Tag Archives: Legal Thoughts

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

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

USCIS Reverting back to 2008 US Citizenship Test

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.

Here’s Why People Filing Taxes Should Be Careful When Selecting A Professional Tax Return Preparer | LEGAL THOUGHTS

Coleman Jackson, P.C. | Transcript of Legal Thoughts Podcast
Published March 10, 2021.

Here’s Why People Filing Taxes Should Be Careful When Selecting A Professional Tax Return Preparer

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 ““Here’s why people filing taxes should be careful when selecting a professional tax return preparer.” You can listen to this podcast by clicking here:

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

TRANSCRIPT:

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

ATTORNEY:  Coleman Jackson

Welcome to Tax Thoughts

  • My name is Coleman Jackson and I am an attorney at Coleman Jackson, P.C., a taxation, litigation and immigration law firm based in Dallas, Texas.
  • Our topic for today is: “Here’s why people filing taxes should be careful when selecting a professional tax return preparer.”
  • 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: Here’s why people filing taxes should be careful when selecting a professional tax return preparer.”

Interviewer:  Mayra Torres, Public Relations Associate

  • Good morning everyone. My name is Mayra Torres and I am the public relations associate at Coleman Jackson, P.C.  Coleman Jackson, P.C. is a law firm based right here in Dallas Texas representing clients from around the world in taxation, litigation and immigration law.
  • Attorney today we are discussing a very important tax topic because filing taxes is on folks minds these days. Many people may be filing taxes for the first time this year because of the recovery rebate credit issues involving their economic impact payments and other Covid-19 relief received during 2020.
  • In this Podcast, we will be discussing the safest, easiest and perhaps cheapest way folks can file their tax returns.

Question 1:

Attorney let’s start with the cheapest way folks can file their taxes for 2020!  What options exist for people who do not want to pay a professional tax return preparer?  I mean, can people file their tax returns for free?

Attorney Answers Question 1:

  • Good morning Mayra.
  • First people can always prepare and file their tax return themselves without hiring and paying anyone.
  • Second people can go to IRS.gov and select a number of brand-name tax software providers who will permit certain eligible taxpayers to use their software to prepare and electronically file their individual tax return for absolutely free. This particular free tax preparation option might be an excellent option for some taxpayers.  Typically, the software providers require people to meet certain income, age and state residency requirements.  The software vendors’ individual qualifying requirements can be found at IRS.gov. Most of the free vendors software is in English, but a few are in Spanish.  This free file option is certainly an option that taxpayers should explore.
  • Third people can use possibly find free tax preparer clients hosted by various accounting and legal societies throughout the community. Some churches and business and law schools also provide minimum fee tax advice and counsel.  People should contact the professional schools in their communities to inquire whether students in tax law training provide such services to the community.  When I attended SMU School of Law, I participated in their tax clinic that provided free or minimum fee tax controversy services by enrolled students under the supervision of the tax clinic professor.  People should make inquiries at professional societies, schools, and places of worship to see what’s available.
  • So to summarize; Mayra, as you can see there are a number of options available for people to get their tax returns prepared at little to no costs.

Interviewer:  Mayra Torres, Public Relations Associate

That is an excellent summary of the free or low-cost tax return preparation and filing options that might be available to people this year:

  1. people can prepare and file their returns without using anyone to help them;
  2. People can go to IRS.gov and select a brand-named software provider to prepare and file their return if they meet the provider’s qualification requirements, and
  3. People can search for a free or low-cost professional tax return preparer at local places of worship, or professional accounting or law societies or local law school tax clinics and accounting schools.

Question 2:

Attorney, some people can’t qualify for one of these free or low-cost tax preparation services. Some people just think taxes are very complex; they can’t prepare these complicated tax returns themselves, and they just want to hire someone to prepare the return and file it for them.  What characteristics and qualifications should people look for when hiring a tax return preparer?

Attorney Answers Question 2:

  • Mayra, that is a very good question since people are responsible for the accuracy of their tax return regardless of whether they prepare and file it themselves or hire someone else to prepare and file their return.
  • These are some of the things that people might should consider when selecting a tax return preparer:
    1. Indicial of educational training in tax law and tax accounting. This might be evidenced by a degree from college in taxes, accounting, law, finance, or some related business degree.  Return preparer might be qualified with only certificates but with increasing complexity of the tax issues involved, should cause taxpayers to exercise more exacting screening of a tax return preparer before they hire them to work on their return.
    2. Professional Tax Identification Number (or PTIN). The PTIN is an annual credentialing issued by the Department of Treasury to professionals authorized to practice before the Internal Revenue Service as paid tax return preparers. To obtain a PTIN, a tax professional must be an attorney in good standing with a State Bar Association, a licensed Certified Public Accountant in good standing with a state CPA licensing authority, an enrolled agent in good standing with the Internal Revenue Service, or a registered tax return preparer under the defunct IRS Registered Tax Return Preparer Program. Taxpayers should look for these types of credentialing when selecting a tax return preparer. In recent years, the annual PTIN fee has been suspended due to Court challenges regarding the IRS’ attempt to regulate tax practice.  The IRS’ stated goal when instituting the PTIN program was to improve the integrity and quality of the tax preparation industry.   Some tax professionals challenged this attempt in Court.  Nevertheless, PTIN credential could be a good metric for the public to use when selecting a tax return preparer.  The bottom line is this— when the professional does not have a current PTIN Card; It is possibly a bright red alert to the taxpayer that they could be taking unnecessary risk by hiring an unqualified tax return preparer.  Taxpayers are responsible and liable for the accuracy of their tax returns regardless of who prepares or files the return for them.
    3. Experience in tax return preparation is critical factor when selecting a tax return preparer. Tax law is constantly changing from year to year, and it is very important that the tax return professional maintains competencies in tax law on an annual basis.  The more experience that the tax return preparer has with the type of return involved the better.  For example, if you have foreign accounts, you should think long and hard before hiring any return preparer who has never worked with taxpayers with foreign accounts or offshore assets.  Over the years, our law firm has seen many taxpayers who have been greatly harmed by tax return preparers who failed to properly counsel and advise them with regards to proper tax accounting for offshore assets and accounts.
    4. So to summarize: taxpayers should look for relevant tax law and accounting education, IRS Tax Professional PTIN certificate and tax experience relevant to tax issues related to their particular situation when selecting a tax return preparer.
  • It is very important to make a wise selection choosing which tax return preparer to hire because taxpayers can be subject to civil penalties and even criminal exposure for inaccuracies and materially false statements and tax positions taken on their tax returns and in their claims for refunds.

Interviewer:  Mayra Torres, Public Relations Associate

  • Bright Red Alert! Before hiring anyone to do your tax return, look at the tax return professional’s educational background… like where did they go to school and where did they learn tax and accounting; look at whether they have a current IRS Tax Professional PTIN certification, and look at whether they have the right type of tax experience to prepare your tax return!
  • If any of these three things are missing; it’s a bright red alert folks! Attorney, thanks for answering my question so clearly concerning what characteristics people should look for when selecting a tax return preparer.
  • Did I get the bright red alerts right, Attorney?

Question 3:

Attorney, it sounds like taxpayers can get in very serious trouble on their taxes if they hire an unqualified, incompetent, or dishonest tax return preparer.

Is there any where a taxpayer can turn for help when they suspect that they have been harmed by their tax return preparer?

Attorney Answers Question 3:

  • The Internal Revenue Service has been given the authority by Congress to maintain the public’s confidence in the federal tax system. Under that authority the IRS maintains advisory committees who establish practices, procedures and policies of the oversight offices designed to enforce regulations governing those authorized to practice before the IRS.  The IRS is required under these regulations to maintain a list of individuals and companies who have been disbarred from practice before the IRS; list practitioners with monetary sanctions, and a list of practitioners who have otherwise been sanctioned by the IRS.
  • In addition to the IRS oversight that I have mentioned; professionals such as attorneys and certified public accountants are accountable to their respective professional licensing authorities in their states. These various professional licensing boards have specific complaint procedures where injured taxpayers can file an official complaint.
  • Finally, taxpayers harmed by tax return preparers can also turn to the courts for redress by filing a lawsuit for professional liability or other claim.
  • I should caution here that every tax position taking on a particular tax return may not rise to the level incompetence or malfeasance on the part of the tax return preparer. Judgment is an inherent part of being a tax professional.  That intangible characteristic of confidence and trust in your tax professional cannot be overstated.

Interviewer:  Mayra Torres, Public Relations Associate

Question 4:

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

Attorney Answers Question 4:

  • The Internal Revenue Code imposes an entire laundry list of civil penalties and criminal penalties on Tax Return Preparers who are incompetent or engage in disreputable conduct. The names and descriptions of these various penalties can be very informative as what goals the IRS is attempting to achieve in terms of protecting the public, protecting the public’s confidence in the tax system, and maintaining the overall integrity of the U.S. federal tax system.  So that I don’t overly complicate this for our none-tax professional listeners, I am going to leave out any references to the specific Internal Revenue Code Section or Treasury Regulation where these penalties are codified.  Most of our listeners probably don’t really care to know the actual tax code section and treasury regulation reference numbers for these penalties.
  • This is a list of some of the types of penalties that the IRS can impose on Tax Return Preparers. Taxpayers should just thing about the item on the list and look beyond what is right in front of them to what the IRS is trying to accomplish by imposing these penalties on incompetent preparers or those engaged in disreputable conduct:
    1. Civil Penalties imposed on tax return preparers for failure to meet due diligence requirements for determining eligibility for certain tax benefits, such as, child tax credit, head of household, and earned income credit. Often times, taxpayers take these tax positions in error or with bad advice from tax preparers.
    2. Penalties imposed on tax return preparers for failure to sign the return and penalties for failing to supply identifying numbers such as, PTIN etc. Again, often, returns prepared by paid tax preparers appear to be self-prepared.
    3. Various penalties imposed against tax preparers for giving false or misleading information to the Department of the Treasury or any of its officers, employees, or agents.
    4. Various penalties imposed against tax preparers for aiding, advising or abetting others in violating federal tax law by suggesting or aiding in an illegal plan to evade the proper application and administration of U.S. tax laws or payment of U.S. taxes.
  • Items three and four can result in civil negligence and civil accuracy related penalties; and willful or reckless violation of U.S. Tax laws could lead to criminal referrals and prosecution of the tax return preparer and the taxpayer.
  1. Penalties imposed on tax return preparer for failure to give the taxpayer a copy of their tax return.
  2. Penalties imposed on the tax return preparer for failure to maintain a copy of the prepared tax return.
  3. Penalties imposed on the tax return preparer for failure to maintain a record of who prepared the return.
  • Items five through seven is designed to create a contemporary record and to provide a chain of responsibility. Tax return preparer operations are subject to IRS examination and investigation.
  • These are only a few of the penalties that the IRS could impose on incompetent tax return preparers and those engaged in disreputable conduct.
  • Taxpayers must be careful when tax return preparers over promise, make claims of abilities to obtain certain refund amounts or tax results, or seek to negotiate taxpayer refund checks. Sometimes dishonest preparers claim that the taxpayer has companies, farms, and factories that the taxpayer themselves never knew they had.  Remember you are responsible for the numbers and data on your tax return and the IRS will look for you first to timely pay the correct amount of taxes.  Your tax return preparer may or may not ever be held accountable.  So, a word to the wise:  be careful when you select your tax return preparer.
  • All these penalty areas that I have mentioned in this podcast should help taxpayers to exercise wisdom and discretion when selecting a tax return preparer. Look for professionals with character and experience even though it might cost you more to have your taxes done.  It may cost more in the long run if you choose an incompetent tax preparer, or one engaged in disreputable acts.

Interviewer:  Mayra Torres, Public Relations Associate

  • Attorney, thanks for such a thorough response to my questions about characteristics, qualifications, and other things that people should consider when selecting a tax return preparer. Character and experience always matter!
  • That’s all the questions I have for now with respect to being wise and prudent when selecting a tax return preparer. It sounds like it’s very dangerous to select the wrong person or firm to prepare your tax return.

Attorney Comment:

  • Well, those were all excellent questions, Mayra. And I am glad we were able to discuss the importance of exercising wisdom and being prudent when selecting a tax return preparer.

Mayra Torres’s Concluding Remarks:

  • Attorneys thank you for this comprehensive and informative presentation on selecting a tax return preparer.
  • 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. You can follow our blogs by going to our law firm’s website at cjacksonlaw.com.  Everybody take care for now!  Come back in about two weeks, for more taxation, litigation and immigration Legal Thoughts from Coleman Jackson, P.C., which is located right here in Dallas, Texas at 6060 North Central Expressway, Suite 620, Dallas, Texas 75206.
  • English callers: 214-599-0431; Spanish callers:  214-599-0432 and Portuguese callers:  214-272-3100.

 Attorney’s Concluding Remarks:

THIS IS THE END OF “LEGAL THOUGHTS” FOR NOW

  • Thanks for giving us the opportunity to inform you about the why people filing taxes should be careful when selecting a professional tax return preparer.
  • 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 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.

Podcast – Update on Covid-19 Relief for Individuals and Businesses pt. 3 | LEGAL THOUGHTS

Coleman Jackson, P.C. | Transcript of Legal Thoughts Podcast
Published January 27, 2021.

Update on Covid-19 Relief for Individuals and Businesses

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

This particular episode of Legal Thoughts is a podcast where the Attorney, Coleman Jackson is being interviewed by Reyna Munoz, Tax Legal Assistant of Coleman Jackson, P.C.   The topic of discussion is “Update on Covid-19 Relief for Individuals and Businesses pt. 3” You can listen to this podcast by clicking here:

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

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

ATTORNEY:  Coleman Jackson

Welcome to Tax Thoughts

  • My name is Coleman Jackson and I am an attorney at Coleman Jackson, P.C., a taxation, litigation and immigration law firm based in Dallas, Texas.
  • Our topic for today is: “Update on Covid-19 Relief for Individuals and Businesses- Part 3.”
  • Other members of Coleman Jackson, P.C. are Yulissa Molina, Tax Legal Assistant, Leiliane Godeiro, Litigation Legal Assistant, Reyna Munoz, Immigration Legal Assistant and Mayra Torres, Public Relations Associate.
  • On this “Legal Thoughts” podcast our immigration legal assistant, Reyna Munoz will be asking the questions and I will be responding to her questions on this important tax topic: “Update on Covid-19 Relief for Individuals and Businesses- Part 3.”

Reyna Munoz Introduces Herself to the Audience:

  • Good morning everyone. My name is Reyna Munoz and I am the immigration legal assistant at Coleman Jackson, P.C.  Coleman Jackson, P.C. is a taxation, litigation and immigration law firm based right here in Dallas, Texas.
  • Attorney we have published two prior podcast where we discussed various aspects of the tax relief offered to individuals and businesses in the Consolidated Appropriations Act, 2021. In Part One of Legal Thoughts Podcast  several weeks ago, we spent most of our time talking about stimulus checks.  Then in Part Two, we spent the bulk of our time discussing tax relief in the Act for businesses, such as the Paycheck Protection Program.  In this Part Three, we will be discussing Discharge of Indebtedness and the Paycheck Protection Program.

Question 1:

  • So, Attorney, let’s get started this morning with this question: Generally speaking, Attorney, what are the tax implications for discharge of indebtedness?

Attorney: Coleman Jackson

ANSWER 1:

  • Good morning Reyna.
  • That is an excellent place to start before we get into the Paycheck Protection Program and the special rules of forgiveness of Paycheck Protection Program loans to businesses under the CARES Act and the Consolidated Appropriations Act, 2021.
  • Generally speaking, under Internal Revenue Code Section 61(a)(11) and Treasury Regulations Section 1.61-12(a), a taxpayer that is discharged from paying a debt by a creditor must include the gross amount discharged in gross income for federal income tax purposes.  It is gross income because the taxpayer has received an increment in wealth; it’s the same as wages, or earnings or dividends or other forms of increase in wealth realized by a taxpayer.
  • There are several exceptions to this rule however, and the one we care about in this Podcast relates to the exceptions codified into law under the CARES Act and the Consolidated Appropriations Act, 2021.

Interviewer: Reyna Munoz, Immigration Legal Assistant

  • That sounds interesting.

Question 2:

  • Could you explain in a nutshell when a Payroll Protection Program loan is qualified for tax-free loan forgiveness under the Covid-19 relief programs you have been discussing in these last three podcasts?

Attorney: Coleman Jackson

ANSWER 2:

  • Reyna, in a nutshell; whether a Paycheck Protection Program Loan is eligible for tax-free cancellation of debt treatment depend upon how much of the paycheck protection program loan amount was used for payment of payroll costs during a covered period.
  • Under the Original CAREs Act, paycheck protection program loan proceeds could be used to pay certain eligible business expenses, such as, payroll costs, utility payments, rent and interest on some mortgage obligations. All of this cost had to be incurred by the recipient of the loan.  Depending upon whether 75 percent or more of the loan proceeds were used on payroll cost during the covered period, some or all of the payroll protection loan was subject to forgiveness under the CARES Act.  Under the original CARES Act there were some questions as to whether the cancelation of the debt was taxable income under Internal Revenue Code Section 61.  Also, under the original CARES Act, the IRS issued rules that stated that the  business costs paid from the Paycheck Protection Act Loan Proceeds were not deductible by the business on their federal tax return.  However, Congress overruled the Internal Revenue Service in the Consolidated Appropriations Act, 2021 making all Payroll Protection Program Loans tax-free and Congress also ruled that the business expenses paid with the loan proceeds were fully deductible business expenses pursuant to normal Internal Revenue Code provisions.  These particular relief provisions in the Consolidated Appropriations Act, 2021 relates back to and applies to Payroll Protection Program loans under the CARES Act as well as those originating under the Consolidated Appropriations Act, 2021.

Interviewer: Reyna Munoz, Immigration Legal Assistant

  • Let me make sure I understand what you just said attorney! I think you said that when a Payroll Protection Program Loan is used to pay business operating expenses, such as, payroll costs, utility payments, rent, and certain kinds of mortgage interest, the Payroll Protection Program loan can be canceled tax-free to the business?  And the business can still deduct the business expenses paid using the loan proceeds on their annual federal tax return!
  • Did I get all that right, Attorney?

Question 3:

  • Attorney is the discharge of Payroll Protection Loan under the CARES Act automatic or do an application for forgiveness have to be filed somewhere?

 Attorney: Coleman Jackson

ANSWER 3:

  • Reyna your summary of what I said is perfect. And no, the forgiveness of a Paycheck Protection Program Loan is not automatic.
  • The recipient must submit the appropriate application to the Small Business Administration through their financial institution.
  • Under the CARES Act, loan forgiveness request were filed on Form 3508 or 3508EZ depending upon the maximum amount of the loan forgiveness and certain other factors. Further all loan forgiveness applications have to be accompanied by credible business records and documents during the covered period supporting the business owners’ assertions in the debt cancellation applications.

Interviewer: Reyna Munoz, Tax Legal Assistant

QUESTION 4:

  • Attorney in a nutshell, what are the eligibility requirements for cancelation of the Payroll Protection Program Loan under the Consolidated Appropriation Act, 2021? I mean, Attorney are the rules, forms and steps to take for tax-free discharge of the debt the same as under the CARES Act?

Attorney: Coleman Jackson

ANSWER 4:

  • Very well! Let me describe some of the differences or changes to the Payroll Protection Program Loan forgiveness rules, forms and procedures made by the Consolidated Appropriations Act, 2021.
  • Remember in our previous Podcast in Part 2, we explained how the eligible expenses paid from a Paycheck Protection Program Loan was expanded under the Consolidated Appropriations Act, 2021 to include expenses like, payment for business software and cloud computing services incurred due to covid-19, certain covered capital expenditures and certain covered worker safety measure expenditures; The key metric to keep in mind is this one: The Paycheck Protection Program is still essentially focused on maintenance of a business’ employees and staff.  Keep people employed– that in a nutshell is what PPP is about.  You can just go by the name of the program— that is, Paycheck Protection Program.  So, expenditure of at least 75% of the loan proceeds to maintain payroll during the covered period is still key to tax-free cancellation of the debt under the Consolidated Appropriations Act, 2021.
  • The Consolidated Appropriations Act, 2021 made it simpler and easier for covered Paycheck Protection Program Loan requests from certain eligible recipients to be forgiven. Only a certification as follows need to be made by the loan recipient; and no substantiating documentation need to be filed with the certification:
  • An eligible recipient must submit to their lender a certification that attest that–
    1. a description of the number of employees they were able to retain because of the paycheck protection loan;
    2. Estimates of amount of the loan spent on payroll costs;
    3. Attest that they have accurately supplied items 1 and 2 and complied with Section 307, Simplified Forgiveness Application requirements of the Consolidated Appropriations Act, 2021 which requires retention of the employment records 4 years after submission of the forgiveness application and retention of all other pertinent records for a period of 3 years.
    4. The Consolidated Appropriations Act, 2021 states that the simplified loan application forgiveness form is not be any more than one page in length. These simplified PPP loan forgiveness procedures apply to Paycheck Protection Program loans in the amount of $150,000 or less.  The Section 307 Simplified Forgiveness Application provisions of the Consolidated Appropriations Act, 2021 applies to Paycheck Protection Program loans originating under the CARES Act or the Consolidated Appropriations Act, 2021.

Interviewer: Reyna Munoz, Tax Legal Assistant

  • That sounds like a solid way many businesses can keep their employees working during this dreadful pandemic. Attorney, Paycheck Protection Program Loan forgiveness is not subject to taxation, right.  I mean we started this podcast talking about discharge of indebtedness.

Question 5:

  • Is the cancelation or forgiveness by the Small Business Administration a discharge of indebtedness where the business will owe income taxes on the amount discharged? I need this to be clear; like in a nutshell; is it taxable income to the business or to the owner of the business?

Attorney: Coleman Jackson

ANSWER 5:

  • In a nutshell, Reyna!
  • Paycheck Protection Loans forgiven by the Small Business Administration is a statutory exception to the Internal Revenue Code Section 61.
  • In a nutshell, Paycheck Protection Program Loans that are forgiving or canceled by the Small Business Administration are tax-free to the business, to its owners, shareholders or partners.
  • Let me throw in this caution however, all business who apply for and successful obtain SBA cancelation of a Paycheck Protection Program Loan should maintain the required books and records because they might have to submit such records for audit inspection and examination up to four years after the loan has been written off by the government.

Interviewer: Reyna Munoz, Tax Legal Assistant

  • That last point is an important one. Paycheck Protection Program Loans are Small Business Administration Loans.  SBA loans are subject to audit examination.

Question 6:

  • Attorney, what is the extent or scope of the likely audit examination?

Attorney: Coleman Jackson

ANSWER 6:

  • Businesses should consult with their trusted advisors when seeking forgiveness of these loans. The matters that we have been discussing are laws.  That is, we are explaining recent Acts of Congress in the government’s attempt to deal with the economic fall out and devastation caused by this dreadful global pandemic.
  • In answer to your question with respect to the scope of the audit; I really don’t know exactly, but for sure the business is going to have to most likely present evidence of eligibility for the loan and eligibility for forgiveness of the loan pursuant to any subsequent rules and regulations that the Small Business Administration, United States Treasury or other governmental agency might issue in the future. Businesses should keep good books and records that properly reflect the expenditure of Paycheck Protection Program loan proceeds for at least seven years.

Interviewer: Reyna Munoz, Tax Legal Assistant

  • Attorney thanks for such a detailed explanation of discharge of indebtedness and the Paycheck Protection Program.

Reyna Munoz’s Concluding Remarks

  • Attorneythank you for this cogent presentation.
  • I know we have not talked about everything concerning the Consolidated Appropriations Act, 2021. But these are my questions for now.  Perhaps we can do another podcast on this topic as time permits and interest by our listeners is communicated to us through calls, emails or otherwise.
  • 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. You can follow our blogs by going to our law firm’s website at cjacksonlaw.com.  Everybody take care for now!  Come back in about two weeks, for more taxation, litigation and immigration Legal Thoughts from Coleman Jackson, P.C., which is located right here in Dallas, Texas at 6060 North Central Expressway, Suite 620, Dallas, Texas 75206.
  • English callers: 214-599-0431; Spanish callers:  214-599-0432 and Portuguese callers:  214-272-3100.

Attorney’s Concluding Remarks:

THIS IS END OF “LEGAL THOUGHTS” FOR NOW

  • Thanks for giving us the opportunity to inform you about the “Consolidated Appropriations Act, 2021 as it relates to Discharge of Indebtedness and the Paycheck Protection Program”. We might do future blogs or podcast dealing with the Exclusion of Entities Receiving Shuttered Venue Operator Grants under Section 7(a)(36) of the Small Business Act, 15 U.S.C. 636(a)(36).
  • 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 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..

Podcast – Update on Covid-19 Relief for Individuals and Businesses pt. 2 | LEGAL THOUGHTS

Coleman Jackson, P.C. | Transcript of Legal Thoughts Podcast
Published January 18, 2021.

Update on Covid-19 Relief for Individuals and Businesses

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

This particular episode of Legal Thoughts is a podcast where the Attorney, Coleman Jackson is being interviewed by Reyna Munoz, Tax Legal Assistant of Coleman Jackson, P.C.   The topic of discussion is “Who is responsible to maintain minimum essential healthcare coverage?”You can listen to this podcast by clicking here:

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

TRANSCRIPT:

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

ATTORNEY:  Coleman Jackson

Welcome to Tax Thoughts

  • My name is Coleman Jackson and I am an attorney at Coleman Jackson, P.C., a taxation, litigation and immigration law firm based in Dallas, Texas.
  • Our topic for today is: “Update on Covid-19 Relief for Individuals and Businesses- Part 2.”
  • Other members of Coleman Jackson, P.C. are Yulissa Molina, Tax Legal Assistant, Leiliane Godeiro, Litigation Legal Assistant, Reyna Munoz, Immigration Legal Assistant and Mayra Torres, Public Relations Associate.
  • On this “Legal Thoughts” podcast our immigration legal assistant, Reyna Munoz will be asking the questions and I will be responding to her questions on this important tax topic: “Update on Covid-19 Relief for Individuals and Businesses- Part 2.”

Reyna Munoz Introduces Herself to the Audience:

  • Good morning everyone. My name is Reyna Munoz and I am the immigration legal assistant at Coleman Jackson, P.C.  Coleman Jackson, P.C. is a taxation, litigation and immigration law firm based right here in Dallas, Texas.
  • Attorney about a week or so ago, we had a conversation about tax relief offered to individuals and businesses in the Consolidated Appropriations Act, 2021. In the first Legal Thoughts Podcast, about a week ago, we spent most of our time talking about stimulus checks.  We had said that we would continue this conversation in a future podcast and primarily discuss benefits to businesses in the $900 billion Covid relief package.

Question 1:

  • But before turning to my questions dealing with business relief under the Consolidated Appropriations Act, 2021; besides the $300 weekly federal unemployment compensation for people who lost their jobs due to Covid, and the $600 stimulus checks for certain individuals, are there any other significant benefits in the Consolidated Appropriations Act, 2021 for individuals or households?

Attorney: Coleman Jackson

ANSWER 1:

  • Good morning Reyna.
  • Yes Reyna; let me briefly summarize some other significant benefits to individuals in the $900 billion dollar Consolidated Appropriations Act, 2021 that was passed by Congress on December 27, 2020.
    1. Families with children are eligible for the Child Tax Credit based on 2019 income rather than 2020 income.  This applies to both the determinations of eligibility for the earned income tax credit and the additional child tax credit.  These credits are designed to help low-income to modest income families with qualifying children.
    2. The threshold adjusted gross income (AGI) for determining the amount an individual or family can deduct in medical expenses was changed from 10 percent of AGI to 7.5 percent of AGI for tax years beginning in 2020.
    3. There are other minor benefits to individuals and families in the Consolidated Appropriations Act, 2021; but, I think I have mentioned the major ones that people should watch out for in terms of seeing whether they personally are impacted by the Consolidated Appropriations Act, 2021.

Interviewer: Reyna Munoz, Immigration Legal Assistant

  • So attorney let me summarize the benefits to individuals, families and households to make sure I understand what you are saying:
  • The unemployed due to Covid-19 is eligible to receive 11 weeks of $300 per-week federal emergency unemployment benefits on top of their state unemployment benefit.
  • With certain exceptions and limitations that you mentioned Attorney, individuals and families can be eligible to receive stimulus payments of $600 for each family member.
  • Families eligibility for the earned income credit and additional child tax credit is based on the families 2019 income.
  • And lastly, medical expense deductions starting in 2020 are based on adjusted gross income of 7.5 percent rather than 10 percent.

Question 2:

  • Attorney, attorney did I summarize the major benefits for individuals and families under the Consolidated Appropriations Act 2021 correctly? Is what I just said an accurate understanding of what you previously said?

Attorney: Coleman Jackson

ANSWER 2:

  • Reyna, you have a good ear. You basically heard me correctly.  The four points that you listed are the major benefits for individuals and families that I gleaned from the Consolidated Appropriations Act, 2021; but, keep in mind that the Act is very massive with numerous tax and none-tax provisions.  I am not going to try to cover that whole piece of legislation in a podcast.  We are merely pointing out some major high points that might be of interest to our listeners.
  • Before we turn to our discussion of businesses impacted by this legislation, let me just point out that the Consolidated Appropriations Act, 2021 corrected the original Cares Act that created the unfortunate situation where couples using only one social security number was denied the stimulus payment under the Cares Act. Under the Consolidated Appropriations Act, 2021, couples using only a single social security number in their household and the other an Individual Taxpayer Identification Number or ITIN are eligible for the $600 stimulus payment under the Consolidated Appropriations Act, 2021.

Interviewer: Reyna Munoz, Immigration Legal Assistant

  • Thanks for pointing out that a second round of direct cash assistance payments of $600 for each family member may be available for mixed-status families where only one spouse has a social security number under the Consolidated Appropriations Act, 2021. That is good news where only one spouse has a social security number!

Question 3:

Let us now talk about businesses.  What is in the Consolidated Appropriations Act, 2021 that benefits businesses, such as, sole proprietors and independent contractors?  And what types of businesses are we talking about, Attorney?

Attorney: Coleman Jackson

ANSWER 3:

  • Reyna; that is good direction to go in! We need to hit the high points of what’s in the Consolidated Appropriations Act, 2021 for businesses, such as independent contractors, sole proprietors, partnerships and other types of businesses.
  • The most significant benefit in the Consolidated Appropriations Act, 2021 is Title II—Continuing The Paycheck Protection Program and Other Small Business Support.
  • A Small Business Concern is defined in the Consolidated Appropriations Act, 2021 as it is defined in section 3 of the Small Business Act, 15 U.S.C. 632. Any business owner who are wondering whether they are a small business should consider reviewing section 3 of the Small Business Act.
  • The Act mandates that the Administrator of the Small Business Administration shall within 10 days after the Act becoming effective, draft, adopt and implement appropriate regulations to administer the provisions and laws established by Congress in the Consolidated Appropriations Act, 2021. Small business owners who think they might be eligible for any benefits under the Consolidated Appropriations Act, 2021 may want to consult with their banker, attorney or other trusted advisor immediately in preparation for the role out of  new SBA regulations implementing the Consolidated Appropriations Act, 2021.

Interviewer: Reyna Munoz, Tax Legal Assistant

QUESTION 4:

  • Attorney how soon will the Small Business Administration issue the implementation regulations for the Consolidated Appropriation Act, 2021?

Attorney: Coleman Jackson

ANSWER 4:

  • I am not sure with regards to the exact date or timing as to when the Small Business Administration will issue the regulatory framework or rules of the road in implementing the Paycheck Protection Act provisions of the Consolidated Appropriations Act, 2021. It is reported that the SBA is working on the regulations and guidelines.  What small business owners need to know at this time is that Congress authorized an additional $285 billion dollars for the Paycheck Protection Program and they specifically set business size limitations, a phase financial institution criteria where its suppose to start funding through community and small financial institutions typically used by minorities and others in depressed economic areas and then to major banking institutions who might not normally fund such areas, and Congress also expanded the types of qualified expenses that can be paid using the Paycheck Protection Program loan proceeds.  There are changes also made to the loan forgiveness procedures and lots and lots of other provisions in the Consolidated Appropriations Act, 2021 that benefits businesses.
  • The Consolidated Appropriations Act, 2021 distinguishes between two broad groups: Let me just call them the “First Draw Borrowers” and the Second Draw Borrowers.
  • First Draw Borrowers are borrowers who did not participate in the original Paycheck Protection Program enacted in the original Cares Act. The Consolidated Appropriations Act, 2021 requires first time borrowers to have less than 500 employees and their business operations must have been operational as of February 15, 2020.  The first draw  Paycheck Protection Program loan cannot exceed 2.5 times the small business average monthly payroll cost and cannot exceed $10 million dollars.

Interviewer: Reyna Munoz, Tax Legal Assistant

  • That sounds great!

Question 5:

  • What are the terms and requirements in the Paycheck Protection Program for the Second Draw Borrowers?

Attorney: Coleman Jackson

ANSWER 5:

  • The Consolidated Appropriations Act, 2021 are for businesses that participated in the original Cares Act, Paycheck Protection Program.  Businesses can apply for a “Second Draw Loan” if they have spent or expect to spend the full amount of their first Paycheck Protection Program loan before they receive funding for the second loan.  They can also apply for a Second Draw Loan” whether they have applied for and received forgiveness of their First Draw Loan or not.  In general the small business must have 300 employees or less to be eligible to apply for a Second Draw Loan under the Consolidated Appropriations Act, 2021, Paycheck Protection Program.
  • It should be noted that the Consolidated Appropriations Act, 2021 increased the ability for Paycheck Protection Program borrowers to request an increase in loan amount due to updated regulations. This effects, such entities that did not accept their loan or returned the loan under the Cares Act.  Impacted entities should consult with their lender, attorney or other trusted advisor concerning making such requests under the Consolidated Appropriations Act, 2021.

Interviewer: Reyna Munoz, Tax Legal Assistant

Question 6:

  • Attorney what are the other eligibility requirements for the Second Draw Paycheck Protection Program Loan under the Consolidated Appropriations Act, 2021?

Attorney: Coleman Jackson

ANSWER 6:

  • The term eligible entity under the Consolidated Appropriations Act, 2021 is defined as a nonprofit organization, housing cooperative, veteran’s organization, tribal business concern, eligible self-employed individual, sole proprietor, independent contractor, or small agricultural cooperative that employs 300 employees or less.
  • The maximum amount of a Paycheck Protection Program loan made to an eligible small business that is assigned a North American Industry Classification System code beginning with 72 at the time of disbursal is the lesser of, at the election of the entity (1) the entities average monthly payroll cost in the year the loan is made, or (2) the entities average monthly payroll cost for the calendar year 2019 multiplied by 3.5 or a maximum of $2 million dollars. The NAICS Code 72 covers such business establishments as cafeterias, restaurants, drinking places, recreational camps, hotels, and generally any type of accommodations and food services establishment.  The business must have been operational as of February 15, 2020.
  • All other small businesses, with the exception of those with North American Industry Classification System Code of 72, which are accommodations and food services industry sector business cannot exceed 300 employees and their second draw loans are limited to 2.5 times the business’ average monthly payroll costs. The second draw loan cannot exceed $2 million dollars. The business must have been operational as of February 15, 2020.
  • Finally, all businesses applying for a second Paycheck Protection Program loan under the Consolidated Appropriations Act, 2021 must show that their business revenue declined by at least 25 percent in any quarter in 2020 compared to the same quarter in 2019.
  • Again, I want to stress that the Small Business Administration are still developing the regulations and implementation of the guidelines for the Consolidated Appropriations Act, 2021. Therefore, some implementation particulars may change but the basic eligibility details are in the Statute itself.  Business owners could consult with their lender, attorney, or other trusted advisor in preparation for the role out of the Second Draw Paycheck Protection Program by the Small Business Administration.  And they can refer to the Small Business Administration website for updates about this program.

Interviewer: Reyna Munoz, Tax Legal Assistant

  • Attorney thanks for such a detailed explanation of what kinds of businesses might be eligible to apply for a Paycheck Protection Program Loan under the Consolidated Appropriations Act, 2021. Its eligible self-employed individuals, independent contractors, people with their own businesses too! And it sounds like, based on required computation models that you mentioned, Attorney; eligible individuals and business need to engage in some complicated computations in terms of determining what their qualified payroll costs are and computing the 25 percent decline in revenue and so forth.

Question 7:

  • Attorney, are there any limitations on the types of expenses a business can pay with a Paycheck Protection Program loan?

Attorney: Coleman Jackson

ANSWER 7:

  • Yes, there are. First of all, the Paycheck Protection Program is for business expenses.  It is absolutely improper to use any of the funds for personal expenses or any other expenses not specifically associated with the business who applies for and receive the Paycheck Protection Program loan whether under the First Draw Loan or the Second Draw Loan.
  • Under the Cares Act, business expenses such as, payroll costs, rents, and utilities could be paid from a Paycheck Protection Program Loan.
  • The Consolidated Appropriations Act, 2021 expanded types of expenses that can lawfully be paid from the Paycheck Protection Program Loan to business expenses such as:
    1. covered operations expenditures, such as, payments for any business software or cloud computing services that facilitates business operations, delivery of services, and such;
    2. covered property damage cost related to property damage and vandalism or looting due to public disturbances that occurred during 2020 that was not covered by insurance;
    3. covered supplier cost for such things expenditure to a supplier of essential goods or services under contract, order or purchase order in effect during the Paycheck Protection Program coverage period; and
    4. covered worker protection expenditures which are capital facility expenditures to adapt a business establishment to comply with Department of Health and Human Services, the Center for Disease Control, local health authorities, or equivalent occupational safety standards and requirements beginning March 1, 2020 and extending to when the President declares the National Emergency resulting from Covid-19 has ended.
  • So as you can see, the types of eligible expenses that can be paid from the Paycheck Protection Program loan has been drastically expanded by enactment of the Consolidated Appropriations Act, 2021.

Reyna Munoz’s Concluding Remarks

  • Attorney, thank you for this cogent presentation.
  • I know we have not talked about the everything concerning the Consolidated Appropriations Act, 2021. But these are my questions for now.  Perhaps we can do another podcast on this topic in about two weeks or something.
  • 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. You can follow our blogs by going to our law firm’s website at cjacksonlaw.com.  Everybody take care for now!  Come back in about two weeks, for more taxation, litigation and immigration Legal Thoughts from Coleman Jackson, P.C., which is located right here in Dallas, Texas at 6060 North Central Expressway, Suite 620, Dallas, Texas 75206.
  • English callers: 214-599-0431; Spanish callers:  214-599-0432 and Portuguese callers:  214-272-3100.

Attorney’s Concluding Remarks:

THIS IS END OF “LEGAL THOUGHTS” FOR NOW

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

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

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

Update on Covid-19 Relief for Individuals and Businesses

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

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

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

TRANSCRIPT:

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

ATTORNEY:  Coleman Jackson

Welcome to Tax Thoughts

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

Reyna Munoz Introduces Herself to the Audience:

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

Attorney: Coleman Jackson

ANSWER 1:

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

Interviewer: Reyna Munoz, Immigration Legal Assistant

Question 2:

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

Attorney: Coleman Jackson

ANSWER 2:

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

Interviewer: Reyna Munoz, Immigration Legal Assistant

Question 3:

What is the substantial presence test?

 Attorney: Coleman Jackson

ANSWER 3:

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

 Interviewer: Reyna Munoz, Tax Legal Assistant

QUESTION 4:

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

Attorney: Coleman Jackson

ANSWER 4:

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

Interviewer: Reyna Munoz, Tax Legal Assistant

  • That sounds easy enough; but Attorney!

Question 5:

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

Attorney: Coleman Jackson

ANSWER 5:

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

Interviewer: Reyna Munoz, Tax Legal Assistant

Question 6:

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

Attorney: Coleman Jackson

ANSWER 6:

  • They should contact the Internal Revenue Service and inquire.

Interviewer: Reyna Munoz, Tax Legal Assistant

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

Question 7:

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

Attorney: Coleman Jackson

ANSWER 7:

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

Reyna Munoz’s Concluding Remarks

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

Attorney’s Concluding Remarks:

THIS IS END OF “LEGAL THOUGHTS” FOR NOW

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

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

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

The Long-Arm of the United States Tax Code

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

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

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

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

ATTORNEY:  Coleman Jackson

Welcome to Tax Thoughts

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

Reyna Munoz Introduces Herself to the Audience:

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

Question 1:

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

Attorney Answers Question 1:

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

Interviewer: Reyna Munoz, Tax Legal Assistant

Question 2:

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

Attorney: Coleman Jackson

ANSWER 2:

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

Interviewer: Reyna Munoz, Tax Legal Assistant

Question 3:

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

Attorney Answers Question 3:

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

 Interviewer: Reyna Munoz, Tax Legal Assistant

QUESTION 4:

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

Attorney Answers Question 4:

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

Interviewer: Reyna Munoz, Tax Legal Assistant

Question 5:

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

Attorney: Coleman Jackson

ANSWER 5:

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

Interviewer: Reyna Munoz, Tax Legal Assistant

Question 6:

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

Attorney: Coleman Jackson

ANSWER 6:

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

Attorney’s Concluding Remarks:

THIS IS END OF “LEGAL THOUGHTS” FOR NOW

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

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

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

Foreign Investments and U.S. Income Tax

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

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

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

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

ATTORNEY:  Coleman Jackson

Welcome to Tax Thoughts

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

Interviewer:  Mayra Torres, Public Relations Associate

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

Question 1:

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

Attorney Answers Question 1:

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

Interviewer:  Mayra Torres, Public Relations Associate

QUESTION 2:

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

Attorney Answers Question 2:

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

Interviewer:  Mayra Torres, Public Relations Associate

Question 3:

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

Attorney Answers Question 3:

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

Interviewer:  Mayra Torres, Public Relations Associate

Question 4:

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

Attorney Answers Question 4:

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

Interviewer:  Mayra Torres, Public Relations Associate

Question 5:

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

Attorney Answers Question 5:

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

Mayra’s Concluding Remarks

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

 Coleman Jackson, Attorney’s concluding remarks:

THIS IS THE END OF “LEGAL THOUGHTS” FOR NOW

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

Podcast – The Earned Income Tax Credit | LEGAL THOUGHTS

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

 

The Earned Income Tax Credit - Podcast - Legal Thoughts

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

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

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

 

TRANSCRIPT:

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

ATTORNEY:  Coleman Jackson

Welcome to Tax Thoughts

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

Interviewer:  Mayra Torres, Public Relations Associate

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

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

Attorney Answers Question 1:

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

Interviewer:  Mayra Torres, Public Relations Associate

Question 2:

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

Attorney Answers Question 2:

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

Interviewer:  Mayra Torres, Public Relations Associate

Question 3:

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

Attorney Answers Question 3:

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

 Interviewer:  Mayra Torres, Public Relations Associate

Question 4:

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

Attorney Answers Question 4:

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

Interviewer:  Mayra Torres, Public Relations Associate

Question 5:

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

Attorney Answers Question 5:

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

Interviewer:  Mayra Torres, Public Relations Associate

Question 6:

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

Attorney Answers Question 6:

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

Mayra’s Concluding Remarks

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

Coleman Jackson, Attorney’s concluding remarks:

 THIS IS THE END OF “LEGAL THOUGHTS” FOR NOW

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