Since the Internal Revenue Service’s systems were unable to process many quarterly payments that needed to be sent by April 15, the IRS is holding millions of tax refunds for manual processing. They are delaying about 29 million tax refunds which will be processed manually due to the complexities of recent tax laws that have been passed by Congress. COVID-19 relief packages, including the Consolidated Appropriations Act, which was passed in December, and the American Rescue Plan Act, which was passed in March, now require the IRS to send second and third rounds of payments to taxpayers as well as providing taxpayers with the maximum amount of their stimulus payments. These laws also required the IRS to consider expansions in the Earned Income Tax Credit and the Additional Child Tax Credit as well as new tax credits such as the Recovery Rebate Credit.

Some believe that the delay in refunds is largely due to the late passage of the Consolidated Appropriations Act. This means that the IRS was not able to adjust their tax forms and computer systems before the start of the filing season. Instead, the IRS had no choice than but to manually process corrections for the Recovery Rebate Credit to verify income for those who choose to use their 2019 income vs. 2020 to calculate EITC or ACTC. Unfortunately, this means that millions of returns are being processed by hand in the IRS’s Error Resolution System unit.

As of April 9, 2021, over 8 million individual 1040 or 1040-SR tax returns were being held in “suspense” status until it has been reviewed. Normally, the Error Resolution System unit processes returns as they come in, without putting them on hold. With those 8 million individual returns, there are about 5.3 million individual 2019 and 2020 paper tax returns, 4.7 million returns with processing errors or fraud identification issues, and 11 million businesses and other returns. The IRS has also experienced delays in its modernized e-file system when trying to process quarterly estimated tax payments, which were, insisted by the IRS, due by April 15th, despite the May 17 extension for individual returns.

The IRS urges taxpayers not to submit the payments a second time if they were worried the payments didn’t go through. The IRS also says that if you did re-submit, that you cancel the second payment by calling 1-888-353-4537 at least two business days before the scheduled payment date, no later than 11:59 pm Eastern Standard Time.

With the constantly changing tax laws as well as the need to send out second and third rounds of stimulus payments, the IRS has been facing an array of challenges this tax season. The computer systems are being overwhelmed as well as their call centers. Many calls are going unanswered due to how busy the IRS has become, which has made their customer service decline.

Talley’s team of tax professionals provide comprehensive tax compliance and consulting services so you can preserve, enhance and pass on the assets and wealth to the next generation. We welcome the opportunity to discuss the current options available for you. For more information, contact us today.

Yesterday, California Governor Gavin Newsom signed AB 80 into law, more than three months after it was first passed in the Assembly. This bill gives businesses who have received PPP loan assistance the power to deduct expenses on their taxes. AB 80 also includes deductibility for all Emergency Injury Disaster Loan (EIDL) forgivable loans due to the Consolidated Appropriations Act. To be eligible, businesses must have received at least a 25% reduction in gross receipts since 2019 and cannot be a publicly-traded company.

AB 80 went through several months of negotiations between Democrats and Republicans until lawmakers decided to add selected provisions from a similar bill, SB 265. The two parties compromised on the 25% reduction in gross receipts minimum and the non-publicly traded company eligibility requirements, which makes this bill bipartisan. Many lawmakers are relieved and in favor of the outcome, as well as numerous small business owners who have been frustrated and waiting for solutions. AB 80 will allow small businesses to get back on their feet as the economy recovers.

Policymakers have embraced the spirit of SB 265 and made COVID-19 relief tax-free for small businesses. Many believe that AB 80 is a huge improvement over the $150,000 deductibility cap that legislative leaders agreed upon two months ago, which would have harmed many job creators. Many believe that there is still a lot more work that needs to be done to include those who have been left out of the AB 80 since many who applied for and received pandemic relief funds need every dollar to stay open.

Talley’s professionals have spent hundreds of hours reviewing the law, regulations and SBA PPP FAQs issued on an almost daily basis and we are happy to assist you in the process. We are available to simply answer a quick question or assist in the application and/or forgiveness audit process.

Last week, a judge ruled that former National Football League wide receiver, Keyshawn Johnson, owes at least $905,000 in state income tax, penalties, and interest. Johnson tried overturning a 2017 California administrative ruling that he was a resident of California in 1996, when he graduated from the University of Southern California and was drafted by the New York Jets. In January, Johnson took his dispute to the Los Angeles County Superior Court.

Tax domicile has become a more pressing issue as states seek to generate additional revenue. The standard definition of domicile is “the place which an individual intends to be his or her permanent home and to which such individual intends to return whenever absent.” When domicile is not clear, over 28 states have created tests in order to determine if an individual is a resident, typically a days-in-and-out equation, with 183-day-presence being the most common. Most states often see domicile and residence as the same thing.

But California focuses on facts and circumstances. While an individual’s intent is considered when determining domicile, the FTB also looks at the individual’s acts and declarations.

Knowing these definitions is important in Johnson’s case. Judge Mark V. Mooney decided to back the Franchise Tax Board in last Wednesday’s ruling. This decision was based on many reasons. One of them was Johnson owning a house in the suburbs of Los Angeles, and filing a New York nonresident return in his 1996 federal return. At the time, Johnson was only able to claim a mortgage deductible by being a primary resident. This means that Johnson’s claim is inconsistent with the original filing. Mooney said that proving that Johnson rented a place in New York for four months is not enough evidence to be considered a New York residence. On the same note, Johnson previously claimed that he was a Nevada resident since he rented a room for $300 a month while also renting an apartment for his girlfriend and baby back in California. Where your spouse and children are located is one of many key factors the CA FTB considers when determining residency in California.

While fighting this battle, Johnson was also trying to abate the interest and penalties accrued. He owes about $905,000 in tax, penalties, and interest; $219,000 of which is the initial Income Tax. This was denied since Judge Mooney did not have the authority to overrule these fees. Judge Mooney also stated that he would not have felt inclined to wave these fees since Johnson could have been paying them while continuing with his dispute.

Talley’s team of tax professionals provide comprehensive tax compliance and consulting services so you can preserve, enhance and pass on the assets and wealth to the next generation. We welcome the opportunity to discuss the current options available for you. For more information, contact us today.

Several of former President Trump’s corporate tax cuts may be coming to an end if President Biden proves that he can roll back the 2017 proposal on domestic income-tax reductions as well as radically overhaul levies on profits that are earned abroad. His $2.25 trillion plan, based on infrastructure, relies on high corporate levies to pay for it. This proposal will change the tax benefits that were the core of the 2017 Tax Cuts and Jobs Act, which passed solely with Republican votes. Biden plans to increase the corporate income tax rate from 21% to 28% as well as have businesses pay more on global earnings. The administration proposes to eliminate fossil-fuel tax breaks and repeal incentives to move assets and jobs offshore.

Biden’s plan will update the matrix of carrot-and-stick incentives that were put in place in 2018. These incentives determine how many U.S. companies currently pay taxes on their foreign profits. Biden proposes a 21% global minimum tax on foreign profits to help keep income and assets local. This would be an estimated increase of 13% from what corporations currently owe on offshore earnings.

While Trump’s tax law was supposed to allow American companies to compete with other foreign companies in countries where taxes were lower and international tax regimes were permissive, it has only disappointed those who put it in place. Instead, companies only repatriated a fraction of foreign profits which were envisioned by the reform. Uncertainty about the longevity of this law had led companies to adopt a wait-and-see approach.

Many Republicans have defended Trump’s tax law, saying that by raising the federal corporate tax not only will the US rate be the highest among G-7 countries, but this would also increase the cost of investing in the country, harming the economy.

The National Economic Council Director Brian Deese predicts that Biden’s plan will stop the “race to the bottom” on corporate taxes. He also argues that Biden’s plan will be beneficial to private sector companies.

Talley’s experienced team of tax professionals provide comprehensive tax compliance and consulting services so you can preserve, enhance, and pass on the assets and wealth to the next generation. We welcome the opportunity to discuss the current options available for you. For more information, contact us today.

Thanks to a hotly debated pandemic tax break, the Internal Revenue Service is approving corporations to receive $14 billion in tax refunds. So far the IRS has received over 41,000 applications from businesses who are taking advantage of the provision in the March 2020 pandemic relief bill; which allowed companies to apply business losses to years in which they were not profitable. The Government Accountability Office (GAO) estimates that 1,200 companies that took advantage of the provision received a refund of more than $1 million.

This tax break, which was included in the bipartisan CARES Act, has recently come under fire from Democrats; calling for it to be repealed due to it largely aiding corporations and wealthy investors. Republicans argue that this was done so that companies can easily liquidate during the pandemic.

This is one of many updates to be rolled out of the economic relief bill that was passed more than a year ago. In its regular report to Congress, the GAO says that programs, such as the Paycheck Protection Program and Economic Injury Disaster Loan, are still suffering from fraud. The GAO also says that these programs need additional protection to help prevent improper disbursal of funds. They also say that states should provide more data to help with recouping billions in fraudulent unemployment compensations that were paid.

Although the IRS has just started issuing refunds to companies claiming the pandemic relief, there are still many more applications. Some were filed on paper, getting caught up in a mail backlog, or are tied to revised tax returns that have not been processed yet. The congressional Joint Committee on Taxation predicts that the corporate tax break will cost the government about $25.5 billion total. The committee also predicts that the tax break for non-corporate entities will total about $169.6 billion over the decade. Although the GAO’s data does not go over other business types, the GAO said it will be monitoring the refund claims for those taxpayers as well.

In 2020, Congress expanded the provisions of the Tax Code which allowed companies to carry losses back as far as 5 years. This allowed previously profitable businesses to mitigate losses as the economy faltered. Normally, the Tax Code allows business owners to tabulate net operating losses for the years they were non-profitable and use those to offset tax bills in the future when they do make money.

Talley’s experienced team of tax professionals provide comprehensive tax compliance and consulting services so you can preserve, enhance, and pass on the assets and wealth to the next generation. We welcome the opportunity to discuss the current options available for you. For more information, contact us today.

Initially set up a year ago, the Paycheck Protection Program was a source of relief as the pandemic paralyzed the American economy. This program has since been expanded and extended due to the ongoing situation. Last week, U.S Senate approved an extension of the small-business relief program, which has about $79 billion left to distribute. The bill passed with a 92-7 vote and was signed into law by President Biden on Tuesday this week. This is a two-month extension that will give small business owners until the end of May to apply for forgivable loans.

According to the Small Business Administration, there is still $79 billion left to be lent, even after the approval of about 3.1 million loans, starting from the beginning of this year to March 21st. Owners that spend forgiveness money on approved costs, such as worker salaries, are eligible to convert their PPP loans into grants. Many business groups and leaders urged Congress to extend the deadline so that small businesses have enough time to apply for the money.

The new round of PPP lending that opened in January was available since Congress had approved of more funds in December. Additionally, lawmakers approved an extra $7.25 billion in the latest $1.9 trillion stimulus bill. This bill also expanded eligibility to some nonprofits and online publishers. This month’s package includes a $28.6 billion grant program for restaurants. Restaurants that have received PPP money can tap the fund if they can demonstrate enough revenue loss. It has not been announced as to how the SBA will be distributing those grants.

With the latest PPP round, some businesses were able to apply for a second loan, if they had already used their first one and met the requirements regarding the number of employees as well as being able to demonstrate a decline in revenue. Unfortunately, these new forms and exclusive access periods for some small businesses meant that the roll-out of additional funding was slow and many applicants waited weeks for their financing to be processed.

Talley’s professionals have spent hundreds of hours reviewing the law, regulations, and SBA PPP FAQs issued on an almost daily basis and we are happy to assist you in the process. We are available to simply answer a quick question or assist in the application and/or forgiveness audit process.

To help pay for the long-term economic program that is designed as a follow-up to the recent pandemic-relief bill, President Biden is planning the first major tax hike since 1993. This next initiative, which is expected to be bigger than the $1.9 trillion Covid-19 stimulus act, won’t rely just on government debt as a funding source. Key advisers are now making preparations for a package of measures that could include an increase in both the corporate tax rate and the individual rate for high earners since it’s clear that tax hikes will be a component of funding.

Tinkering with rates is fraught with political risk since each tax break and credit has its own lobbying constituency to back it. This helps to explain why the tax hikes in Bill Clinton’s 1993 overhaul stood out from the modest modifications done since. For the Biden administration, the changes are an opportunity not just to fund key initiatives, but also to address what Democrats argue are inequities in the tax system itself. The plan will test both Biden’s capacity to woo Republicans, and Democrats’ ability to remain unified.

Biden’s outlook has always been that Americans believe tax policy needs to be fair. He has viewed all of his policy options through that lens, which is why the focus is on addressing the unequal treatment between work and wealth. To even out the wealth, The White House expects to propose a suite of tax increases. Portions of President Donald Trump’s 2017 tax law will likely be repealed under taxes that were included in any broader infrastructure and jobs packages that benefit corporations and wealthy individuals.

The following are proposals currently planned or under consideration, in no particular order:

  • Raising the corporate tax rate to 28% from 21%
  • Paring back tax preferences for so-called pass-through businesses; like limited-liability companies (LLCs) or partnerships
  • Raising the income tax rate on individuals who are earning more than $400,000
  • Expanding the estate tax’s reach
  • A higher capital gains tax rate for individuals earning at least $1million annually

According to an independent analysis done by the Tax Policy Center, about $2.1 trillion would be raised by Biden’s campaign tax plan. Although the overall program has not been released yet, analysts are penciling roughly $2 to $4 trillion raised.

While debates over whether infrastructure will ultimately pay for itself, there have been efforts to make the expanded child tax credit in the pandemic-aid bill permanent. This could be proven difficult to sell if pitched as entirely debt financed. Experts say that investing in infrastructure may provide durable economic gains that support higher pay and promote the diffusion of gains across demographic lines and political persuasions. Democrats would need at least 10 Republicans to back the bill to move it under regular Senate rules.

Although the 1993 bill marks the last comprehensive set of increased taxes, Biden’s bill is much bigger. While Bush’s 1993 bill passed on a two-vote margin in the House, it required the vice president to break a tie in the Senate. This means that Biden’s bill might be in a similar position. Some argue that due to some proposals, Republicans may support the bill.
These proposals include:

  • A shift from a gasoline tax to a vehicle-miles-traveled fee to help fund highway projects
  • More money for the Internal Revenue Service

If passed, tax measures would likely take effect in 2022, although this may change depending on the unemployment rate in the next year or so.

Talley’s experienced team of tax professionals provides comprehensive tax compliance and consulting services so you can preserve, enhance, and pass on the assets and wealth to the next generation. We welcome the opportunity to discuss the current options available for you. For more information, contact us today.

UPDATE: Federal and California April 15th tax deadline for individuals extended to May 17th

Earlier this month, President Biden signed the American Rescue Plan Act into law, which triggered the release of $1,400 economic impact payments along with tax breaks to stimulate the economy. Included in this $1.9 trillion legislation is a one-year expansion of child tax credit, up to $3,600 per child, extension of the employee retention credit, and the addition of more money to the Paycheck Protection Program. It promises to boost the economy substantially as it slowly recovers from the pandemic, which has left millions unemployed.

Employee retention credit. With the Employee Retention Credit that was introduced in the 2020 CARES Act, the goal was to keep workers on the payroll by providing tax credits to employers when the pandemic first started. This act was extended in December 2020 in the $900 billion Consolidated Appropriations Act. The main goal of Biden’s legislation is to extend the employee retention credit as well as the changes made due to the Consolidation Appropriations Act. The changes allow employers to claim a credit against 70% of qualified wages paid. Eligible wages went from $10,000 per year to $10,000 per quarter, and the recent legislation extends it until the end of the year. This means that businesses can get $28,000 per employee instead of the 2020 maximum of $7,000 per employee. This will allow businesses to put non-paycheck expenses towards PPP loan forgiveness since the required attributable wages went from 75% to 60%, giving businesses more potential employee retention tax credits.

Talley LLP is now submitting ERC claims on behalf of our clients. For more information, please Contact Us

Child Tax Credit. Huge benefits to taxpayers with small children, especially big families, are expected to be a result of the expansion of the child tax credit. Although it was used to reduce child poverty for a year, Democrats want to extend it further. The expansion of the child tax credit raised the amount for qualifying children from the 2020 $2,000 to $3,600 for children five and under, and $3,000 for children between six and seventeen. Many families will start to see payments this July. Families are also eligible for daycare expenses up to $4,000 after filing 2021 taxes.

Talley’s experienced team of tax professionals provides comprehensive tax compliance and consulting services so you can preserve, enhance, and pass on the assets and wealth to the next generation. We welcome the opportunity to discuss the current options available for you. For more information, contact us today.

Under pressure to transform its operations digitally, GameStop Corp announced that they hired former Amazon.com Inc. executive Matt Francis as their first chief technology officer. GameStop’s change of focus from its 5,000 stores to e-commerce is due to activist investor Ryan Cohen. Mr. Francis will be overseeing GameStop’s e-commerce and technology functions.

Experts say that for a technology executive to be a successful digital transformation leader, they must have a special set of business and technology skills. These skills include, but are not limited to:

Map Data’s Role Across the Business
Starting with a digital transformation mission will put the focus on technology without understanding the business context. It is important to start with business transformation first to understand how data plays a role in customer engagement and business operations over time. Next, map technology against those strategies and understand where technology transformation is needed. By doing these things, focus changes from bottom-up to top-down, which creates a clear context for change.

Communicate in Language the C-Suite Understands
Understanding technical requirements as well as being able to put them into non-technical business language is important. Although fellow businesspeople may understand your viewpoints, it is best to keep it simple so that people can buy into your plan and are more willing to help out. The best digital transformation leader is one that communicates well, is seen as a colleague, and is seen to be an expert in IT.

Be a Talent Magnet
Being a really strong people leader is something that sets a lot of technology executives apart. No one is going to be able to solve all of the problems that may occur in a digital transformation. They need to set themselves apart in the competition for talent.

Connect Tech Investments to New Lines of Business
Many chief technology officers have to communicate with chief executives, boards, and other C-suite stakeholders to help construct and deliver technology that will be the right fit for the process. It is the digital transformation leader’s job to be in charge of the change when it comes to conversations about how the change will affect costs and revenue. Although many see technology as a way to cut costs, many are coming to realize that with technology, you can create new productivity, products, and lines of business.

Proper business planning is a complex and ongoing effort, requiring expert counsel—a professional with knowledge and experience, familiar with the challenges that characterize an entrepreneur’s business ventures. Talley LLP shares the same entrepreneurial spirit that has helped propel our clients to their current level of success. With over 25 years’ experience in helping high net worth individuals and business owners, Talley has the expertise necessary to assist entrepreneurs throughout their entire journey, from formation through succession.

Last month, Amazon announced Jeff Bezos will step down as CEO and be replaced by the head of the company’s cloud computing unit, Andy Jassy, in the third quarter of 2021. Jassy and Jeff Wilke were likely successors to Bezos. With Wilke’s announcement of leaving Amazon, it was inevitable for Jassy to take the role of CEO. Incoming CEO Jassy is likely to keep Amazon on its current path, increasing the profit that he helped to create despite the pandemic.

Much like Bill Gates, Bezos isn’t going far and will remain a chairman of Amazon. In Bezos’s new role, he is able to focus on one of his passions, innovation, without being encumbered by the daily duties that come with being a CEO of a global empire. Now, Bezos is able to turn his attention to promising ideas as well as his ownership of Blue Origin, his space exploration company, and the Washington Post.

In the quarter ending in March, Amazon estimates projected revenue to be in the range of $100 to $106 billion, with a projected operating income of $3 to $6.5 billion. Amazon, also, reported that fourth-quarter sales jumped to 125.6 billion, an increase of about 44%, beating the average estimate of 119.7 billion. Although Amazon has had much success during the pandemic, investors still remain mindful of Amazon’s rising expenses. According to Amazon, COVID-19 related costs such as lost productivity due to social distancing as well as extensive cleaning and sanitization procedures throughout Amazon warehouses and shipping centers are going to add an estimated $2 billion to expenses for the current quarter.

Colleagues say that Jassy is very similar to his boss, Bezos and is known to becoming a micromanager when it comes to projects he’s passionate about. Jassy, also, prefers data-driven decision-making that puts customers at the center of the company’s thinking.

Proper business planning is a complex and ongoing effort, requiring expert counsel—a professional with knowledge and experience, familiar with the challenges that characterize an entrepreneur’s business ventures. Talley LLP shares the same entrepreneurial spirit that has helped propel our clients to their current level of success. With over 25 years’ experience in helping high net worth individuals and business owners, Talley has the expertise necessary to assist entrepreneurs throughout their entire journey, from formation through succession.


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