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Our Tax Attorneys Have Good News if you Didn’t Apply for a PPP Loan by the Deadline of June 30, 2020.

July 7, 2020 | by Dennis N. Brager

PPP Loans are an excellent way for small businesses with Covid-19 related financial issues to obtain a very low (one percent) interest loan from the government. Unfortunately, if you haven’t applied yet the time period for submitting an application expired on June 30^th. The good news is that the Senate and the House have passed a bill which extends the deadline to apply to August 8, 2020. President Trump signed the bill into law on July 4, 2020. While it seems that large businesses are the usual recipients of government money, this program reaches the smallest of businesses.

At the time of this writing it appears that there was still about $130 billion in loans still available. With an average loan size (the precise number keeps changing) of about $110,000 that means that up to about another 1.2 million businesses could take advantage of the PPP loan program.

If handled properly, the loan will be forgiven by the government. Therefore, it is essentially a grant by the government. When the loan is forgiven there will no discharge of debt income to take into account. However, businesses will be unable to deduct expenses paid with the forgiven loans on their income tax returns.

SBA Publishes Loan Forgiveness Form and Instructions for PPP Loans

May 18, 2020 | by Dennis N. Brager

Most, if not all, Payroll Protection Program (PPP) borrowers are focused on the question of whether they will be able to have their PPP loan forgiven. Many questions have arisen, and some but not all, have been answered by the Loan Forgiveness Application and instructions released by the SBA on Friday, May 15, 2020. Here are some of the highlights.

Annual “cash” payroll costs are capped at $100,000 per employee. While this is not news, the SBA calculates that this amount on a pro-rata basis for the 8 week “Covered Period” is $15,385. If you do the math, that is equal to 8 weeks per year divided by 52 weeks multiplied by $100,000. Some were hoping that those on a semi-monthly pay schedule could use a larger amount based upon 24 pay periods per year. Apparently not.
Alternative Payroll Covered Period. The Covered Period is generally eight weeks (actually 56 days) beginning on the date the loan is first funded. The Alternative Payroll Covered Period is only for employers with bi-weekly or more frequent payroll schedules. Therefore, it doesn’t appear to apply to employers who pay semi-monthly. It begins on the on the first day of the first payroll period following the PPP Loan Disbursement Date and ends 56 days later. The following example is provided: Alternative Payroll Covered Period: “… if the Borrower received its PPP loan proceeds on Monday, April 20, and the first day of its first pay period following its PPP loan disbursement is Sunday, April 26, the first day of the Alternative Payroll Covered Period is April 26 and the last day of the Alternative Payroll Covered Period is Saturday, June 20.” This suggests that one cannot include payments for a payroll period that begins before the PPP Loan Disbursement Date but is paid after that date. However, that is inconsistent with the Press Release issued concurrently by the SBA which states that the form and instructions provide “Flexibility to include eligible payroll and non-payroll expenses paid OR incurred during the eight-week period after receiving their PPP loan.” (emphasis supplied). See more below.

IRS Suspends Most Collection Activities due to COVID-19 Pandemic

April 17, 2020 | by Dennis N. Brager

Due to the ongoing COVID-19 Pandemic, the IRS has provided relief to taxpayers by extending filing and other deadlines. Now, in an internal memorandum from Fred Schindler the Director of Headquarters Collection (SBSE), the IRS continues to provide relief to taxpayers with tax debt by suspending most tax collection activities. These changes mirror the previous relief provided by the IRS, and restates the relief contained in the People First Initiative. Our tax litigation attorneys are advising our clients that they can expect enforced tax collection activities to be suspended unless there is an exigent circumstance including the loss of the opportunity for the government to collect taxes due. The expiration of the statute of limitations is one example.

The importance of the memo is that while it mostly repeats and fleshes out the People First Initiative, it is a direct “order” from the head of SBSE Collection to all Collection Executives. The People First Initiative is a bit more nebulous in terms of its actual impact on the activities of rank and file employees. The collection activities outlined in the memo include most activities related to the collection process such as meeting with taxpayers, filing new Notices of Federal Tax Liens (NFTL), issuing levies, taking or scheduling seizures actions, and pursuing civil suit proceedings. Automated tax levy programs are also suspended. The memorandum also directs Collections not to default installment agreements for missed payments due between April 1 and July 15, 2020 (the suspension period). Due to the ongoing and ever changing nature of the COVID-19 epidemic in the United States, the IRS may extend the suspension period and the incorporated relief provisions further.

It is important for taxpayers and their advisors to remember that even though collection enforcement activity will be rare from now through July 15^th, once the suspension period ends the IRS may begin filing liens and levies with a vengeance. Our tax lawyers are therefore recommending to our clients that, to the extent practicable, they position themselves to take appropriate action to forestall collection after the suspension period ends. This includes submitting offers in compromise, and requesting installment agreements now.

Not Just Another Covid-19 Announcement

March 17, 2020 | by Dennis N. Brager

Some of you may be concerned about the impact of the Coronavirus aka Covid-19 outbreak on your taxes, and those of your clients. The news from the IRS has been slow in coming. On Friday of last week President Trump declared a National Emergency. At the same time, he directed Treasury Secretary Mnuchin to provide relief from “tax deadlines” to Americans who are adversely impacted by the emergency. This allows the IRS to extend various deadlines for up to a one-year period. This authority is not, however, self-executing. That is, the IRS must specify exactly which due dates, and for how long they are being extended.

Prior to President Trump’s announcement Secretary Mnuchin had told reporters that most deadlines would be extended for “small businesses” and most individuals other than the “super rich.” Our tax lawyers couldn’t find a definition of super rich anywhere in the Internal Revenue Code. Finally, this morning, Tuesday March 17^th, after partnership and certain LLC returns were already due, Mnuchin stated in a press conference that the filing deadline for the 2019 income tax return would be extended by 90 days. For individuals that would mean July 14^th. Presumably, the IRS will actually extend the date to July 15^th just to make things a touch easier. Individuals living overseas already have an extension to June 15^th so presumably they would have until September 15^th to file.

In addition to stating that the income tax filing deadline would be extended, Mnuchin also stated that the 2019 payment deadline for income taxes owed of less than $1 million dollars for individuals or $10 million for corporations. This would be an interest and penalty free extension. For those who are over the thresholds it is unclear whether the entire amount due would be subject to interest and penalties or just that amount over the threshold. It is also not clear whether the filing extension would apply to those who owe taxes in excess of the cut-off amount.

Dennis Brager Published in Fox News Article

January 22, 2020 | by Dennis N. Brager

Recently, Dennis was interviewed by Fox News on his thoughts on Prince Harry and Meghan Markle’s move to North America and how it may impact their taxes. Below is an excerpt of the quote:

“Basically speaking, the U.S. has a system of taxation which is different from the vast majority of countries in the world in that in the United States, if you’re a U.S. citizen, it doesn’t matter where you’re living in the world, you pay tax on all of your income wherever you earn it.”

He also went on to say, “So if Meghan takes a modeling job in the U.K., she still pays tax in the United States. She’s still subject to all the reporting requirements that U.S. citizens are.”

Sisyphus and the Tax Collector

September 16, 2019 | by Dennis N. Brager

In Greek mythology, King Sisyphus is punished by the gods and forced to roll a huge boulder up a hill only for it to roll down as it nears the top. No matter how much effort Sisyphus puts into attempting to push the boulder over the crest of the hill, it always come tumbling back down. He is doomed to push the boulder up the hill for all eternity. Sometimes collecting payroll taxes can be a “Sisyphean task” for the IRS. At least, that is what the 11^th Court of Appeals wrote in a recent decision.

United States v. Askins & Miller Orthopedics, involved a private medical practice which refused to pay payroll taxes. The IRS first tried to negotiate an installment agreement with the medical practice’s business owners, but the business owners would ultimately renege on any agreement. Then the IRS issued a tax levy on property held by the medical practice in various entities, but the business owners would simply shift property to new entities out of reach of the power of the levies. Believing it was out of options, the IRS requested a permanent injunction from the district court to compel the taxpayers to perform and pay their employment taxes now and into the future.

The district court rejected the IRS request because the court argued that the IRS had yet to suffer irreparable harm. The district court reasoned that the IRS could still sue for monetary damages once the taxpayers again failed to pay their employment taxes. This is in spite of the fact that the district court conceded that the taxpayers exhibited a pattern of unlawful conduct likely to persist. In other words, the taxpayers would continue to find ways to not pay their taxes.

Actions to Take Before You Can Pursue an IRS Tax Settlement

September 5, 2017 | by Dennis N. Brager

Before attempting to settle your IRS tax debt, there are a few things that every taxpayer should do. While some tax settlement cases can be fairly straightforward, there may be more advanced settlement options available for certain taxpayers, and missing out on these opportunities may prevent you from eliminating significant back taxes, penalties, or interest.

Follow these steps before attempting to settle you tax debt:

File Back Tax Returns

How To Apply for Currently Not Collectible Status

March 28, 2017 | by Dennis N. Brager

If you are unable to pay your tax debt, you can request that the IRS report your account as currently not collectible (CNC). This will temporarily delay all collection activities by the IRS.

Applying For Currently Not Collectible Status

The most common reason the IRS determines that an account is currently not collectible is due to economic hardship. You will often be required to submit a Collection Information Statement when applying for CNC status. This statement lists all of your assets, income, and expenses. The IRS will not take your word for it if you claim you have a financial hardship; they will make their own determination based on your financial information.

Can the IRS Levy My Bank Account?

March 23, 2017 | by Dennis N. Brager

The IRS can legally levy your bank account and other assets to satisfy a tax debt. When the IRS sends a tax levy to your bank, the levy attaches to all the funds in your account at the time. Your bank is required to give your money to the IRS once a 21 day period elapses.

IRS Actions Before Issuing a Levy

The IRS will not levy your bank account until its given you several notices of your obligation to pay your tax debt. First, the IRS must make a tax assessment against you and send you a Notice and Demand for Payment.

Do I Qualify For Innocent Spouse Relief?

March 16, 2017 | by Dennis N. Brager

There are three different types of innocent spouse relief. The IRS offers these defenses to taxpayers who want relief from the joint and several liability that is imposed on married taxpayers who file joint returns.

Traditional Innocent Spouse Relief

To qualify for traditional innocent spouse relief, you must meet all of the following conditions: