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Monthly Archives: June 2019

Breaking News – SC Says States Can't Tax Nonresident Trust Benefits

On April 17, 2019 we posted US S.C. Heard Oral Arguments on Whether States Can Tax Out-of-State & Foreign Trusts where we discussed that the Supreme Court will hear a case that may clarify how much states are able to tax and that in April, the Supreme Court of the United States will hear an appeal against North Carolina's practice of taxing the undistributed income of an out-of-state trust that has a beneficiary living in the state. 

North Carolina is one of 11 states that consider trusts taxable when they hold income for a person who is using the state's services, but US courts have reached different results about whether due process prohibits these taxes. 

Today The U.S. Supreme Court ruled that North Carolina violated the due process clause by taxing an out-of-state trust when the only connection between the state and trust was a beneficiary’s residence in North Carolina.

 

In a unanimous decision authored by Justice Sonia Sotomayor, the court agreed with the North Carolina Supreme Court, which ruled a year ago that the residency of a beneficiary, who did not receive distributions from the Kimberely Rice Kaestner 1992 Family Trust, was insufficient nexus under the due process clause for the state to tax it.

The settlor and initial trustee for trust were in New York, and during the tax years, the trustee was a Connecticut resident. The justices agreed with the trust that the money belonged to him.

“Look, the trustee lives in New York, OK?
The settlor is in New York.
All the administration is in New York,”
Justice Breyer said, adding that
"North Carolina would also have connections
 if the beneficiary received distributions,
but she didn’t for the tax years in question."

 “But that isn’t what you want to tax,” Justice Breyer said. “Moreover, we don’t even know if she’ll ever get the money. Now there’s something wrong with that."

The ruling comes exactly one year after the high court’s landmark decision in South Dakota v. Wayfair, in which the justices decided that physical presence was not necessary for a state to require sales and use tax collection and remittance by out-of-state sellers. North Carolina had sought to use that decision to advance an argument that a trust also need not be present in a state for the state to impose taxation, but the justices rejected that on Friday.

 

This reasoning is the same as The North Carolina Supreme Court’s Finding That Taxation Of The Trust Was Unconstitutional Was That Kaestner, The Beneficiary, Did Not Receive Distributions From The Trust During The Years At Issue. The Revenue Department Collected $1.3 Million In Taxes From The Trust Over Four Years.

This Case Should Also Impact Foreign – Non-US Trusts,

Who Have US Beneficiaries, Living In States Which
Tax Income From Out-Of-State Trusts.
 

This outcome of NC Department of Revenue vThe Kimberley Rice Kaestner1992 Family Trust should d positively impact whether individuals are able to avoid state taxes by placing assets with trustees in states with no income tax liability.  More than $120 billion of our nation's income flows through trusts, and this case that may clarify how much states are able to tax.

Have a IRS Tax Problem?  

 
Contact the Tax Lawyers at 

Marini& Associates, P.A. 

 
 

for a FREE Tax HELP ... Contact Us at:

Toll Free at 888-8TaxAid (888) 882-9243



 
 
 

  

 
More than $120 billion of our nation's income flows through trusts, and this case that may clarify how much states are able to tax.
Have a IRS Tax Problem?  

Contact the Tax Lawyers at 

Marini& Associates, P.A. 

 
 

for a FREE Tax HELP ... Contact Us at:

Toll Free at 888-8TaxAid (888) 882-9243

 

Read more at: Tax Times blog

Millions of ITINs Are Set to Expire in 2019

In  IR-2019-118 the IRS stated that nearly 2 million Individual Taxpayer Identification Numbers (ITINs) are set to expire at the end of 2019 as the Internal Revenue Service continues to urge affected taxpayers to submit their renewal applications early to avoid refund delays next year.

“We urge taxpayers with expiring ITINs to take action
and renew the number as soon as possible.

Renewing before the end of the year will avoid unnecessary delays related to their refunds,” said IRS Commissioner Chuck Rettig. “To help with this process, the IRS is sharing this material in multiple languages. We encourage partner groups to share this important information to reach as many people with ITINs as possible.” 

Under the Protecting Americans from Tax Hikes (PATH) Act, ITINs that have not been used on a federal tax return at least once in the last three consecutive years
will expire Dec. 31, 2019.

In addition, ITINs with middle digits 83, 84, 85, 86 or 87 that have not already been renewed will also expire at the end of the year. These affected taxpayers who expect to file a tax return in 2020 must submit a renewal application as soon as possible.

ITINs are used by people who have tax filing or payment obligations under U.S. law but who are not eligible for a Social Security number. ITIN holders who have questions should visit the ITIN information page on IRS.gov and take a few minutes to understand the guidelines.

The IRS continues a nationwide education effort to share information with ITIN holders. To help taxpayers, the IRS offers a variety of informational materials, including flyers and fact sheets, available in several languages, including English, Spanish, Traditional Chinese, Russian, Vietnamese, Korean and Haitian/Creole on IRS.gov.

Who should renew an ITIN

  • Taxpayers whose ITIN is expiring and who expect to have a filing requirement in 2020 must submit a renewal application. Others do not need to take any action. ITINs with the middle digits 83, 84, 85 or 86, 87 (For example: 9NN-83-NNNN) need to be renewed even if the taxpayer has used it in the last three years. The IRS will begin sending the CP-48 Notice, You must renew your Individual Taxpayer Identification Number (ITIN) to file your U.S. tax return, in early summer to affected taxpayers. The notice explains the steps to take to renew the ITIN if it will be included on a U.S. tax return filed in 2020. Taxpayers who receive the notice after acting to renew their ITIN do not need to take further action unless another family member is affected.
  • ITINs with middle digits of 70 through 82 have previously expired. Taxpayers with these ITINs can still renew at any time, if they have not renewed already.

Family option remains available

Taxpayers with an ITIN that has middle digits 83, 84, 85, 86 or 87, as well as all previously expired ITINs, have the option to renew ITINs for their entire family at the same time. Those who have received a renewal letter from the IRS can choose to renew the family’s ITINs together, even if family members have an ITIN with middle digits that have not been identified for expiration. Family members include the tax filer, spouse and any dependents claimed on the tax return.

How to renew an ITIN

To renew an ITIN, a taxpayer must complete a Form W-7 and submit all required documentation. Taxpayers submitting a Form W-7 to renew their ITIN are not required to attach a federal tax return. However, taxpayers must still note a reason for needing an ITIN on the Form W-7. See the Form W-7 instructions for detailed information.

Spouses and dependents residing outside of the U.S. only need to renew their ITIN if filing an individual tax return, or if they qualify for an allowable tax benefit (e.g., a dependent parent who qualifies the primary taxpayer to claim head of household filing status.) In these instances, a federal return must be attached to the Form W-7 renewal application.

There are three ways to submit the Form W-7 application package. Taxpayers can:

  • Mail the form, along with original identification documents or copies certified by the agency that issued them, to the IRS address listed on the Form W-7 instructions. The IRS will review the identification documents and return them within 60 days.
  • Work with Certified Acceptance Agents (CAAs) authorized by the IRS to help taxpayers apply for an ITIN. CAAs can authenticate all identification documents for primary and secondary taxpayers, verify that an ITIN application is correct before submitting it to the IRS for processing and authenticate the passports and birth certificates for dependents. This saves taxpayers from mailing original documents to the IRS.
  • In advance, call and make an appointment at a designated IRS Taxpayer Assistance Center to have each applicant’s identity authenticated in person instead of mailing original identification documents to the IRS. Each family member applying for an ITIN or renewal must be present at the appointment and must have a completed Form W-7 and required identification documents. See the TAC ITIN authentication page for more details.

Avoid common errors now and prevent delays next year

Federal tax returns that are submitted in 2020 with an expired ITIN will be processed. However, certain tax credits and any exemptions will be disallowed. Taxpayers will receive a notice in the mail advising them of the change to their tax return and their need to renew their ITIN. Once the ITIN is renewed, applicable credits and exemptions will be restored, and any refunds will be issued.

Additionally, several common errors can slow down some ITIN renewal applications. These mistakes generally center on:

  • mailing identification documentation without a Form W-7,
  • missing information on the Form W-7, or
  • insufficient supporting documentation, such as U.S. residency documentation or official documentation to support name changes.

The IRS urges any applicant to check over their form carefully before sending it to the IRS.

As a reminder, the IRS no longer accepts passports that do not have a date of entry into the U.S. as a stand-alone identification document for dependents from a country other than Canada or Mexico, or dependents of U.S. military personnel overseas. The dependent’s passport must have a date of entry stamp, otherwise the following additional documents to prove U.S. residency are required:

  • U.S. medical records for dependents under age 6,
  • U.S. school records for dependents under age 18, and
  • U.S. school records (if a student), rental statements, bank statements or utility bills listing the applicant’s name and U.S. address, if over age 18.
Have a IRS Tax Problem?
 

  
Contact the Tax Lawyers at 

Marini& Associates, P.A. 

 

 

for a FREE Tax HELP Contact Us at:
orToll Free at 888-8TaxAid (888) 882-9243
 

Read more at: Tax Times blog

IRS Summons to Uncover Unreported Virtual Currency Gains Partially Enforced

In U.S. v. Coinbase, Inc., et al, (DC CA 11/28/2017) 120 AFTR 2d ¶2017-5538

IRS has been granted partial enforcement of a summons served on Coinbase, a virtual currency exchange that represents the largest U.S. exchange of bitcoin into dollars. As part of its investigation into the reporting gap among virtual currency users, IRS originally sought information concerning all U.S. persons who conducted any transaction in a virtual currency over a multi-year period.

However, The Summons Was Ultimately Narrowed To Include Information Pertaining Only Those Accounts With At Least The Equivalent Of $20,000 In Any One Transaction Type.


Have a Unreported Income? 


  
Contact the Tax Lawyers at 

Marini& Associates, P.A. 

 
 

for a FREE Tax HELP Contact Us at:
orToll Free at 888-8TaxAid (888) 882-9243

Read more at: Tax Times blog

IRS Releases Data Book for 2018 Showing Data on Tax Audits & Collection

The Internal Revenue Service on May 20, 2019 released the 2018 IRS Data Book, a snapshot of agency activities for the fiscal year.

The 2018 IRS Data Book describes activities conducted by the IRS from Oct. 1, 2017, to Sept. 30, 2018, and includes information about tax returns, refunds, examinations and appeals. The annual publication is illustrated with charts showing changes in IRS enforcement activities, taxpayer assistance levels, tax-exempt activities, legal support workload and IRS budget and workforce levels when compared to fiscal year 2017 and prior years. Included this year is a section on taxpayer attitudes from a long-running opinion survey.

“Underlying the numbers in this year’s edition of the Data Book is the hard work of IRS employees,” said IRS Commissioner Chuck Rettig. “Our employees are the backbone of this agency, delivering our mission efficiently and effectively. They work hard to help taxpayers, and the numbers outlined in the Data Book reflect their commitment.”

Revenue collection, returns processing, taxpayer service and enforcement actions

During fiscal year 2018, the IRS collected nearly $3.5 trillion, processed more than 250 million tax returns and other forms, and issued over 120 million individual income tax refunds totaling almost $395 billion.

The IRS received and processed more of every major type of form during FY 2018 than during the prior year, with the exception of estate tax returns; those filings were down slightly less than 1 percent compared to the prior year. However, filings by pass-through entities were up in FY 2018; partnerships filed almost 5 percent more forms with the IRS in FY 2018 than in the prior year, S-corporation filings were up almost 6 percent in the same timeframe.

The IRS provided taxpayer assistance through more than a half-billion visits to IRS.gov and helped more than 64.8 million taxpayers through different service channels, such as correspondence, toll-free telephone helplines or at Taxpayer Assistance Centers. There were also more than 309 million inquiries to the “Where’s My Refund?” application, up 11 percent compared to the prior year. 

Net revenue from delinquent collection activities rose to just over $40 billion, an increase of 1.6 percent compared to the prior year. IRS levies were up 8.3 percent compared to the prior year, but the agency filed about 8 percent fewer liens than in fiscal year 2017.

Compared to the prior year, there were fewer audits during fiscal year 2018. The IRS audited more than 892,000 individual income tax returns during the fiscal year, down slightly from the prior year.

 
 Have a IRS Tax Problem?

  
Contact the Tax Lawyers at 

Marini& Associates, P.A. 

 
 

for a FREE Tax HELP Contact Us at:
orToll Free at 888-8TaxAid (888) 882-9243

Read more at: Tax Times blog