Tax Problem Help Archives - Chicago IRS Tax Attorney

1099-K Rule Delayed: What You Need To Know

December 29, 2022 by admin

Wednesday December 28, 2022 – The Internal Revenue Service (IRS) recently announced that it is delaying the implementation of 1099-K reporting requirements until January 2023. This delay affects businesses and individuals who receive payments from financial organizations and other third parties through electronic payment channels such as PayPal, Venmo, Square, Apple Pay or Google Wallet.

The delay provides financial organizations and their customers with a valuable reprieve from the compliance and administrative costs associated with the new requirements. More importantly, the IRS doesn’t have the capabilities to process the huge increase in information returns. In 2020 the IRS processed 3.2 billion information returns – 30 million of which went unprocessed. In 2021 the IRS processed 4.7 billion information returns. It isn’t clear if the IRS left any unprocessed.

For both businesses and individuals receiving payments through these online platforms, this announcement offers interim relief from an onerous process for filing 1099-K forms for income earned through digital payment methods to report to the IRS. The original deadline was in 2021, but now has been extended for two years. There have been Congress members, on both sides of the aisle, proposing legislation to change the parameters. The current law triggers a 1099-K after just $600 of activity. With that low trigger, it is clear the number of returns were set to explode.

The extension also provides additional time for employers to develop additional safeguards or systems that protect taxpayers from being charged taxes on amounts that should be exempt from taxation, as commercial activity tax laws vary between different states. It is important to bear in mind that while this delay may provide comfort to some businesses, they are still required to comply with all applicable federal tax laws when it comes to reporting any income received through digital payment channels starting January 2023.

Attorney Steven A. Leahy looks at this new development on Today’s Tax Talk

https://www.irs.gov/newsroom/irs-announces-delay-for-implementation-of-600-reporting-threshold-for-third-party-payment-platforms-forms-1099-k

https://www.jdsupra.com/legalnews/irs-delays-reporting-requirements-on-3732485/

https://nypost.com/2022/12/26/cheer-irss-delay-of-congress-ugly-rule-socking-the-gig-economy-but-it-should-die-entirely/

https://www.cpapracticeadvisor.com/2022/05/13/report-irs-destroyed-30-million-paper-tax-documents/49460/

Steven A. Leahy is a tax attorney in Illinois. He was the host of the long-running popular Radio Show “The IRS Radio Hour” heard every Sunday evening on AM 560 The Answer. Attorney Leahy is also the author of the book “Deal With Your IRS Problems Today!” You can get a FREE copy of this important book at FreeIRSBook.com. Or Call 24/7 (312)664-6649

The IRS Has A Billion Dollars to Hand Out

March 9, 2017 by admin

Steven A. Leahy

The IRS Has A Billion Dollars to Hand Out

You may have heard the news that the IRS is searching for over a million tax payers to hand out more than a billion dollars. Here is what is happening. The IRS has ten years to collect delinquent taxes from taxpayer. This is referred to as the Collection Statute Expiration Date (CSED). However, if the IRS owes taxpayers refunds for tax years with unfiled tax returns, the taxpayer only has three years from the due date to collect this refund. And, if the taxpayer is also entitled to an Earned Income Tax Credit, those funds too, must be claimed within three years of the tax return due date.

If taxpayers have unfiled tax returns and it appears to the IRS there will be a tax liability, the IRS takes it upon themselves to file a Substitute for Return (SFR). The SFR is not a service, it is a penalty! They prepare your taxes in order to assess a tax – the IRS can’t collect a tax that has yet to be assessed. Generally, the SFR overstates the true tax obligation of the taxpayer. However, the IRS begins collection efforts to collect the assessed tax. It may take the IRS some years to assess the tax for an unfiled return – and the CSED does not begin until the tax is assessed. So, the IRS has additional time, from the date of assessment – not from the date the tax return is due, to collect the assessed tax.

If it appears the taxpayer has a refund due, the IRS does not complete the SFR. Therefore, a tax is never assessed, so the IRS does not calculate what your refund would be. They leave it to the taxpayer to calculate that number.

This year, 2017, tax-day is April 18th. This is the second-year tax-day has landed on April 18th rather than April 15th. The reason that is revolves around a little-known Washington DC Holiday, Emancipation Day. Here is the rule:

Generally, if a due date for performing any act for tax purposes falls on a Saturday, Sunday, or legal holiday, the act is considered to be performed timely if it is performed no later than the next day that isn’t a Saturday, Sunday, or legal holiday. The term legal holiday means any legal holiday in the District of Columbia. The calendars provided in this publication make the adjustment for Saturdays, Sundays, and legal holidays. But you must make any adjustments for statewide legal holidays, as discussed later.

Emancipation Day is a Washington DC holiday every April 16th. The holiday celebrates the DC Compensated Emancipation Act of 1862 that ended slavery in Washington DC. When April 16 falls on a Saturday, the holiday shifts to Friday. That’s why 2016 tax-day was moved to the next Monday, April 18th. This year, 2017, the holiday falls on a Sunday, so the holiday shifts to the next Monday, April 17th. And, because April 15th is a Saturday, the next day that is not a Saturday, Sunday or holiday is Tuesday April 18th.

Next year, 2018, April 15th will be on Sunday and Emancipation Day will fall on Monday Apirl 16th. Next year, tax-day will fall to Tuesday April 17th.
I have several clients with unfiled tax returns, many dating back before 2013. Several of these clients are W-2 employees, and likely have a refund due. So, we are concentrating on getting their 2013 tax returns completed and filed BEFORE Tuesday April 18, 2017 to make sure they receive credit for the refund they have coming.

If you owe the IRS for taxes pre-dating 2013, and you fail to claim your return timely, the IRS WILL NOT use the refund to offset those taxes. In this situation, Taxpayers are hit with a double whammy.

If you have unfiled tax returns dating back to 2013 – call my office today, right now! We can still complete those returns and get them filed so you can claim your refund. You should give me a call – Opem Tax Resolutions & The Law Office of Steven A. Leahy, PC (312) 664-6649. Call NOW to set up your FREE Consultation.

Cash is King! IRS Form 8300

January 6, 2017 by admin

Steven A. Leahy

Cash is King – IRS Form 8300

By Steven A Leahy

Recently, I received a telephone call from a business owner in his accountant’s office. They wanted some information about large cash payments the business received 18 months prior. I immediately shut the conversation down and insisted they come to my office if they wanted to discuss this matter with me. I did that because, with the accountant privy to our conversation, the conversation conflicted with the traditional doctrine of attorney-client privilege. What they were discussing possibly involved illegal activity, and not something you want to talk about in mixed company.

Federal law requires that all cash payments more than $10,000.00 must be reported to the IRS with Form 8300. In general, the law requires that anyone engaged in a trade or business – “in the course of such trade or business, receives more than $10,000.00 in cash in 1 transaction (or 2 or more related transactions)” shall file the proper cash transaction forms. If Form 8300 is required, it must be filed within 15 days after the date the cash transaction occurred. Form 8300 must include “the name, address, and TIN of the person from whom the cash was received.”

Not only must you file IRS Form 8300, you must furnish a “written statement” to each person “from whom the cash was received.” That written statement must be provided “on or before January 31 of the year following the calendar year for which [Form 8300] was required to be made.”

A transaction could be the sale of a machinery, construction work for a home owner, or repair work for a vehicle. The cash payment can be a lump sum of $10,000.00 or more; Installment payments that cause total cash received within one year of the initial payment to total more than $10,000.00, or; Previously unreported payments that cause the total cash received within 12-month period to total more than $10,000.00.

For example, let’s say a customer agrees to buy a piece of equipment for $14,000.00. He pays you $9000.00 in a cashier’s check and the balance 10 days later with $5,000.00 cash. This is a cash transaction and must be reported. You have received more than $10,000.00 cash. Because “Cash” may include cashier’s checks, bank drafts, travelers checks and money orders with a face value of $10,000.00 or less. Confused yet?

Wait, there’s more. The law also requires that you report suspicious transactions. For example, if you suspect the customer is attempting to prevent a Form 8300 from being filed – you must file Form 8300. What you must NOT do – EVER – is help the customer structure the transaction to avoid the Form 8300 reporting requirement.

Failure to file Form 8300, when required, may result in civil penalties. The penalties can amount to millions of dollars. Worse, a person may be subject to criminal penalties. The criminal penalties are generally for willful behavior, and include fines up to $100,000.00 and/or imprisonment up to 5 years, plus the cost of prosecution. The criminal penalties apply to those whom attempt to structure the transaction in such a way that would make it seem unnecessary to file Form 8300.

Receiving cash payments in a transaction can cause BIG problems. Who must file Form 8300, when that form must be filed, what constitutes cash, the transactions that trigger the requirement and the penalties that follow non-compliance are often difficult to understand. Don’t play games – get advice!

So, if you receive large cash payments, you should work with a local law firm that will work with you to stay in compliance with these complicated laws. You should give me a call – Opem Tax Resolutions & The Law Office of Steven A. Leahy, PC (312) 664-6649. Call NOW to set up your FREE Consultation.

Are You In A Vicious IRS Circle?

September 22, 2016 by admin

Steven A. Leahy

Are You In A Vicious IRS Circle?

By Steven A Leahy

Here is the problem I see all the time. Someone has an IRS problem. They work to solve the IRS problem themselves. While they work on fixing their problem, instead of going away, the problem grows. It grows because they fail to address their current IRS obligations.

I helped a family who owed the IRS more than $60,000.00. The father ran his own business. He was very good at his profession – but the paperwork got to be a problem. Several years ago, the April 15th deadline to file his tax return was approaching and he needed more time to complete his tax returns. So, he filed IRS Form 4868 – Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. As the name of the form indicates, the extension is automatic. The filing date is then extended to about October 15 of the same year (depending on the Washington DC holiday schedule).

Problem solved, right? Wrong. His first mistake was he failed to estimate his tax liability and send a check with Form 4868. His next mistake was he didn’t file his tax return by the October due date. Once he filed the extension, he forgot about his tax returns. The beginning of the next year, he realized his mistake, he sent a portion of the tax he thought he would owe and promised himself to complete last year’s tax return and that year’s tax return by the April 15th deadline.

Now, completing the previous tax return became a big task. Many of the records were now hard to locate. So, as the April 15th deadline approached – you guessed it – he filed IRS Form 4868 for an automatic extension. This went on for several years. He would send some money to the IRS every so often to pay his back taxes he knew he would owe had he filed his tax return, but those payments left him no extra money to pay his current IRS obligation.

This family was in the Vicious IRS Circle, or a cascading tax problem. Instead of going away, the problem was growing because of the penalties and interest were growing, and becoming a real danger to their financial future. The problem was growing because they didn’t know how the IRS worked, so they couldn’t come up with a strategy to solve it. That’s when they heard me on the radio and decided to visit my office for a free consultation.

I explained to them that the first step to solving any IRS problem is getting into compliance. In this case, compliance meant filing past tax returns and paying current quarterly estimated taxes as they came due. Those with IRS problems need to focus on the future, rather than worrying about the past. If a taxpayer allows their current IRS obligations to be put aside in favor of paying the older taxes, the vicious circle begins and it becomes nearly impossible for taxpayers to solve the problem by themselves.

If you feel trapped by your IRS problem and want to stop the Vicious IRS Circle, you should contact me right away. My name is Attorney Steven A. Leahy and I help people solve their IRS problems Call me at 312-664-6649. Call now!

My Ex Claimed the Child Deduction – Now What?

September 1, 2016 by admin

Steven A. Leahy

My Ex Claimed the Child Deduction – Now What?

By Steven A Leahy

It’s August, and the IRS is starting to go after taxpayers who listed a child as a dependent, when another party listed that same child as a dependent. Who gets the deduction? This is the most common question I get around this time of year.

Here is the typical scenario. Parent A and Parent B live apart. The child lives with Parent A, but Parent B has joint custody. Parent A claims a dependency exemption on their tax return. Later, Parent A discovers Parent B has already claimed a dependency exemption on their tax return. Because a child’s social security number is necessary to claim a dependency exemption, the IRS’ computer system flags both returns and sends a notice of deficiency to each parent. The question rises, “Which Parent is entitled to claim a dependency exemption for tax purposes?”

First, let’s talk about what is at stake. The IRS provides as a deduction an exemption from taxable income ($4,000 for 2015) for each “dependent.” A dependent is defined as either a “qualifying child” or a “qualifying relative” of the taxpayer. To be considered a “qualifying child” of the taxpayer, the child must (among other things) have the same principal place of abode as the taxpayer for more than one-half of the taxable year. In addition, a qualifying child may enable a taxpayer to claim other benefits. Benefits like Head of Household, the child tax credit, the child and dependent care credit, and an earned income tax credit. In total, these benefits amount to thousands of dollars.

Generally, when parents are legally separated or divorced, the dependency exemption is awarded to the custodial parent. The custodial parent is the parent with whom the child lived for the greater number of nights during the year. But there are exceptions. If the custodial parent “signs a written declaration” releasing his or her claim to the exemption and the noncustodial parent “attaches such written declaration to the noncustodial parent’s return for the taxable year” the non-custodial parent can claim the exemption. The declaration by the custodial parent must be made on Form 8332 or in a signed document substantially similar to Form 8332.

Often, the non-custodial parent has a divorce decree, separation agreement, or some other agreement that spells out the rights of the non-custodial parent to claim the deduction. If the decree or agreement went into effect before 2009, the non-custodial parent can attach certain pages to the tax return instead of Form 8332. However, if the decree or agreement went into effect after 2008, the decree or agreement can’t be attached and the non-custodial parent must use Form 8332.

You can see how this can become a problem – parents at odds with who gets the tax benefits. The IRS has sided with the custodial parent; even if the divorce decree or agreement says the custodial parent has agreed to waive the right to claim an exemption for the child. If the custodial parent released a claim to exemption and signed Form 8332 granting the right to the non-custodial parent, the custodial parent can complete Part III of Form 8332 and revoke that waiver, as long as they provide a copy of the form (or make a reasonable effort to provide actual notice) to the non-custodial parent and attach the revocation to their own tax return for each year.

Yes, I know it is complicated. Dealing with the IRS is ALWAYS complicated. If you need help with the IRS, you should work with a local law firm. Better, you should give me a call – Opem Tax Resolutions & The Law Office of Steven A. Leahy, PC (312) 664-6649. Call NOW to set up your FREE Consultation.

1099-K Rule Delayed: What You Need To Know

The IRS Has A Billion Dollars to Hand Out

The IRS Has A Billion Dollars to Hand Out

Cash is King! IRS Form 8300

Cash is King – IRS Form 8300

Are You In A Vicious IRS Circle?

Are You In A Vicious IRS Circle?

My Ex Claimed the Child Deduction – Now What?

My Ex Claimed the Child Deduction – Now What?

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