The Newport Beach Tax Attorney Blog

Tax Flash - IRS Ramps Up Audits of High Earners

The IRS is planning to audit more high-income taxpayers, Treasury Secretary Steven Mnuchin told House lawmakers this week. The plan comes on the heels of recent reports that the IRS has conducted more audits of lower-income taxpayers largely because of the increased complexity and resources needed for high-income examinations. In doing so, the Trump administration’s FY 2021 budget request proposes $12 billion in base funding for the IRS, which would provide an increase from currently enacted levels of $11.5 billion.

If you or your business have legal questions or concerns regarding a state or federal tax audit, the professionals at Wilson Tax Law Group are available to assist and can be reached at 949-397-2292. Wilson Tax Law has offices in Newport Beach and Yorba Linda, California. Wilson Tax Law assists clients throughout California, the United States and worldwide.

Feds Gut Alimony Deduction but State of California Still Allows

With respect to payments required under divorce or separation instruments that is executed after Dec. 31, 2018, the Tax Cut and Jobs Act (TCJA) eliminates the deduction for alimony payments and recipients of affected alimony payments will no longer have to include them in taxable income. These changes solely apply to federal tax returns.

California law does not conform to changes made by the TCJA regarding alimony and separate maintenance payments made under any divorce or separation agreement executed after December 31, 2018, or executed on or before December 31, 2018, and modified after that date (If the modification expressly provides that the amendments apply). Thus, deduction for alimony payments are still deductible and recipients of alimony payments are still required to include them in taxable income under California law.

If you or your business have legal questions or concerns regarding your state or federal tax filings, the professionals at Wilson Tax Law Group are available to assist and can be reached at 949-397-2292. Wilson Tax Law has offices in Newport Beach and Yorba Linda, California and assists clients worldwide.

IRS "Beefs Up" Identify Theft Resources for Tax Professionals and Clients

The IRS has announced the launch of "Identity Theft Central", a resource designed to improve online access to information on identity theft and data security protection for taxpayers, tax professionals and businesses. The resource provides information on how to report identity theft, how taxpayers can protect themselves against phishing, online scams and more. It is located on the IRS website and is available 24/7.

The IRS, state tax agencies and the nation’s tax industry, all working in partnership under the Security Summit banner, have made substantial progress in the fight against tax-related identity theft since 2015. However, thieves are still constantly looking for ways to steal the identities of individuals, tax professionals and businesses in order to file fraudulent tax returns for refunds. As a part of the effort to help educate and improve protections for taxpayers, tax professionals and businesses, the IRS has redesigned the information into a new, streamlined page- Identity Theft Central. The following information is available to taxpayers on the page:

Taxpayer Guide to Identity Theft, including what to do if someone becomes a victim of identity theft.

Identity Theft Information for Tax Professionals, including knowing responsibilities under the law.

Identity Theft Information for Businesses, including how to recognize the signs of identity theft.

Moreover, the IRS has advised tax professionals and others to bookmark Identity Theft Central and check their specific guidance periodically for updates. Finally, the page features videos on key topics that can be used by taxpayers or partner groups, including a video message from the IRS Commissioner on warning signs for phishing email scams.

If you are the subject of identity theft and/or have questions or concerns regarding your tax filings, the professionals at Wilson Tax Law Group are available to assist and can be reached at 949-397-2292.

Did your business recently receive Summary of Account Notice from the FTB? Not to Worry

In late January/early February 2020, we began mailing FTB 3713 Summary of Account Payments, Transfers, and Credits to business entities who made an Estimated Tax Payment(s) or Estimated LLC Fee payment during the 2019 tax year.

This account summary provides:

• Payment

• Transfer

• Credit information

• Payment amounts and effective dates

The notification letter provides the same data available internally to FTB call center agents and proactively addresses the most common reason tax professionals contact the Tax Practitioner Hotline: calling to verify payments.

For 2020, the FTB added “This is Not a Bill” to the top of the letter for added clarity and to discourage recipients from remitting payment with the notice. Finally, payment information is also available online to businesses and their tax representatives who register for a MyFTB account.

Contact Wilson Tax Law Group at 949-397-2292 if you have IRS or FTB tax concerns.

Tax Flash- Special Tax Return now Available for Seniors

Please note the availability of a new tax form, Form 1040-SR, featuring larger print and a standard deduction chart making it easier for older Americans to read and use. All lines and checkboxes on Form 1040-SR mirror the Form 1040, and both forms use all the same attached schedules and forms. The revised 2019 instructions cover both Forms 1040 and 1040-SR. Taxpayers born before January 2, 1955, have the option to file Form 1040-SR whether they are working, not working or retired. The form allows income reporting from other sources common to seniors including investment income, Social Security and distributions from qualified retirement plans. Moreover, married taxpayers filing a joint return can use the Form 1040-SR regardless of whether one or both spouses are aged 65 or older or retired. Finally, the form can be used to file the 2019 federal income tax returns, which is due April 15, 2020.

Contact Wilson Tax Law Group at 949-397-2292, if need assistance.

Reminder to Employers: Deadline for Submission of Wage Statements and Independent Contractor Forms

Just a reminder to all employers and other businesses. This Friday, January 31, 2020, is the deadline for submitting wage statements and forms for independent contractors with the government. Employers also need to file their copies of Form W-2, Wage and Tax Statement, and Form W-3, Transmittal of Wage and Tax Statements, with the Social Security Administration by said deadline. The deadline also applies to certain Forms 1099-MISC, Miscellaneous Income, filed with the IRS to report non-employee compensation to independent contractors. If an employee does not receive their W-2 by the end of February, as a first step, they should contact their employer.

Contact Wilson Tax Law Group if you require assistance or have questions regarding your legal filing requirements at 949.397-2292.

Take Advantage of Free Tax Return Preparation

Many people with less complex returns can do both their federal and state tax returns for free online through Free File offered either by the IRS or by states that have a similar public-private partnership. Inidivuals whose prior-year adjusted gross income was $69,000 or less can use IRS Free File. Generally, individuals must complete their federal tax return before they can begin their state taxes. More than 20 states also have a state Free File program patterned after federal partnership, which means many taxpayers are eligible for free federal and free state online tax preparation. Moreover, for residents of Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming, IRS Free File may be the only tax product required. Those states do not have an income tax. To take use of Free File:

go to IRS.gov/FreeFile to see all Free File options;

browse each of the 10 offers or use a "look up" tool to find the right product;

select a provider and follow the links to their web page to begin the tax return; and

complete and e-File the tax return only if the taxpayer has all the income and deduction records needed.

Free File partners charge a fee for state tax return preparation unless their offer outlines upfront that the taxpayer can file both federal and state returns for free. Finally, if an individual wishes to use one of the state Free File program products, they can visit their state tax agency’s Free File page.

Of course if you have more complex issues and do not meet the free file requirements you should consult a tax professional to do your tax return. Contact Wilson Tax Law Group if you require assistance with tax filings or issues before the IRS or FTB at 949.397-2292.