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Category Archives: criminal tax law

OECD Says Tax Treaty Rules Likely Cover COVID-19 Telework

According to Law360, people working in countries other than their usual ones because of the coronavirus pandemic aren't likely to trigger new taxation requirements for employers under global treaty rules, according to guidance issued Friday by the Organization for Economic Cooperation and Development.

In general, workers who are temporarily based in a different country because of cross-border travel restrictions related to the outbreak probably won't incur new tax obligations under international tax treaty rules, according to the guidance. The OECD noted that travel restrictions are among the unprecedented measures governments have taken in response to the global spread of the virus, which causes the respiratory disease COVID-19.

A company's taxable presence in a jurisdiction, its permanent establishment or PE, is determined based on the tax treaty between its home country and the jurisdiction in question. Some businesses may be concerned that employees who are stranded in countries where they don't normally work could create a permanent establishment there, but companies probably won't have to worry based on treaty rules, according to the guidance.

“The Exceptional and Temporary Change of the Location Where Employees Exercise Their Employment Because of the COVID-19 Crisis, Such As Working From Home, Should Not Create New PEs For The Employer,”
According To The OECD.
 


For employees working from home, the guidance cited the OECD's Model Tax Convention, which is meant for countries to use when they write tax treaties. The OECD Model explains that even though part of a company's business may be conducted out of an employee's home office, “that should not lead to the conclusion that that location is at the disposal of that enterprise.”

Teleworking from home because of the COVID-19 crisis wouldn't create a permanent establishment because such activity lacks a sufficient degree of permanency or because the company has no control over that home office, except through that one employee, according to the guidance.  

However, the guidance noted that thresholds for tax registration under domestic law may be lower than those under a tax treaty and may therefore trigger corporate income tax filing requirements. Accordingly, the OECD encouraged tax administrations to provide guidance on domestic law threshold requirements in the context of the COVID-19 crisis.

Some countries have already started issuing guidelines. The Australian Taxation Office recently published guidance that said it will “not apply compliance resources” to determine if a company has a permanent establishment in the country if the business has employees there only because of travel restrictions related to the pandemic.

Employees who are working in a different country from their usual also aren't likely to create a new individual tax residence under global treaty rules, according to the OECD guidance. A new tax residence could change where that person's income is taxed, but under a situation like the current pandemic, treaty residence is likely to remain in the home country, according to the guidance.

“Despite the complexity of the rules, and their application to a wide range of potentially affected individuals, it is unlikely that the COVID-19 situation will affect the treaty residence position,” according to the guidance.

Countries have started issuing guidance on the impact of the COVID-19 crisis on the tax residency statuses of individuals who have been forced to relocate. Last month, the U.K. government relaxed its tax residency rules amid the pandemic. Australia also published guidance stating that people won't be considered residents of the country for tax purposes if they're temporarily there because of COVID-19.

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Read more at: Tax Times blog

Coronavirus Causes IRS to Postpones Deadline for Gift and GST Returns



The Internal Revenue Service is postponing the date for filing gift tax and generation-skipping transfer tax returns and making payments until July 15, 2020, because of the novel coronavirus pandemic.

The IRS issued Notice 2020-20 on Friday, extending the relief it provided earlier this month on the tax-filing and payment dates for most other types of tax returns. The IRS also said the associated interest, additions to tax, and penalties for late filing or late payment will be suspended for the gift tax and generation-skipping transfer tax until July 15.
The relief is automatic and applies to any amounts due related to these types of returns. There’s no requirement to file for an extension and the three-month period between the original due date of April 15 and the new deadline of July 15 will be disregarded in terms of any interest, penalties or extra taxes for those who fail to file a Form 709 United States Gift and Generation-Skipping Transfer Tax Return by April 15. 

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TIGTA Says Pot Biz Underpaid $243M in Taxes!

TIGTA issued a report on March 30, 2020 that indicates that the IRS may have missed out on $242.6 million in unassessed taxes against marijuana businesses in three states that likely claimed prohibited business expense deductions.

Highlights of Reference Number:  2020-30-017 to the Commissioner of Internal Revenue.
IMPACT ON TAXPAYERS
Marijuana is classified as a Schedule I controlled substance under the Controlled Substances Act.  Businesses in this industry have limited banking access and are subject to Internal Revenue Code (I.R.C.) Section (§) 280E, which prohibits the deduction of expenses incurred in trafficking Schedule I controlled substances.  The IRS risks diminished taxpayer compliance when marijuana businesses fail to report all income as required under I.R.C § 61, regardless of source, and deduct expenses not allowed under I.R.C. § 280E.
WHY TIGTA DID THE AUDIT
This audit was initiated to evaluate the IRS’s examination and education approach to certain cash-based industries with an emphasis on legal marijuana operations.
WHAT TIGTA FOUND
TIGTA reviewed statistical random samples of marijuana businesses in three States and determined that 59 percent (140 out of 237) of the tax return filings for Tax Year 2016 had likely I.R.C. § 280E adjustments, which when projected over the population totaled $48.5 million in unassessed taxes for Tax Year 2016 or $242.6 million when the results are forecasted over five years.

TIGTA also estimated the tax impact to comply with I.R.C. § 280E for the same sampled marijuana business taxpayers.  When projected to the population, TIGTA estimated a $95 million Federal income tax impact to these taxpayers from the application of I.R.C. § 280E on their Tax Year 2016, or $475.1 million when forecasted over five years.

In addition, TIGTA selected a statistically random sample of 90 marijuana businesses that filed State returns for Tax Year 2016 in the State of Washington to determine whether these taxpayers were reporting all of their income in compliance with I.R.C. § 61.  TIGTA found that 23 (26 percent) of 90 returns likely have I.R.C. § 61 adjustments involving either underreported income or nonfiling of tax returns.  When projected over the population for Washington, the IRS missed the opportunity to address $3.9 million of potential assessments for Tax Year 2016, or $19.3 million when forecasted over five years.
Also, the IRS lacks guidance to taxpayers and tax professionals in the marijuana industry.  Such guidance would improve awareness of tax filing requirements for taxpayers in this industry, such as the correct application of I.R.C. §§ 280E and 471(c), which would reduce the burden of tracking inventory for certain small businesses.
WHAT TIGTA RECOMMENDED
TIGTA recommended that the IRS develop a comprehensive compliance approach for the marijuana industry, including a method to identify businesses in this industry and track examination results; develop and publicize guidance specific to the marijuana industry, such as guidance on the application of I.R.C. § 471(c) in conjunction with I.R.C. § 280E;  leverage publically available information at the State level and expand the use of existing Fed/State agreements to identify nonfilers and unreported income in the marijuana industry; and increase educational outreach towards unbanked taxpayers making cash deposits regarding the unbanked relief policies available.
The IRS agreed with five of the six recommendations.  The IRS did not agree with the recommendation to develop and provide guidance on I.R.C. § 471(c) citing other priorities.  However, the IRS added that once the 2019-2020 Priority Guidance Plan is resolved, developing guidance to ensure coordination between I.R.C. §§ 280E and 471(c) will be considered.
 
To view the report, including the scope, methodology, and full IRS response, go to:
https://www.treasury.gov/tigta/auditreports/2020reports/202030017fr.pdf.

Have An IRS Tax Audit Problem?
 
 
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Read more at: Tax Times blog

IRS operations during the coronavirus pandemic – 10 Things You Should Know

This COVID-19 epidemic required the IRS to make significant adjustments to the way it does business. The IRS will be doing its best to conduct business as usual while helping taxpayers by administering many of the recently passed COVID-19 relief provisions.

The IRS is urgently working on building remote work capability for many of its 70,000-plus employees, most of whom usually work from IRS locations and offices throughout the country.

This transition will take some time in order to return to normal operations. In some cases, operations will not return to normal until well after the pandemic is over.

In the meantime, accountingTODAY nicely summarized the current status of IRS operations and list the following topics: that were not doing an extension not to June 15 which could be July 50

  1. IRS.gov is the first place to answer your questions.
  2. Live assistance is very limited.
  3. The IRS will be hard to reach, even after the pandemic is over.
  4. You can put that audit on hold, unless it deals with a refund hold situation.
  5. If you owe back taxes, you have a temporary reprieve.
  6. IRS will not require your monthly installment agreement payment.
  7. IRS Transcripts are usually your best method to answer to account-related questions.
  8. TAS can be reached if you have a hardship, but you must call your local office.
  9. The IRS is still processing tax returns and it is best to file as soon as possible.
  10. IRS tax collectors will not grab the stimulus payment to pay past tax debt.

Have a Tax problem?

 
Need to Obtain IRS Relief during
The Coronavirus (COVID-19) Epidemic?
Contact the Tax Lawyers at
Marini & Associates, P.A.
  

 
for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or
Toll Free at 888 8TAXAID (888-882-9243)
 

Read more at: Tax Times blog