Answer – Question 4:

Remember that the Child Tax Credit was originally created to provide aid to lower-income and middle-income families with children. This is possibly the reason why Congress may revise thresholds and various other aspects of the Child Tax Credit during periods of economic struggle and other issues impacting American households with children.

A great example of changes made by Congress to the Child Tax Credit were those made during the Covid-19 global pandemic. To offset the economic impacts and displacements due to the devastation caused by Covid-19 on families, the Child Tax Credit was amended in 2021.

2021 Changes to the Child Tax Credit under the American Rescue Plan were as follows:

  1. Credit was increased to $3,000/child. $3,600 for children under 6.
  2. Credit was made fully refundable. Taxpayers were able to claim 2021 child tax credit as long as they filed a tax return. Even if they didn’t owe any federal income tax for the year.
  3. Advanced monthly payments were made to taxpayers with qualifying children from July 2021 through December 2021. Families with qualifying children received about $300 in monthly benefits instead of having to wait to receive their tax refund the following year.

INTERVIEWER: Alexis Brewer, Tax Legal Assistant

Wow those sound like some great benefits.

Question no. 5: What upcoming changes to the child tax credit should taxpayers be aware of?

Attorney Answer – Question 5:

Unfortunately, the enhanced Child Tax Credit was temporary and expired December 31, 2021. Unless Congress extends these Covid-19 Child Tax Credit modifications implemented during the pandemic; the child tax credit will revert back to what it was in 2020 for 2022 and future tax periods. As of yet, Congress has not addressed the issue. Families receiving the child tax credit must budget their household affairs accordingly–

Major changes to be expected in 2022:

  1. Credit will revert to $2,000/dependent
  2. Dependents are capped at 16 and younger
  3. Credit is NOT fully refundable
    1. Max refund in 2022 is capped at $1,500
    2. The taxpayer must have earned income to be eligible for refund
  4. There will be no advanced payments. That means child tax credit is claimed on the annual 1040 and is received when that return is accepted, processed and released by the IRS; not on a monthly basis.

INTERVIEWER: Alexis Brewer, Tax Legal Assistant

Question no. 6: So, what does this all mean for taxpayers?

Attorney Answer – Question 6:

Well Alexis, as I suggested before, taxpayers should manage their expectations and adjust their household budgets for 2022 and beyond since the 2021 modifications to the Child Tax Credit were in response to the upheavals caused by the Covid-19 global pandemic.  Warning; pay attention to this:

  1. Monthly payments of child tax credit are a thing of the past,
  2. Taxpayers will have to wait until they file their tax return for 2022 and subsequent tax periods
  3. Expect smaller child tax credit amount per child than you received during the pandemic relief

Taxpayers should keep an eye on Congress; but no one in Congress seem to be talking, these days of high inflation concerns, about extending the pandemic related child tax credit changes; however,Congress could still extend 2021 child tax credit changes.

Interviewer Wrap-Up

Attorney, thank you for siting with me today to explain what the Child Tax Credit is, why it was implemented in U.S. tax law and on the very likely possibility that the expanded Child Tax Credit benefits associated Covid-19 Pandemic Relief might end soon.

It seems like the take away here is that American households who were benefiting from these expanded child tax credit benefits might have to make some budget adjustments.

To our listeners who want to hear more podcast like this one please subscribe to our Legal Thoughts Podcast on Apple Podcast, Google Podcast, Spotify or where ever you listen to your podcast.  Everyone take care!  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: “Pandemic Related Child Tax Credit Changes Are Likely to End”

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.

Gains from Sale Or Exchange of a Residence are Sometimes Taxable

 By:  Coleman Jackson, Attorney & Certified Public Accountant
June 12, 2022

Gains from Sale Or Exchange of a Residence are Sometimes Taxable

The residential real estate market has been hotter than a Texas Summer for more than three years now.  Principal residences have been flying off the shelf for just as long throughout Texas and practically everywhere else in the United States. First time home buyers, others and investors too have been bidding up the prices; seemly, with no end in sight to higher and higher prices.  I heard recently that the pace of home sales in the North Texas area has begun to slow a bit; but the prices have not modulated that much.  Prices are up; and residential residence sellers are still in the power seat; some continue to flip their homes like flipping pancakes on a hot griddle.  Lots of money is being made by home owners.  What does the federal tax laws have to say about gains from sale or exchange of principal residences?

 

property gain

Gain Exclusion for Single Taxpayer Filers:

Internal Revenue Code Sec. 121(b)(1) provides for exclusion from gross income for federal tax purposes up to $250,000 of gain from the sale or exchange of property if, during the 5-year period ending on the date of the sale or exchange, the property was owned and used by the taxpayer as the taxpayer’s principal residence for periods aggregating 2 years or more.

Gain Exclusion for Husbands and Wives Filing Joint Tax Returns:

Internal Revenue Code Sec. 121(b)(2) provides for exclusion from gross income for federal tax purposes up to $500,000 of gain from the sale or exchange of property if, during the 5-year period ending on the date of the sale or exchange, if

  1. Either spouse owned the property during the 5-year period ending on the date of the sale or exchange and either spouse used the property as their principal residence for periods aggregating 2 years or more;
  2. Both spouses meet the 2-year use requirement; and
  3. Neither spouse is ineligible for the principal residence gain exclusion because one or both of them were involved in the sale or exchange of prior principal residence during the 2-year period ending on the date of the current sale or exchange.

property gain

Some Special Rules or Applications in Various Different Situations:

Physical or Mental Incapacity:

Taxpayers can become ill and incapacitated and spend long stresses of time in nursing homes or other long-term care facilities.  If such unfortunate events, such as, physical or mental incapacity occur, the taxpayers qualify for the exclusion of gain on the sale of their principal residence, so long as, they own the property for a five-year period and reside in the property as their principal residence for a period aggregating 12 months

Ill Health, Change of Employment Unforeseen Circumstances:

In the event the5-year principal residence ownership period or the 2-year principal residence use period are not met due to ill health, change of employment or otherwise unforeseen circumstances. The burden rest on the taxpayer to marshal the facts and evidence to show that they qualify for this exception to the 5-year ownership requirement and the 2-year principal residence use requirement of the statute.

Survival and Divorce Situations:

The 5-year property ownership and 2-year principal residence use period includes the 5-year property ownership and 2-year use period the survival’s deceased spouse held the property for purposes of exclusion of the gain on sale of principal residence.  Property used by a former spouse pursuant to a divorce decree or marital separation agreement counts towards the individual’s 2-year use of the property as a principal residence for the purposes of exclusion of gain on sale or exchange of a principal residence.

Uniformed Services, Foreign Service, and Intelligence Community:

Uniformed service members, United States foreign service employee and employees of the U.S. intelligence community can elect to extend the 5-year ownership period for up to 10 years and suspend the 2-year use period while they or their spouse is serving the U.S. in their official capacities as a member of the U.S. uniformed services, or U.S. foreign service or employee of the U.S. intelligence community.

Expatriation to Avoid Tax (Former Citizens of the United States):

Internal Revenue Code Sec. 877 provides that gain on the sale or exchange of property by an expat is included in their gross income for federal tax purposes.  The exclusion rules of Internal Revenue Code Sec. 121(a) are not applicable to expats.

 

With respect to the high real estate prices and rapid flipping of residential real estate now-a- days, the tax issue is this one:  how many homeowners selling their residences will have recognized gains for federal tax purposes?  If none of the special situations and rules discussed above apply, these gains from sale of residential property could be taxable at the taxpayer’s ordinary tax rates.

 

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 | Portuguese (214) 272-3100

The Deadline for Employers and Other Payors for Sending Forms W-2, 1099-NEC and 1099 MISC is Approaching Fast! Penalties for Failure to Meet the January 31, 2022 Deadline Without Reasonable Cause Are Drastic!

By:  Coleman Jackson, Attorney & Certified Public Accountant
January 7, 2022

The Deadline for Employers and Other Payors for Sending Forms W-2, 1099-NEC and 1099 MISC is Approaching Fast!

 The Law:  Treasury Regulation Section 1.6041(a):

The federal income tax regulations require that anyone engaged in a trade or business must report compensation paid on Form 1096, Annual Summary and Transmittal of U.S. Information Returns and Form 1099 for non-employee compensation over $ 600 and on Form W-2 for employee compensation.  Form 1099 has been divided into a series of forms over the years.  The main ones are Form 1099-Misc which is used for reporting all kinds of payments to third parties and Form 1099-NEC which is used to report compensation paid to non-employees.  See Internal Revenue Code Section 6041.

 

The Deadline for Information Returns and Where: Internal Revenue Code Section 6071 

The Deadline for Information Returns and Where:  Internal Revenue Code Section 6071:

The deadline for sending employees Form W-2 and filing it with the Social Security Administration is January 31, 2022 for compensation paid in 2021.  The deadline for sending non-employees Form 1099-NEC and filing it with the Internal Revenue Service is January 31, 2022 for compensation for services incurred in 2021.  Since 2020 compensation of $600 or more paid to non-employees, including attorneys are to be reported on Form 1099-NEC; except for non-employee payments made to corporations.  Payments to corporations of attorneys are to be reported on Form 1099-MISC. For non-employee payments made during the course of conducting a trade or business, the deadline for filing Form 1099-MISC is also January 31, 2022.  January 31, 2022 is right around the corner; certain extensions are available if requested prior to January 31, 2022.

 

The Potential Legal Exposure to Employers and Other Payors of Compensation for Services

The Potential Legal Exposure to Employers and Other Payors of Compensation for Services:

An employer or payor of compensation for services who fails to supply accurate information forms, such as, Form W-2 to employees and Forms 1099-NEC to non-employees or Form 1099-Misc to non-employees can be assessed a penalty under Internal Revenue Code Section 6721 for the following violations of U.S. tax law:

  1. Failure to timely provide a correct Form W-2 to an employee;
  2. Failure to timely file a correct Form W-2 and related Form W-3 and Form 1096 to the Social Security Administration;
  3. Failure to timely provide a correct Form 1099-NEC to a non-employee;
  4. Failure to timely file a correct Form 1099-NEC with the Internal Revenue Service;
  5. Failure to timely provide a correct Form 1099-Misc to a payee when required;
  6. Failure to timely file a correct Form 1099-Misc with the Internal Revenue Service; and
  7. Note: the key point here is the timeliness of providing the proper form to the payee and timely filing the correct information to the proper governmental agencies.  For example, the employer does not file Form W-2 with the Internal Revenue Service.  Employers and other payors can incur penalties for failing report correct Social Security Numbers or valid ITINs or filing incomplete forms or illegible documents with the government.  Employers must ensure employees accurately complete Form I-9 at the time of their hire.  Moreover, all payors of compensation to non-employees must verify with the IRS that the tax identification numbers received by workers are properly issued to them.  Otherwise, payors of compensation can be subjected to substantial penalties. 

 Table of Potential Penalties for Untimely or Inaccurate Information Returns

Table of Potential Penalties for Untimely or Inaccurate Information Returns:

Internal Revenue Code Section 6721 and the implementation regulations permits the Internal Revenue Service to exercise discretion when charging penalties for failing to comply with U.S. tax law pertaining to information returns.  The Internal Revenue Service routinely charge separate penalties for failing to file a correct information return on time and failure to provide correct payee statements on time.  So, keep in mind when reviewing the penalty table below that there could be doubling of penalties:  one for untimely or failure to file the return with the appropriate governmental agency and two for untimely or failure to provide correct statements to employees or non-employee payees.  The following penalties in time can be very substantial and the maximum penalty allowed under the law for negligent violations differ depending on the size of the employer.  Intentional violators of these information return laws are subject to a wide range of civil penalties under U.S. tax law, criminal sanctions are also a real possibility for tax fraud.  See Internal Revenue Code Section 7204, Tax Crimes, Other Offenses and Forfeitures.  Moreover, whenever a taxpayer violates tax laws with intent, willfully or with reckless abandonment they expose themselves and their organizations to legal exposures under other laws pertaining to defrauding the U.S. government. In this blog we will limit our analysis and discussion to civil actions.  Interested readers should follow our blog site where we routinely write about taxation, government contracts, contract litigation and immigration law matters; which are, areas of law that we practice at Coleman Jackson, P.C.

Potential Civil Charges for Each Information Return or Payee Statement:

Tax Year Up to 30 Days Late 31 Days Late Through August 1 After August 1 or Not Filed Intentional Disregard
2023 $50 $110 $290 $580
2022 $50 $110 $280 $570
2021 $50 $110 $280 $560
2020 $50 $110 $270 $550
2019 $50 $100 $270 $540
2018 $50 $100 $260 $530
2017 $50 $100 $260 $520
2016 $50 $100 $260 $520
2015 – 2011 $30 $60 $100 $250

 

I should point out here that although we label the following table in this blog using the term, ‘potential charges’; there is nothing uncertain about these penalty assessments.  I do not want you to think that there is some doubt as whether the IRS will enforce the law against violators of the information return reporting laws.  These penalties are routinely assessed practically automatically when an IRS agent or examiner audits the taxpayer or the IRS otherwise discovers the problem through informants, disgruntled workers, payees, conflicting information in Form 941, Form 940 and Form 1096, incongruent tax positions taken by the taxpayer, such as 1099A positions or otherwise. In recent years, the IRS Civil and Criminal Divisions seemed to have focused on payroll tax compliance issues.   Penalties for failure to timely provide and file information returns are subject to interest just like other penalties under other provisions of the Internal Revenue Code.  Criminal provisions in U.S. tax law also exposes violators to potential prosecution.

 

What Can an Employer Do if Potential Compliance Issues Lurk in the Dark at their Establishments?

What Can an Employer Do if Potential Compliance Issues Lurk in the Dark at their Establishments?

Establishments engaged in a trade or business should first of all consider reviewing their 2021 expenses prior to the January 31, 2022 information return filing deadline and make sure that they timely provide employees and non-employees correct statements.  Moreover, they should consider filing the correct reports with the correct governmental agency.

In the event an establishment engaged in a trade or business conducts a review of its expenses and determines that they have filed incorrect information reports in the past, they should consider providing corrected statements to their workers or other non-employee payees.  This is especially true if they timely files the corrected forms with the appropriate governmental officials.  Information returns, if timely corrected may not be subjected to these penalties.  There is however a very short window to amend and file corrected information reports.  These information reports must be corrected within approximately six months of their respective due date(s).

Now, in the event the returns cannot be corrected by amendment; taxpayers who can show that the information return violations were due to reasonable cause or that their failure to comply with federal tax laws were not due to any fault of their own or that the violations of law were due to causes beyond their powers or controls could potentially successfully get the penalties abated in part or in total. An abatement of penalty request is simply a way the taxpayer can seek forgiveness.  The request is based in fundamental fairness and justice and requires good faith and a genuine basis in fact and law.  The traditional penalty abatement procedures and rules apply to abatement of penalty request associated with violations of the federal information return tax laws. The decision to ask for an abatement of penalties should not be filed lightly since frivolous refund requests applies to abatement requests.  Frivolous or groundless requests are subject to a 20% penalty under U.S. tax law.  These requests need to be based in law with the marshalling of documentary evidence, witness testimony and other credible substantiating evidence.

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 | Portuguese (214) 272-3100

Regulation of Paid Tax Preparers Likely Coming Soon – Law Watch

Coleman Jackson, P.C. | Law Watch Transcript
09.10.2021

Regulation of Paid Tax Preparers Likely Coming Soon

Welcome to Law Watch

My name is Reyna and I am the legal assistant here at Coleman Jackson PC a tax, litigation, and immigration law firm based in Dallas Texas.

Our topic today is “Regulation of Paid Tax Preparers Likely Coming Soon”.

This presentation is word for word of a question-and-answer session that I had with Attorney Jackson. I will only be relaying the information that Attorney Jackson and I discussed.

Reyna Munoz

Question 1:

So, Attorney, let’s get to it.  What is all this buzz that we’ve been hearing in the news about the regulation of paid tax preparers?

Attorney Coleman Jackson

About two or three weeks ago a proposed bipartisan legislation was introduced in the U.S. House of Representatives, proposing to authorize the U.S. Treasury to regulate paid tax return preparers and enforce minimum standards of competency to protect the American tax payer and protect the integrity of the federal tax system.  Earlier this year, President Biden had introduced The American Family Plan that also has regulatory protections for American tax payers which also seeks to regulate paid tax return preparers. Both of these measures have strong support by the American Institute of Certified Public Accountants and other professional organizations who have long supported measures to improve the competency and accountability of tax return preparer industry.

Reyna Munoz

Novice taxpayers go to these tax return preparers to competently advise them in complying with the tax laws and help them file their tax returns on time.  So that leads me to my second question.

Question No. 2:

How exactly does this proposed legislation expect to protect American taxpayers?

Attorney Coleman Jackson

Let us keep in mind that this is merely proposed legislation at this point.  It must go through the legislative process in both the House of Representatives and U.S. Senate and ultimately be signed into law by the President.  That may or may not happen and the terms of the bills announced in the House a few weeks ago and the legislation proposed by the President might change before it ever becomes law.

But let me just discuss some of the highlights of the proposed legislation to date:

The Proposed legislation will impose the following regulatory scheme with respect to paid tax preparers:

The IRS will have regulatory authority to regulate paid tax return preparers;

The IRS will have the authority to reinstitute the IRS’s 2011 Registered Tax Return Preparer Program.  This is the program that was challenged in Loving v IRS whereby the courts stated that the IRS did not possess the authority to impose certain mandatory requirements on paid tax return preparers.

The IRs will have the authority under the proposed legislation to sanction and revoke an incompetent or fraudulent tax preparer’s tax identification number; thereby, prohibiting the tax preparer from representing taxpayers before the IRS or filing tax returns for the public.

The proposed legislation has other provisions, but these three are the major ones. The bottom line is Congress and the President are trying to establish minimum competency requirements for tax return preparers.  The public has a right to expect competency and professionalism in those who they trust with their tax information and in those they rely on to help them comply with complicated tax laws.  Those who prepare tax returns should possess the knowledge and skill to accurately prepare tax returns and help taxpayers to take lawful tax positions.  These public policy goals seem to be the expression of the pending legislation.

Reyna Munoz

Question 3:

What if any laws protect taxpayers now from incompetent tax return preparers or those preparers that simply commit all kinds of unspeakable acts harming their clients?

Attorney Coleman Jackson

Well, there are various laws and regulatory bodies that regulate certain tax return preparers.  For example, lawyers are regulated by state licensing authorities.  Likewise, Certified Public Accounts (CPAs) are also regulated by state licensing authorities.  Enrolled agents are currently regulated by the IRS.

But currently there are unregulated tax return preparers who prepare tax returns as well.  This is the big problem because these unregulated tax return preparers are not subject to any accountability authority.  If a taxpayer has a problem with their lawyer, they can go to the State Bar and file a complaint.  If a taxpayer has a problem with their CPA, they can go to the State authorities who licenses CPAs in their State.

The problem is how do you regulate and protect the public from incompetency.  There  are long established tax laws against malfeasance and fraud committed by tax return preparers.  Congress has also over the years passed due diligence requirements of tax return preparers.  And the IRS has had the power to impose various penalties on tax return preparers who  unlawfully disclose or use taxpayer information and who advise taxpayers to take unlawful deductions and other unfounded tax positions and commits tax fraud.

Finally, most States have professional mal-practice laws and consumer protection laws that might give some taxpayers a legal remedy in tax preparer cases.  But those laws can be complex and have extremely short statutes of limitation.  What the attorney is saying is this: it is costly to sue in Texas and most other states and most taxpayers probably don’t know where to start in holding a tax return preparer accountable.  Whenever anyone sues a tax preparer in court, it’s wise to hire a lawyer.  Lawyers are expensive; lawsuits take time and the wheels of justice turns slow.

All the while, the wronged taxpayer may have to pay the IRS back taxes, penalties and interest for problems caused by an incompetent or unethical tax preparer.  The attorney believes that this is at the core of the proposed regulation of paid tax return preparers.   The trusting public needs a remedy that is quick and effective in getting unscrupulous and incompetent tax preparers out of the market place.

Reyna Munoz

Question No. 4

How likely is this legislation to become law that is designed to protect taxpayers from their own tax return preparer?

Attorney Coleman Jackson

Answer No. 4:

I don’t know.  All I can say is that several different pieces of legislation are in process.

And some powerful regulatory organizations like the American Institute of Certified Public Accountants and the National Tax Return Preparers have publicly come out in favor of some if not all of the measures that we’ve been discussing in this video.

We have to wait and see whether some of these protections will actually become law.  The legislative process can be slow, but Attorney Jackson believes that these changes are needed based on some of things that he has seen over the years in representing taxpayers, many of whom were harmed by their tax return preparers through no fault of their own.  They were innocent victims.  It’s a shame and hopefully some if not all of these regulatory measures will become law.

Reyna Munoz

Question No. 5

Our listeners just have to continue to listen to our Legal Thoughts Podcast, watch our Law Watch videos and read our blogs because our law firm communicates regularly on topics in taxation, litigation and immigration that might educate our audience in the areas of law that we practice.

Question NO. 5:

Attorney, am I right about this?  You do intend to monitor the progress of the legislation designed to protect American taxpayers from incompetent or unscrupulous tax return preparers?  I mean this is an important development because most folks are just at the mercy of their tax return preparer

Attorney Jackson

Definitely. Anyone interested in learning more about this and other topics dealing with taxation, contract litigation and immigration can follow our Legal Thoughts Podcast, Law Watch videos and blogs by going to www.cjacksonlaw.com.  All of our publications are free of charge and are designed to educate our clients and the general public on legal topics that we think might be of importance to them.

Attorney Jackson sees the right to practice law as a privilege and publication of these items are our way of giving back to the public and hopefully helping people understand the laws and their legal rights.  They do not constitute an Attorney-Client relationship between our firm and the listeners of the podcasts, viewers of our videos or readers of our blogs.  People should seek legal representation of their choosing.

We are very likely to monitor the developments on the tax preparer regulatory front and alert our listeners either by follow up podcast like this one or by Law Watch video published on our U-Tube Channel or by blogs.  Again, our viewers can access all of these for free by going to www.cjacksonlaw.com.

Reyna Munoz’ Concluding Remarks

I’d like to take the time to thank Attorney Jackson for providing us with this information about proposed legislation designed to protect American taxpayers from incompetent or unscrupulous tax return preparers.

Our listeners who want to see more videos like this one should subscribe to our channel and listen to our Legal Thoughts Podcast on Apple Podcast, Google Podcast, Spotify or wherever they listen to their podcast.  You can follow our blogs by going to our law firm’s website at www.cjacksonlaw.com.

This is the end of Law Watch for now

Thanks for giving us the opportunity to inform you about the “Regulation of Paid Tax Preparers Likely Coming Soon”.

This has been a presentation based on a question-and-answer session with Attorney Jackson. Find our contact details in our description box. See you in our next video.

Economic Impact Payments and other Tax Benefits for those Experiencing Homelessness | Legal Thoughts

Coleman Jackson, P.C. | Transcript of Legal Thoughts Podcast
Published June 28 ,2021

Economic Impact Payments and other Tax Benefits for those Experiencing Homelessness

Legal Thoughts is an audio cast 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 audio cast where the Attorney, Coleman Jackson is being interviewed Mayra Torres, Public Relations Associate of Coleman Jackson, P.C.  The topic of discussion is “Economic Impact Payments and other Tax Benefits for those Experiencing Homelessness“. 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 Tax Thoughts

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

Interviewer:  Mayra Torres, Public Relations Associate

  • Good afternoon everyone. My name is Mayra Torres, and I am the public relations associate at Coleman Jackson, P.C.  Coleman Jackson, P.C. is a law firm based right here in Dallas Texas representing clients from around the world in taxation, litigation and immigration law.
  • Attorney, thank you for joining us today to discuss Economic Impact Payments and other Tax Benefits for those Experiencing Homelessness.
  • Question 1:
  • Could you give us a general overview of the struggles people experiencing homelessness face in getting the economic impact payments?

Attorney Answers Question 1:

  • Good afternoon Mayra. Yes, I can give a general overview of the struggles people experiencing homelessness face in getting the economic impact payments.
  • There are many misconceptions about who can receive Economic impact payments and who is eligible.
  • Individuals who earned less than $75,000, or $150 if filed jointly, in 2019 or 2020 are eligible for the three rounds of economic impact payments. In 2020, the IRS issued two Economic Impact Payments as part of the economic stimulus efforts. The first payments were up to $1,200 person and $500 per qualifying child. The second payments were up to $600 per eligible person and $600 per qualifying child. For 2021, eligible taxpayers who did not receive the full amount, can claim it as the Recovery Rebate Credit when filing a 2020 tax return. These stimulus checks are a great addition to individuals’ income but for people who need it the most it can be hard to get.
  • Economic payments are sent automatically to most people, but the IRS can’t issue payments to eligible American when information is not available in the IRS’s system. This is due in part to the fact that some individual’s income is low enough that filing a tax return is not required.
  • People might be hindered from claiming economic Impact payments or other tax benefits because they do not have a permanent address or a bank account, or a job. However, as long as they have a Social Security number and are not being supported by someone else who can claim them as a dependent, they are eligible to get economic impact payments as well as other tax benefits.

Interviewer:  Mayra Torres, Public Relations Associate

Question 2.

  • Attorney, you mentioned that some individual’s income is low enough that they don’t have to file taxes. Can they still file a tax return if that is the case?

Attorney Answers Question 2:

  • Mayra, even though there is not a filing requirement for these individuals, they can still file a tax return to claim all the Economic impact payments and tax benefits they are eligible for.
  • Like I said the IRS needs information from people who don’t usually file a tax return. Even if an individual did not have any income in 2019 or 2020; or their income was not large enough to require them to file, they should still file a basic 2020 tax. This only way for the IRS to have that information is for people to file a basic tax return.
  • If an individual hasn’t filed a tax return in years, they can still qualify for the first two Economic Impact Payments when they file their 2020 return by claiming the Recovery Rebate Credit. There’s a special section on IRS.gov that can help: Claiming the 2020 Recovery Rebate Credit if you aren’t required to file a tax return. For the current third round of payments, people who are experiencing homelessness usually qualify to receive $1,400 for themselves. If they are married or have dependents, they can get an additional $1,400 for each of their family members.
  • Filing a 2020 federal income tax return that provides very basic information about the person is something that can be done electronically using a smartphone or a computer. When the IRS receives the return, it will automatically calculate and issue the Economic Impact Payments to eligible individuals.
  • Like I previously stated, as long as an individual has Social Security number and are not being supported by someone else who can claim them as a dependent, they are eligible to receive Economic Impact Payments and other tax benefits under the various programs, such as, the original CAREs Act and the American Rescue Plan Act of 2021.

Interviewer:  Mayra Torres, Public Relations Associate

Question 3:

  • Attorney, I know many individuals received their stimulus check through direct deposit.
  • What if an individual does not have a bank account to include on their tax return for direct deposit?

Attorney Answers Question 3:

  • Answer No 3:
  • Mayra, many financial institutions will help a person who doesn’t have a bank account to open a low-cost or no-cost bank account. Individuals who open accounts will then have an account and routing number available when they file and claim a direct deposit of the Economic Impact Payment.
  • The Federal Deposit Insurance Corporation (FDIC) website has all the details, in both English and Spanish, on opening an account online. The site can be reached by going to https://www.fdic.gov/getbanked.
  • Among other things, people can also use the FDIC’s Bank Find tool to locate a nearby FDIC-insured bank. In addition, Bank On, American Bankers Association, Independent Community Bankers of America, National Credit Union Administration have all compiled lists of banks and credit union that can open an account online.
  • Veterans can visit a website to view the Veterans Benefits Banking Program (VBBP) and learn how to access financial services at participating banks at https://veteransbenefitsbanking.org
  • For those with a prepaid debit card, they may be able to have their refund applied to the card. Many reloadable prepaid cards or mobile payment apps have account and routing numbers that can be provided to the IRS. Individuals would need to check with the financial institution to ensure the card can be used and to obtain the routing number and account number, which could be different from the card number.

Interviewer:  Mayra Torres, Public Relations Associate

Question 4:

  • Attorney, what happens if an individual is not able to choose the direct deposit option to receive their money from the IRS?

Attorney Answers Question 4:

  • If they are unable to choose direct deposit, the IRS can mail a check or debit card for the tax refund and the third Economic Impact Payment to an address of the individual’s choice.
  • Now this does not have to be a permanent address. Individuals experiencing homelessness can list the address of a friend, relative or trusted service provider, such as a shelter, drop-in day center or transitional housing program, on the return filed with the IRS.

Interviewer:  Mayra Torres, Public Relations Associate

Question 5:

  • Attorney, are there any resources available for low income individuals to help them file their taxes with the IRS?

Attorney Answers Question 5:

  • Yes Mayra, individuals can visit IRS.gov an click the File Your Taxes for Free link. Through the IRS’s Free File System, individuals with an AGI of $72,000 or less can file at an IRS partner site. The fastest and easiest way to claim the 2020 Recovery Rebate Credit and Earned Income Tax Credit (EITC) or to get the third Economic Impact Payment is to file a return electronically using IRS Free File. It can even be done using a smartphone or computer
  • If an individual would prefer to receive in-person assistance in filing their taxes and earn moderate income or less, can receive free tac help from trained community volunteer tax preparers. Through VITA (Volunteer Income Tax Assistance) and TCE (Tax Counselling for the Elderly), volunteers prepare basic tax returns at thousands of tax help sites nationwide-e. To find the nearest, location visit https://irs.treasury.gov/freetaxprep or call 800-906-9887. VITA/TCE site availability is updated throughout the filing season, so check back if there aren’t any sites listed nearby.

Interviewer:  Mayra Torres, Public Relations Associate

Question 6:

  • Attorney, what other tax benefits can homeless and low income taxpayers be entitled to receive when they file a tax return?

Attorney Answers Question 6:

  • Mayra, for those experiencing homelessness who have a job, filing a return can have benefits such as getting a refund based on various tax benefits, especially the Earned Income Tax Credit (EITC) for low-and moderate-income workers and working families. To get the credit, federal law requires that a worker live in the U.S. for more than half of the year and meet other requirements, such as having a valid Social Security number, claim a certain filing status and be a U.S. Citizen or resident Alien all year. Therefore, individuals experiencing homelessness, including those who reside at one or more homeless shelters, can meet these requirements.
  • For 2020, the income limit is $15,820 for singles with no children ($21,710 for couples with no children). The income limit is higher for people with children. For example, the limit is $50,594 for singles with three or more children ($56,844 for couples with three or more children). Those who make less than this amount must also meet other eligibility requirements. Because it’s a refundable credit, those who qualify and claim the credit could pay less federal tax, pay no tax, or even get a tax refund. The EITC can put up to $6,660 into a worker’s pocket. The amount varies depending upon the worker’s income, marital status, and other factors. The EITC has special qualifying rules for military members, clergy members and taxpayers and their relatives with disabilities. To find out if they’re eligible, individuals can go on IRS.gov and use the EITC Assistant. It’s available in both English and Spanish.
  • Even if a individual isn’t required to file a tax return, they should still do so to claim the 2020 Recovery Rebate Credit and Earned Income Tax Credit (EITC) and to receive the third Economic Impact Payment under the American Rescue Plan Act of 2021. Bottom line:  File a tax return because you might be entitled to receive 2020 recovery rebate credits and the earned income credit even though you do not earn enough money to ordinarily file an annual tax return.

Mayra Torres’ Concluding Remarks

  • Attorney thank you very much for this very comprehensive and informative presentation on this topic:  “Economic Impact Payments and other Tax Benefits for those Experiencing Homelessness.”
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THIS IS END OF “LEGAL THOUGHTS” FOR NOW

  • Thanks for giving us the opportunity to inform you about the “Economic Impact Payments and other Tax Benefits for those Experiencing Homelessness”.
  • If you want to see or hear more taxation, government contracts litigation and immigration LEGAL THOUGHTS from Coleman Jackson, P.C. Stay tune!  Watch for a new Legal Thoughts podcast in about two weeks and check our law firm’s website at www. cjacksonlaw.com to follow our blogs.  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.