IRS Working Through Mail Backlog

Dear Clients,

Please find the following article regarding the IRS and their backlog of unopened paper tax returns from National Society of Accountants (NSA), written by Jessica L. Jeane, JD, the Director of Public Policy and Communications:

IRS Continues to Work Through Mail Backlog Consisting of Over 5 Million Unopened Items, Commissioner Rettig Says

October 7, 2020

The IRS continues to work through its mail backlog, which consists of over 5 million unopened items, according to IRS Commissioner Charles “Chuck” Rettig. Notably, there are an estimated 2.5 million unopened paper income tax returns included within the backlog.

“We are doing everything we can to reduce this backlog, including providing relief for taxpayers who have sent us mail that was unopened for a period of time,” Rettig said during an October 7 House Oversight and Reform Subcommittee on Government Operations hearing. Additionally, the IRS continues to receive approximately 300,000 to 500,000 pieces of mail each week, Rettig noted.

According to Rettig’s written testimony provided to the National Society of Accountants (NSA) by the IRS, some of the following initiatives are taking place:

  • For people who had tax refunds affected by IRS closures, it is paying interest on refunds. These payments, which can sometimes show up as a second deposit, average $18 for nearly 14 million taxpayers.
  • The IRS is also crediting people in instances where there is unopened mail and they are making a payment. The IRS credits people on the date the mail was received, not the day the IRS processes the payment.

2020 Tax Filing Season

Rettig also spoke with lawmakers about the 2020 tax filing season, noting that is set records on January 27 when the IRS processed more than 2.275 million e-filed returns in an hour and at a rate of 631 submissions per second, without error. As of September 11, the IRS had received more than 158.2 million individual returns and issued more than 120.5 million refunds.

In related news, the IRS on October 7 issued IR-2020-231, reminding taxpayers that the October 15 deadline is fast approaching for those who requested filing extensions. To that end, Rettig, during Wednesday’s House panel hearing, encouraged taxpayers and practitioners to file 2019 tax returns electronically because of the continuous mail backlog.

Economic Impact Payments (EIP)

Additionally, Rettig told lawmakers that the IRS continues its efforts to reach individuals eligible for an EIP who have not yet received one. “[W]e mailed a letter to roughly nine million Americans who haven’t received an EIP and didn’t file a return for either 2018 or 2019,” Rettig said. “These letters started being mailed in mid-September, and the mailings were completed by the end of the month. We performed an extensive internal analysis and found these are people who don’t typically have a tax return filing requirement but had received Forms W-2, 1099s and other third-party statements.”

Moreover, the IRS announced in IR-2020-229 on October 5 that it has extended the EIP deadline to November 21. The later date provides an additional five weeks beyond the original deadline. Individuals who have not received a payment can register using the Non-Filers: Enter Info Here tool on IRS.gov. 

Taxpayer First Act Implementation; IRS Modernization

Looking ahead, Rettig provided a glimpse of work the IRS is doing to implement the Taxpayer First Act (TFA) (P.L. 116-25). The IRS’s Taxpayer First Act Office (TFAO) was created in response to the legislation.

In February of this year, NSA submitted several recommendations to the IRS on how restructuring could benefit both the IRS and individual taxpayers, while also serving to facilitate and strengthen the relationships between the IRS and the tax practitioner community.

According to Rettig’s testimony, the TFAO is centered on six major themes, all of which help the IRS shape the foundational components of a new, holistic taxpayer experience. 

  • Expanded Digital Services: The IRS will work to provide an improved experience through self-service digital channels by building upon existing online accounts and introducing online accounts for tax professionals and business taxpayers and continue to provide traditional channels of communications.
  • Seamless Experience: The IRS will guide taxpayers to the resources and communication channels that will resolve their issues most effectively and efficiently.
  • Proactive Outreach and Education:  The IRS will educate the taxpayer community by proactively providing information in the language, timing, and method taxpayers need or prefer.
  • Focused Strategies for Reaching Underserved Communities: The IRS will provide a consolidated program to engage with historically underserved communities to address issues of communication, education, transparency and trust, as well as access to quality products and services.
  • Community of Partnerships: The IRS will establish and facilitate a collaborative and interactive network of partnerships across the entire tax ecosystem and bring together existing efforts.
  • Enterprise Data Management and Advanced Analytics: The IRS will create an Enterprise Data Management strategy that includes a cross-enterprise understanding of the customer experience, emerging needs and expectations, and operational data.

The IRS needs to “come of age” to be able to serve the people of this country in a manner with which they deserve to be served, Rettig told lawmakers. “We don’t want a tax administrator that is behind the times.”

The IRS’s TFA Report is expected to be submitted to Congress in December.

NSA presents this information in the interest of its members for information purposes only and is not intended to provide, nor should it be relied upon, as legal, tax, or accounting advice.

Source:

https://connect.nsacct.org/blogs/jessica-jeane1/2020/10/07/irs-continues-to-work-through-mail-backlog-consist

COVID-19 Relocation and Taxation

Please find the following post regarding state income tax rates and relocation to different states during the pandemic, from the law firm WithersWorldwide:

Beginning early this year, COVID-19 started spreading in the United States, with some states hit harder than others.  People who had the means and ability left the hard-hit, densely populated states and fled to less affected, less congested states.  For a few, the relocation was a permanent move, but for most people, the relocation was meant to be a temporary move until the pandemic subsided.  We are now past the halfway point of 2020 and the number of confirmed cases is still substantial.  Many of those who initially planned for a few months’ stay are now considering extending their stay for the remainder of the year or longer. 

If you are one of those who relocated, have you considered the potential impact of your relocation on your tax planning?  Will you be able to benefit from the lower state income tax rate of the new state?  Is there any risk that you may be subject to taxation in more than one state?

State Income Tax

If an individual is a resident of a particular state, such individual is subject to that state’s income tax on his or her worldwide income, whereas if an individual is a nonresident, the individual is subject to that state’s income tax only on income that has its source in that state. 

Forty-three states and the District of Columbia impose state income taxes on individuals.  New York and California boast the highest state income tax rates in the country, with top marginal rates of 12.696% for New York City and 13.30% for California.  Given these high rates, the income tax savings realized by moving to a state that has much lower or no state income tax rate can be substantial.  However, such tax savings don’t come easy and individuals may be caught in the trap of dual residency and dual taxation instead.

Residency

Although each state has its own definition of who is a “resident” of its state for income tax purposes, the majority of states define “residency” based on a person’s “domicile.”  Some states also have a day counting residency rule for statutory residency in addition to the domicile test.  Most of these states consider an individual to be a “statutory resident” for state income tax purposes if the individual maintains a permanent place of abode in the state and spends more than 183 days in the state during the tax year.  For example, under New York law, an individual is a resident if he or she is domiciled in New York, or if the individual is a statutory resident, such that he or she maintains a permanent place of abode in New York for more than 11 months of the year and spends more than 183 days in New York during the tax year.  On the other hand, California does not have a statutory residency rule and defines a “resident” as any individual who is in California for other than a temporary or transitory purpose or domiciled in California but outside the state for a temporary or transitory purpose.

Domicile

Domicile, generally speaking, is the place in which an individual intends to be his or her permanent home and to which such individual intends to return whenever absent.

An individual can only have one domicile at a time.  Once an individual acquires a domicile, it is presumed to continue until a new domicile is definitively established.  Establishing a new domicile generally requires a change of physical address and presence as well as an intent to abandon the former domicile and acquire a new domicile.  

As with the definition of residency and domicile, states vary on the exact elements required for proving the establishment of a new domicile.  For example, there are five “primary factors” and eight “other factors” used by the New York taxing authority to determine both a change in residence and an intention to change domicile.  The other factors are examined only if the primary factors fail to provide convincing evidence relating to the individual’s domicile or point equally to a domicile in another location.  By comparison, there is no bright-line rule for establishing residency under California law; rather it is determined based on the totality of circumstances, taking into consideration all relevant facts and circumstances.

Risk of Dual Residency

Because the definition of a “resident” varies from state to state, an individual can be a domiciliary of a state and be a statutory resident of another state during the same tax year (i.e., a “dual resident”).  Therefore, without careful planning, an individual can be a dual resident for income tax purposes and subject to tax on all of his or her income in two states.  Although most states provide tax credits for taxes paid to other states on income earned in that state to prevent double taxation, such tax credits may not be available for certain types of income (e.g., interest, dividends, capital gains, and other intangible income, etc.) and may be subject to certain limitations in some states. 

In recent cases* involving dual residents who were domiciled in Connecticut but also statutory residents of New York, taxpayers were not allowed a credit for the tax they paid to Connecticut on intangible income (i.e., gains from the sale of a business) because New York does not consider such income as being “sourced” to Connecticut.  New York (and Connecticut) permits double taxation on a resident’s intangible income based on the taxpayer’s dual residency if such income does not derive from activities in either state.  Appeals filed by taxpayers in these cases were dismissed by the New York Court of Appeals and the U.S. Supreme Court also declined to consider the cases.  As a result, taxpayers had to pay New York taxes on top of Connecticut taxes paid on the same income, with no credit.

* See, Samuel Edelman, et ux. v. NY State Dept. of Taxn. and Fin., et al., Nos. 156415, 156416, 156970, 15697 (N.Y. S.Ct., App. Div., 1st Jud. Dept., June 26, 2018), motion for leave to appeal denied (N.Y. Ct. App. March 26, 2019), cert. denied, Dkt. No. 18-1570 (U.S. S.Ct. Oct. 1, 2019); Chamberlain v. N.Y. Dept. of Tax. and Fin., No. 525967 (N.Y. S.Ct., App. Div., 3rd Jud. Dept., Nov. 1, 2018), motion for leave to appeal denied (N.Y. Ct. App. March 26, 2019), cert. denied, Dkt. No. 18-1569 (U.S. S.Ct. Oct. 1, 2019).

The information contained in this e-alert is for information only and does not constitute legal or other advice. You should not rely on the content of this e-alert. We do not accept any liability to any person who does rely on the content of this e-alert. As legal provisions change frequently any comment in this e-alert should be reconfirmed before any action is taken. This material is not intended or written to be used, and cannot be used by anyone reading it, for the purpose of avoiding federal tax penalties that may be imposed on any taxpayer.

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NYT Op-Ed: So You Think New York is Dead

Please find the following New York Time’s Op-Ed piece, by Jerry Seinfeld.

Jerry Seinfeld: So You Think New York Is ‘Dead’
(It’s not.)

By Jerry Seinfeld
Mr. Seinfeld is a comedian.
Aug. 24, 2020

When I got my first apartment in Manhattan in the hot summer of 1976, there was no pooper-scooper law, and the streets were covered in dog crap.

I signed the rental agreement, walked outside, and my car had been towed. I still thought, “This is the greatest place I’ve ever been in my life.”

Manhattan is an island off the coast of America. Are we part of the United States? Kind of. And this is one of the toughest times we’ve had in quite a while.

But one thing I know for sure: The last thing we need in the thick of so many challenges is some putz on LinkedIn wailing and whimpering, “Everyone’s gone! I want 2019 back!”

Oh, shut up. Imagine being in a real war with this guy by your side.

Listening to him go, “I used to play chess all day. I could meet people. I could start any type of business.” Wipe your tears, wipe your butt and pull it together.

He says he knows people who have left New York for Maine, Vermont, Tennessee, Indiana. I have been to all of these places many, many, many times over many decades. And with all due respect and affection, Are .. You .. Kidding .. Me?!

He says Everyone’s gone for good. How the hell do you know that? You moved to Miami. Yes, I also have a place out on Long Island. But I will never abandon New York City. Ever.

And I have been onstage at your comedy club Stand Up N.Y. quite a few times. It could use a little sprucing up, if you don’t mind my saying. I wouldn’t worry about it. You can do it from Miami.

There’s some other stupid thing in the article about “bandwidth” and how New York is over because everybody will “remote everything.” Guess what: Everyone hates to do this. Everyone. Hates.

You know why? There’s no energy.

Energy, attitude and personality cannot be “remoted” through even the best fiber optic lines. That’s the whole reason many of us moved to New York in the first place.

You ever wonder why Silicon Valley even exists? I have always wondered, why do these people all live and work in that location? They have all this insane technology; why don’t they all just spread out wherever they want to be and connect with their devices? Because it doesn’t work, that’s why.

Real, live, inspiring human energy exists when we coagulate together in crazy places like New York City. Feeling sorry for yourself because you can’t go to the theater for a while is not the essential element of character that made New York the brilliant diamond of activity it will one day be again.

You found a place in Florida? Fine. We know the sharp focus and restless, resilient creative spirit that Florida is all about. You think Rome is going away too? London? Tokyo? The East Village?

They’re not. They change. They mutate. They re-form. Because greatness is rare. And the true greatness that is New York City is beyond rare.

It’s unknown. Unknown anyplace outside of New York City.

You say New York will not bounce back this time.

You will not bounce back. In your enervated, pastel-filled new life in Florida. I hope you have a long, healthy run down there. I can’t think of a more fitting retribution for your fine article.

This stupid virus will give up eventually. The same way you have.

We’re going to keep going with New York City if that’s all right with you. And it will sure as hell be back.

Because of all the real, tough New Yorkers who, unlike you, loved it and understood it, stayed and rebuilt it.

See you at the club.

Jerry Seinfeld (@JerrySeinfeld) is a comedian who lives with his family in New York.

The Times is committed to publishing a diversity of letters to the editor. We’d like to hear what you think about this or any of our articles. Here are some tips. And here’s our email: letters@nytimes.com.

Follow The New York Times Opinion section on Facebook, Twitter (@NYTopinion) and Instagram.

Source:

https://www.nytimes.com/2020/08/24/opinion/jerry-seinfeld-new-york-coronavirus.html

Main Street Lending Program

The Federal Reserve established the Main Street Lending Program (Program) to support lending to small and medium-sized businesses and nonprofit organizations that were in sound financial condition before the onset of the COVID-19 pandemic. The presentation below focuses details, eligibility, and required documents regarding for-profit businesses.


Main Street Lending Program Webinar

Three different loan programs have been designed for the for-profit business — Main Street New Loan Facility (MSNLF), the Main Street Priority Loan Facility (MSPLF), and the Main Street Expanded Loan Facility (MSELF). You can access the terms of each loan by clicking on their individual names.

Updates to the Main Street Lending Program can be found on the Federal Reserve website.  Please see below for the most recently updated set of FAQs, as of July, 31, 2020.


Main Street Lending Program FAQs

The information in this post was derived from:
The Federal Reserve (the link below and links therein)
https://www.federalreserve.gov/monetarypolicy/mainstreetlending.htm