Bipartisan Problem Solvers Caucus Unveils COVID-19 Stimulus Framework

Earlier this week, the bipartisan Problem Solvers Caucus (PSC), comprised of 25 Democrats and 25 Republicans from the House, unveiled its “March To Common Ground” framework to help break the gridlock on the latest COVID-19 relief package and encourage negotiators to get back to the table.

The package addresses key areas of need, including COVID-19 testing, unemployment insurance, direct stimulus, worker and liability protection, small business and non-profit support, food security, schools and child care, housing, election support, and state and local aid.

In light of the urgent needs facing millions of Americans, families, and small businesses, the framework is designed for a six month horizon and through the next inauguration, except for state and local funding which extends for a full year.

Depending on the severity of the pandemic and if a successful vaccination program is adopted by March, 2021, a system of automatic “boosters” are designed to incrementally increase the amount of relief to individuals and families. Conversely, a system of “reducers” will decrease the total cost of the package.

A Summary of the Proposed Framework

  • $280 billion in funding for $1,200 stimulus checks plus $500 per child plus dependent adults.
  • The PSC’s framework includes $100 billion of additional health care spending – testing and contact tracing, healthcare provider support, and forgiveness of Medicare loans to providers.
  • $11 billion would go to enhance WIC and SNAP through March and July 2o21 respectively. (WIC is a nutrition program for Women, Infants and Children. SNAP is commonly called “food stamps”).
  • There is $25 billion for rental assistance, rent stabilization and an eviction moratorium through January 2021 and student loan forbearance through December 31, 2020.
  • The unemployment provision is $450 per week for an eight-week transition period. That is followed up by up to $600 per week but not to exceed 100% of previous wage for thirteen weeks through January 2021.
  • Reappropriating $145 billion of PPP money and adding $95 billion in new money with simplified forgiveness and $50 billion for the Employee Retention Credit.
  • $145 billion for schools and child care.
  • Half a trillion in aid to state, local, territorial and tribal governments and
  • $400 million for election security.

The proposed framework would include automatic reducers and boosters depending on how things go based on Covid-19 hospitalization metrics and vaccine progress. If things get better more quickly PPP, state and local aid and renters assistance could be carved back by as much as $200 billion.
Alternatively, if things get worse, the framework’s “boosters” include a 3-month extension on the unemployment benefits starting in February 2021 and another $280 billion for automatic stimulus checks in March 2021.

Meanwhile, Congress is expected to focus in the coming weeks on passing legislation funding the government beyond Sept. 30, the end of the current fiscal year.

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Nearly two weeks after President Trump’s payroll tax deferral program came into effect, no major private employers have stepped forward with plans to forgo withholding the levy from workers’ paychecks. Costco Wholesale Corp., United Parcel Service Inc. and FedEx Corp are among those not participating.

Part of the challenge for the White House is it can’t unilaterally cut taxes and can only defer the due date. Internal Revenue Service guidelines left employers on the hook to pay back the payroll levy early next year, effectively doubling withholding from employees’ paychecks.

Among the challenges, is how companies can get the money owed from people who opt into the payroll tax deferral but leave prior to repaying their portion of the payroll tax being deferred. Other challenges include calculating the precise amount of payroll tax to pay back by the time taxes are due next year in April. If there are under-payments, discrepancies or reconciliation problems, the IRS can assess interest, penalties and additions to tax beginning May 2021, for which employers would be liable.

Trump’s August directive delayed the payroll tax due date for the 6.2 percent Social Security taxes for those making less than $4,000 bi-weekly, which amounts to about $104,000 a year. It was his latest attempt to achieve a second tax reduction after criticism that the 2017 Republican tax overhaul didn’t do enough to help middle-class workers.

Lawmakers did endorse a deferral of the portion of payroll taxes that is paid by companies and it was part of the last stimulus package, approved in March. That measure was easier for employers to administer and acted as a temporary liquidity aid.

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

At the beginning of the pandemic, many workers were sent home armed with a laptop and other remote equipment so they could work remotely until it was safe to reopen public spaces again. But if you’re doing your job in a state different from your usual one, beware: You may need to file returns and perhaps pay taxes there.

Each state tax system is a unique combination of rules that consider how long a worker is there, what income is earned, and where the worker’s true home, known as domicile, is. But nearly all states that have income taxes impose them on workers who are passing through. In two dozen states, that can be for just one day.

So far, 13 states and the District of Columbia have agreed not to enforce their tax rules for remote workers who are present due to the coronavirus, according to American Institute of CPAs spokeswoman Eileen Sherr. Some states don’t have an income tax, but more than two dozen others, including New York and California, which are famously aggressive, are still set to levy taxes on these remote workers for 2020.

Most states offer tax credits to offset income earned in other states avoid double taxation. But these credits might not make the worker whole if the remote work is in a state with higher taxes than the home state. For example, a Seattle employee who works remotely from Oregon during the pandemic and owes Oregon income tax won’t get a credit from Washington, because it doesn’t have an income tax.

Businesses with employees or owners working remotely face further tax headaches. Simply having a worker present in a state can trigger so-called nexus rules that raise state taxes on business as well as personal income.

Out of state or telecommuting employees should talk to their employers about where state taxes are being withheld while they’re working remotely. As arrangements that at first seemed provisional take root, taxpayers should also track days spent working in different states, because auditors often use cell-phone or credit-card records to track movement.

Congress has come up with several possible solutions to this issue, however they seem to have limited traction at the moment. The proposed Multi-State Worker Tax Fairness Act, which has been introduced repeatedly since 2016, limits the ability of states to tax nonresident telecommuters. Alternatively, Senate Republicans’ HEALS Act includes a temporary provision which partially restricts such double taxation through 2024.

With these complex issues in play, we urge you to act soon to see how you may be affected when filing your taxes for 2020.

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

The Internal Revenue Service will start examinations of several hundred high-net-worth (HNW) taxpayers beginning July 15. These audits will address partnerships, private foundations (PFs), trusts and other matters for sophisticated individual taxpayers. With a coordinated IRS campaign, HNW taxpayers can expect aggressive IRS audits.

Partnerships and Other Passthroughs. The IRS will likely target HNW taxpayers with partnerships and other pass-through entities. Exams will address taxpayers with pass-through structures, such as partnerships, S corporations and disregarded entities. The Bipartisan Budget Act of 2015 overhauled the partnership audit rules to make it easier for the IRS to audit partnerships and collect tax from those audits.

Private Foundations. IRS examinations are expected to include individuals with PFs. HNW individuals and families utilize PFs to facilitate charitable giving and charitable activities. The tax rules governing PFs are complex. PFs are subject to several excise taxes and compliance requirements to ensure that PF assets are devoted to charitable purposes and to ensure that disqualified individuals don’t obtain certain prohibited personal benefits.

Multi-jurisdictional Families. Individuals with non-U.S. assets and income are subject to special tax and reporting requirements for offshore accounts and assets. The IRS has focused enforcement efforts on taxpayers with offshore bank accounts, assets and structures for several years. Reporting and compliance for these assets can be a trap for the unwary, especially for taxpayers living outside the United States, globally mobile individuals and multi-jurisdictional families. The IRS maintains a voluntary disclosure practice for individuals to regularize non-compliance with US international tax and reporting obligations.

TCJA Examinations for Individuals. The 2017 Tax Cuts and Jobs Act (TCJA) made major changes to the taxation of HNW individuals with international assets and activities. Many of the changes had a disproportionate impact on HNW individuals, including the rate structure of the Internal Revenue Code Section 965 transition tax, global intangible low taxed income and limits on available deductions. In May, the IRS announced a TCJA campaign and stated that “[t]he goal of this campaign is to identify transactions, restructuring and technical issues and better understand taxpayer behavior under the new law.” HNW individuals should be prepared to address TCJA tax issues and related planning during the coming cycle of examinations.

How Can Taxpayers Prepare? HNW individuals should be prepared to address issues relating to their sources of income, estate planning, foreign financial accounts, gifts to family members, assets transferred to PFs or charitable organizations and to identify assets they own both within and outside the United States. Increased scrutiny of IRS audits of HNW individuals make it extremely likely that the IRS will consider increasing enforcement measures.

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

We’ve heard of artificial intelligence in movies like Terminator and I, Robot. But the real applications of artificial intelligence include analyzing complex data sets, driving vehicles, providing more insightful user experiences, and even setting dinner plans or weeding out spam callers. While these applications have grown incredibly in the private sectors, government agencies like the IRS have also started to employ artificial intelligence as a utility for improving communication, taxpayer assistance, and even detecting tax evasion.

Several government tax agencies have already employed the use of chatbots to answer taxpayer questions. The most recent example comes in the form of Canada’s Charlie the Chatbot. A similar system is no doubt in the works for the IRS, which will hopefully help taxpayers avoid long wait times on the phone and get clarification on confusing documentation on the IRS website. Artificial intelligence has a consumer-facing goal of making lives easier, so it’s not far off to expect time-saving applications like chatbots.

While this appeals to taxpayers and consumers, the ideal application for an agency like the IRS is in tracking tax evasion, and increasing the likelihood of collecting tax payments from delinquent tax payers or non-filers. Such an application comes into the picture as the Internal Revenue Service ramps up data collection and analysis by using artificial intelligence to create graphs and present relationships between data to identify people who may be avoiding their taxes. But the usability goes as far as analyzing the scripts between IRS agents and taxpayers in order to find out how to effectively solicit tax payments, and ultimately “get a check sent.”

In an effort to fulfill these objectives, the IRS has even engaged in relationships with data firms to investigate potential tax evasion. IRS commissioner Charler Rettig even reveals the benefits of these new partnerships with this quote: “If I get a first name and a cell phone number, you’d be shocked how much information Palantir can provide.” Palantir refers to Palantir Technologies, a private data analytics company based in California. The initiatives are still fairly new and uncertain considering the budget of the IRS.

Additional implications come from the already detached nature of the organization becoming more automated, pushing human interaction even further from the taxpayer. Often, taxpayers are already confused as to the reason for IRS notifications, and making the communication process automated could become frustrating and ultimately leave taxpayers even more uninformed.

While the involvement of artificial intelligence in tax processes remains uncertain, human interaction will always be close by. Taxpayers should be wary of the fact that the evolution of technology within agencies like the IRS makes it much harder to conduct nefarious actions like tax evasion.

Talley’s experienced team of tax professionals provides comprehensive tax compliance and consulting services so you can preserve, enhance and pass on to the next generation the assets and wealth that you’ve worked hard to build. We welcome the opportunity to discuss with you the current opportunities available to you, your family and business. For more information, contact us today.

With tax season in full swing, it’s a great time to address tax savings strategies that apply to everyone. No matter what your age or what capacity you are employed in, if you are making money then these tips apply to you. We wanted to focus on retirement, not only because it’s relevant in the current self-help-centered social climate, but because saving for retirement is one of the most crucial investments in your future that may also serve as a tax-saving tactic.

Most Americans are not prepared for retirement. Consider the fact that almost 300,000 baby boomers are set to retire each month until 2030 with less than 10% of the suggested minimum retirement savings. The unfortunate reality is that the lack of retirement investments and savings coupled with active debt (e.g., a mortgage), many baby boomers are not in a position to enjoy a stress-free retirement. Many may even be forced out of retirement or kept from retiring altogether. That is why it is so important to take advantage of financial planning options like retirement accounts and leveraging tax-saving strategies that are available to you.

Most workplaces offer options like a 401(k) or 403(b), which are effectively savings accounts that allow you to invest your money while deferring any taxes until a later time. Although there is more to it and the details are generally pretty complex, it’s not hard to set up automatic contributions every month. As a bonus, if you are utilizing a 401(k) offered by your company, they may even offer to match what you put in up to a certain amount.

Traditional IRAs are also an option because you are taxed at the time of withdrawal. As such, these contributions may be considered tax deductions when you file your taxes. Roth IRAs are an interesting alternative because you pay taxes upfront, so the benefits come later on. Either way, the best part is that you can maintain both a 401(k) and IRA at the same time.

In conjunction with money management and financial planning, long-term tax planning can help both you and your family protect your hard-earned money. No matter your situation, consulting with your wealth advisor and tax advisor is a good start.

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

California’s groundbreaking Assembly Bill 5 (AB 5) went into effect on Jan. 1st, becoming the standard for determining whether workers should be classified as employees or independent contractors. All companies using independent contractors in California will be put through a three-part test to determine whether they must reclassify their workers. If they don’t pass that test, they’ll have to turn their workers into employees.

The debate that raged around the bill for months focused mainly on its effects on Big Tech and gig economy companies such as Uber, Lyft and Postmates. But by the time the legislation became law last year, its scope broadened to encompass an array of industries, from transportation/trucking to journalism. Proponents of the bill say that it forces companies to replace gigs with jobs that entitle employees to state-mandated protections like paid time off, coverage for job injuries, and unemployment insurance. Critics of AB 5 say despite its good intentions the legislation has boomeranged on contractors, making it harder for tens of thousands of them to make a living in a tight economy.

The three-part AB 5 “ABC classification test” requires businesses to use the following test in determining whether a worker is an employee or an independent contractor:

(A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.

(B) The person performs work that is outside the usual course of the hiring entity’s business.

(C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.”

If even one of the conditions is not met, then the worker is classified as an employee. As concerns grow over the new law, large companies and third-party organizations like Uber and Airbnb are looking for ways to avoid having to take on a rush of new “employees” under this classification.

Our assessment of AB 5 is that it will have major tax implications across a wide variety of businesses and industries. Talley welcomes the opportunity to discuss what AB 5 may mean for you and your business. For more information, feel free to contact us

If you have followed the news in regards to retirement, you know that multiple sources have referenced the lack of retirement savings among retirees and older people. While this isn’t isolated to America, the Fed reports about 25% of Americans don’t have a retirement plan in place. With declining policies in place to take care of Americans post-retirement, retirement accounts and financial knowledge is more important than ever. While the SECURE Act doesn’t specifically address all the financial issues when it comes to retirement, it does allow some solid options for Americans.

RMDs to start at age 72 instead of 70 ½. First and foremost, the SECURE Act increases the age in which you need to start required minimum distributions from traditional retirement accounts. While the change from 70 ½ years old to 72 is only 1 ½ years, this allows retirement accounts to continue gaining interest while also allowing the account holder to hold off on paying interest on the money.

You can contribute to traditional IRAs after age 70 ½. There is no longer an age cap on a traditional IRA, similar to a Roth IRA. After 70 ½ years old, participants can continue to contribute money to the retirement account, provided they have earned income. This is especially helpful for not-so-retired retirees.

More Annuity Options with 401(k) plans. Another positive note is the addition of improved legal coverage for employers with hopes that this will lead to more options in the annuity realm. Traditionally, the liability was too much for most companies to offer an option like this in a 401(k). They were even able to offer 401(k) options to part-timers as long as they fulfill a short list of requirements. Small businesses gained a boost as well, with potential to offer 401(k) options through economies of scale.

Your tax bill on inherited IRAs will come sooner. The bill also essentially eliminates the “stretch IRA,” an estate planning method that allows IRA beneficiaries to stretch out their distributions from their inherited account and the required tax payments that come with it. Under the new law, most beneficiaries will be required to withdraw all the distributions from their inherited account and pay taxes on it within 10 years.

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

While a new year means new commitments to health and happiness, individuals should also make goals for their financial wellness. With tax season opening at the end of January, making some new year’s tax resolutions can make a big impact and require little follow through. Although new tax laws from the IRS and Congress can’t always be anticipated, it is a good idea to try to avoid as many surprises as possible when it comes to your taxes.

First and foremost is to take a step back and evaluate your plans for 2020. These include personal plans, business goals (if you are a business owner), and whether any of these impact your tax withholding. Some examples of significant plans or changes include having a child, purchasing a home, and getting married. A quick check on the IRS website or a consultation with a tax advisor can help determine if you are withholding too much or too little.

Even more important may be a look at your beneficiary designations. When working on non-probate assets like retirement accounts or life insurance policies, you must be sure to have the proper beneficiary designations in place. With changes to IRC §401 and other parts of the law, the way that you contribute and benefit from non-probate assets has changed. Being proactive and taking a look at the pieces you can control, like beneficiary designations, can give you more peace of mind. In addition to this, estate planning documents are important items to review. Changes in federal estate taxes and exemptions may have an impact, and even if they don’t, there may be reason to adjust for new goals or changes in your life.

A final tip is to always stay aware and up to date on policies and changes to tax laws. Following the correct procedures and remaining compliant, especially when it comes to alternative interests like offshore accounts or virtual currency, is as important as ever. Most people might not realize it, but the penalties for willingly ignoring tax laws can be incredibly serious. While these resolutions don’t require much more than a bit of time and consideration, they can offer massive benefits later during tax time.

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

It is one thing to test fate with excessive deductions or claiming unverifiable items, but it is an entirely different thing to not even file a tax return. Yet, that is precisely what Harvard law professor, Ronald S. Sullivan, Jr. did, and the consequences were all too real. Sullivan’s neglect to file his 2005-2013 tax returns resulted in a $1.2 million tax bill from IRS assessments of his records, a sum he claims is much higher than his income warrants.

The IRS can and will file returns for you, known as “substitutes for returns.” As a result of this policy and Sullivan’s irresponsibility, the IRS filed his taxes and assessed that he owed over $1.2 million for 2012 and 2013 alone. When the IRS tried to collect, Sullivan ignored procedure until they filed a Notice of Intent to Levy, which he objected to. Although he argued his income was not indicative of taxes that large, Sullivan again neglected his due diligence when it came time to respond with proof. He was prompted at least seven times for information, including three letters requesting that he file taxes for the years of 2012-2015 and a telephone hearing with an assigned IRS settlement officer.

Throughout 2017, Sullivan continued to ignore these requests, communications, and his responsibility in the matter. As a result, when the case was brought to the United States Tax Court, they upheld the IRS’ assessment of taxes owed and agreed that Sullivan was responsible for paying the total amount. It’s very much possible that Sullivan was telling the truth and that his income did not command taxes owed to that amount, but he lost the opportunity to correct the assessment when he neglected to file tax returns for eight years and failed to respond to the IRS’ inquiries.

It’s disheartening to hear that you have to pay over $1.2 million in taxes (especially if it is just for two years of income), but the reality is that the consequences can be so much worse: an actual levying of your assets and accounts, garnishing of your wages, and jail time. It is unclear how the situation was resolved, but if Sullivan had at the very least filed taxes, the situation would have been much easier to fix.

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


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