Tax Lawyer Blog

A Blog written by the Tax Attorneys for Individuals and Businesses

January 2017: Client Alert

 
 

January 2017: Client Alert

 

Happy New Year!

We wish you prosperity and good health in 2017. At Moskowitz LLP, we look forward to continuing to represent and serve you, our client. Remember, tax day is just around the corner!

Sincerely,

Steve Moskowitz, Esq.
Founding Partner

Mark Your Calendar: First Quarter 2017 Tax Deadlines

Tax return filing season has arrived, which means it's time to mark your calendar for these 2017 tax deadlines.

January 17

  • Due date for the fourth and final installment of 2016 estimated tax for individuals (unless you file your 2016 return and pay any balance due by January 31).

January 31

  • Employers must furnish 2016 W-2 statements to employees, and send copies to the Social Security Administration. This deadline applies to both paper and electronic filing.
  • Payers must file all copies of 2016 Forms 1099-MISC with non-employee compensation in Box 7. This deadline applies to both paper and electronic filing.
  • Employers must generally file 2016 federal unemployment tax returns and pay any tax due.

February 28

  • Payers must file information returns with the IRS. (Except for certain Forms 1099-MISC, March 31 is the deadline if filing electronically.)

March 1

  • Farmers and fishermen who did not make 2016 estimated tax payments must file 2016 tax returns and pay taxes in full.

March 2

  • Large employers must furnish Form 1095-B and Form 1095-C to employees.

Note the New Due Dates for Forms W-2 and 1099

Did you spot the new due dates on the tax calendar? As you begin your January payroll preparation, take into account earlier due dates for two common information reporting forms.

Forms W-2 for 2016 are due January 31 for all copies. In the past, you had to provide Forms W-2 to your employees by January 31. Now the January 31 deadline also applies to copies submitted to the Social Security Administration.

Also, the due date for filing all copies of 2016 Forms 1099-MISC with non-employee compensation in Box 7 is January 31, 2017. For these forms, the January 31 due date also applies to both paper and electronic filing.


IRS Extended the Due Date for Forms 1095

When you're an applicable large employer (generally, when you employ 50 or more full-time workers and equivalents), you're required to provide information about health coverage to the IRS and to your employees. The IRS extended the date on which two of these forms are due to your employees. Instead of being due January 31, Form 1095-B, Health Coverage, and Form 1095-C, Employer Provided Health Insurance Offer and Coverage, are now due March 2, 2017. There is no change to the February 28, 2017, due date for filing paper forms with the IRS, nor the March 31, 2017, due date for filing electronically.


2017 Financial Fitness: Small Steps Toward Big Goals

Shaping up your finances in 2017 may seem like a big goal, perhaps even too daunting, but if you take one small step at a time, these small steps will add up. Here are some suggestions:

Shift Out of Automatic Have you established automatic bill pay at your bank or service provider, or automatic charges to your credit card?
Small Step: Look for payments for goods or services you no longer use, such as recurring monthly subscriptions and cancel them.
Big Goal: Reduce total expenses and increase savings.

Take the Urgency Out of Emergency Sure, you know that having an account with enough funds specifically earmarked for emergencies is a good idea, but the amount you need to save seems overwhelming. The good news is you don’t have to immediately fund six months of living expenses.
Small Step: Set up a separate account with automatic deposits of $5 or $10 per paycheck, perhaps with funds you’ve redirected from those unused recurring monthly subscriptions.
Big Goal: An emergency fund with enough cash to cover six months of expenses.

Give Yourself Credit Maybe you intend to pay off your credit card debt, but do you have a plan? Knowing where you stand is the first step in getting to where you want to be.
Small Step: Make a list of your cards, balances, minimum payments, and interest rates.
Big Goal: Eliminate finance charges by being able to pay off your balance each month.

Retire Your Excuses Does your employer offer a retirement plan? If so, you may be leaving money on the table.
Small Step: Find out what amount is on offer as “matching” funds. That’s money your employer will add to your account when you make contributions.
Big Goal: Maximize your retirement contributions.

Small steps can lead to big improvements in your financial health. Contact Moskowitz LLP for more tips.

Some Federal Income Tax Refunds may be Temporarily Delayed

In general, you can expect your federal refund to be issued approximately 21 days after your electronically filed tax return has been accepted. However, identity theft is still a major problem, and the IRS continues to implement new strategies to protect taxpayer data. For example, if you claim the Earned Income Tax Credit or Additional Child Tax Credit on your 2016 individual federal income tax return, your refund will be held until February 15.

Employment Tax - Still a Top Priority with DOJ and State of California

Both the United States and the State of California continue to prevail in cases regarding unpaid payroll/employment tax matters. Our tax law blog discusses many of the recent cases, below are a couple of interest.

The federal case discusses the Responsible Officer Penalty and the burden (it's high) that a taxpayer must establish for relief from the penalty. The IRS prevailed in a case upholding a responsible officer penalty against a doctor who, after an embezzlement, used his own funds to pay office bills. See McClendon v. United States of America below.

Further, the State of California brought criminal charges for employment tax and unemployment insurance matters. From a criminal tax law perspective, the charges and the fact pattern are garden variety. What is interesting is that the Tax Recovery and Criminal Enforcement Tax Force (TRaCE) was involved and that the taxpayer took a plea deal. The plea deal is significant only because the public will not get a chance to glean insights as to how the investigation was conducted and the surrounding circumstances, which would be available through a trial and/or sentencing memorandums. Links discussing these two recent posts are below:

McClendon v. United States of America: Good Motives are Not an Excuse of Unpaid Employment Taxes

State of California v. Fumeei Nikko Wu: Willful Failure to Report Employee Wages to EDD Leads to Felony Conviction

 

1 (888) 829-3325 ∙ 180 Montgomery Street Suite 1950, San Francisco, CA 94104

 

Moskowitz LLP, A Tax Law Firm, Disclaimer: Because of the generality of this post, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice from a tax attorney based on particular situations. Prior results do not guarantee a similar outcome. Furthermore, in accordance with Treasury Regulation Circular 230, we inform you that any tax advice contained in this communication was not intended or written to be used, and cannot be used, for the purposes of (i) avoiding tax related penalties under the Internal Revenue Code, or (ii.) promoting, marketing, or recommending to another party any tax related matter addressed herein.

 

Willful Failure to Report Employee Wages to EDD Leads to Felony Conviction

For over a decade, Fumeei Nikko Wu owned and operated the iconic 10,000 square foot, three-story Stonehouse Old Brewery in Nevada City, CA. Following complaints and a 1½ year-long joint investigation by local police and TRaCe (the Tax Recovery and Criminal Enforcement Task Force of the Department of Alcohol and Beverage Control), Wu was arrested for payroll tax evasion and other felonies.

Wu had owned the property since 2003, but since 2008 she had apparently been struggling to find tenants and turn a profit. From July 2011 through September 2013, Wu did not report all of her employee’s wages and remit payroll taxes - an audit determined that she failed to report a total of $578,659 in wages to the California Employment Development Department (EDD), and that she owed a total of $46,071.

The charges and its consequences

The Attorney General’s office issued an 18-count criminal complaint against Wu, which included multiple counts for willful failure to file quarterly reports to the EDD and pay over amounts due; failure to file returns, collect, account for, and pay unemployment contributions; and willful misrepresentation to the EDD of amounts she actually paid to employees in order to lower her required unemployment benefit payments.

Wu was arrested in October 2015, held on $200,000 bail, and spent 12 days in jail immediately following her arrest. Her business license was suspended, forcing her to cancel events at the Stonehouse. Local news reported that Wu and her friends put together a fundraising campaign through GoFundMe and Facebook to pay $15,000 in back event deposits, wages, insurance and utility costs. They also held a fundraising party in late November, 2015.

Wu recently pleaded no contest to five of the felony counts raised against her under the California Unemployment Insurance Code:

  1. Section 2101.5 - Willfully making false statements or knowingly failing to disclose material information in order to lower or avoid required contributions.
  2. Section 2106 - Procuring, counseling, advising, coercing or assisting someone to willfully make a false statement or representation, or knowingly failing to disclose a material fact for the purpose of lowering or avoiding required contributions.
  3. Section 2108 - Willful failure or refusal to make the required contributions.
  4. Section 2117.5 –Submitting a fraudulent return, report, statement or false statement with or without intent to evade the required filings and contributions under the law (misdemeanor carrying civil penalty of up to $1,000 and up to one year’s imprisonment, or both). 
  5. Section 2118.5 – Willful failure to collect, account for, and pay over any tax or amount required to be withheld by a person required to do so (felony punishable by fine of up to $20,000 and/or imprisonment, at the discretion of the court).

The other charges were dropped, but Wu will have to pay restitution and charges for the investigation against her, and may serve time in jail.

San Francisco employment tax attorneys

Failure to report employee wages and make required payments to the EDD can result in harsh penalties. If you are a business owner who is under investigation or otherwise requires legal and tax assistance, contact the Moskowitz, LLP team today.