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Orange County Tax Law Blog

When the IRS sends you mail or knocks on your door

While the federal government shutdown is entering its fourth week, the criminal investigations (CI) division is still fully staffed and working cases. To protect business interests, it’s crucial to know what to do at the first sign of an tax-related audit or investigation.

Ignoring the mail notices from the IRS will never make the problem go away. The first step may be to gather up the letters and schedule a consultation with an experienced tax attorney to review them together.

5 FAQS on employment tax compliance and enforcement

Payroll taxes are often problematic for employers.

Sometimes it's a matter of legitimate questions about when it's appropriate to classify workers as independent contractors or to pay them in cash. In other situations, employers may be engaged in sophisticated (or not so sophisticated) payroll tax avoidance schemes.

Shutdown affects IRS workers and those awaiting a refund

In its 17th day and entering its third week, the effects of the partial federal government shutdown are being felt both by those who work for the IRS as well as early filers who count on a tax refund. If the shutdown continues for "months or even years," what will happen?

In this post, we look at it from the perspective of an IRS employee on furlough and a taxpayer awaiting a refund. And for comparison, in 2018, the Service started accepting tax returns on January 29 and received more than 18 million returns (about 11 percent of the total returns filed) in the first week.

Will the shutdown affect the 2019 tax season?

The short answer is yes it will likely have an impact. The IRS has a workforce of almost 78,000 employees. Only about 10,000 of those are “excepted” from furlough.

With the timing of the shutdown over the two holiday weeks, the good news is that some employees would have already been out of the office. The IRS had recently completed a contingency plan detailing which employees were considered essential.

Make the most of market volatility to offset gains

As the year comes to a close, Wall Street continues to make headlines with terms like whipsaw, fizzle and turmoil. The losses have been broad based and even seemingly quality stocks have taken hits.

For those with significant capital gains after selling while the markets were hot, it could be time to review the investment portfolio. Unloading underperforming stocks at year end is a good strategy to offset taxable gains.

End-of-year tax considerations

While it might not seem possible that we are already at year end, there is still time for some last minute tax planning. Maximizing charitable giving or adding an electric vehicle are two to think about.

Several changes affect charitable giving. Pease limitations that restricted certain deductions available to high-income taxpayers on donations no longer exist. And charitable expenses can be deducted up to 50 percent of adjusted gross income for those who itemize.

Tax evasion and fraud charges lead to prison sentence

As concerns begin to mount about the length of the current expansion, damage from the last downturn continues to unwind in court. In 2017, a 34-count indictment was filed against a biotech investment fund founder for a scheme to siphon money from investors that started in 2007. By 2013, millions were missing.

A northern California judge recently sentenced the man to 30 months in federal prison and three years of supervised release. He had pleaded guilty to one count of investment-adviser fraud and federal tax evasion.

How to guard against W-2 and identity theft scams

The IRS recently warned small businesses to be on the guard against tax-related scams. Cybercriminals continue to look for new ways to access sensitive identifying information.

Businesses, as well as individuals, can fall prey to identity theft. For example, a stolen Employer Identification Number (EIN) can be used to open a new line of credit or file a fraudulent return.

Q & A on Qualified Opportunity Zones (QOZs)

Qualified Opportunity Zones (QOZs) allow investors to defer or abate capital gains by investing in “low-income communities” as designated by census tracts. In October, the IRS shared more details about Section 1400Z, a provision in the 1,097-page Tax Cuts and Jobs Act that initially did not receive much attention.

The idea is boost investment and spur economic development in neighborhoods that have been down on their luck. States were allowed to designate up to 25 percent of census tracts as well as contiguous low-income communities. In California, the state has provided resources to identify the 879 Designated QOZs.

Pleasant and unpleasant tax surprises in 2019

It’s the time of year to run calculations and make adjustments to avoid unpleasant tax-related surprises in the new year. While many deductions have been removed, a positive is that the Alternative Minimum Tax is unlikely to snare as many taxpayers in 2019.

For shareholders or partners in pass-through entities, it may be a good idea to schedule an end-of-year review to consider the effect of the Section 199A deduction. The related IRS regulations were only issued three months ago. Taxpayers who pay most of their income taxes through paycheck withholdings will probably also see changes.