Tag Archive for: Louisiana tax attorney

How the DOMA Decision Will Impact Federal Income Tax Filing for Same Sex Couples

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While same sex couples and supporters of gay marriage lauded the U.S. Supreme Court decision in the United States v. Windsor, which struck down part of the Defense of Marriage Act (DOMA), the ruling leaves many same sex partners in a state of limbo in terms of the impact of more than a thousand federal programs and laws that are affected by marital status.  Although those same sex couples who were married in a state that legally recognizes same sex marriages will be able to claim the dependency deduction for a same gender marital partner under DOMA, many other GLBT couples are left in uncertain status and may be well-advised to take certain steps to avoid an unintentional waiver of certain federal rights and benefits, such as income tax benefits provided to married couples.

An understanding of the income tax consequences of the Windsor decision requires an analysis of the impact of the decision on DOMA.  The nation’s highest court struck down Section 3 of DOMA, which defined marriage under federal law as a legal union between a man and a woman.  This definition of marriage meant that same gender marriages that were previously lawful under state law did not qualify the marital partners for federal benefits and programs like joint filing status and the dependency deduction.  The downside of the Windsor decision for gay and lesbian couples is that the Supreme Court decided that the decision on how to define marriage should be left to individual states.

Because only 13 states and the District of Columbia have formally legalized gay marriage, many same sex couples who are not lawfully married still cannot take advantage of the federal tax benefits of marriage.  We have provided an explanation of the federal income tax filing impact of the DOMA decision.  Those who have been lawfully married in a state that recognizes same sex marriages will be able to file taxes jointly and claim a dependency exemption for a marital partner.  Those who are only in civil unions or otherwise not lawfully married under state law cannot file jointly or claim a dependency exception for a same sex partner.  Those in this situation also would not be able to use “married filing separately” or “head of household” status.

At the minimum, same sex couples may want to re-examine their federal income tax return and consider whether they would benefit from filing an amended return for the prior three tax filing years.  If you have other IRS tax questions, you should contact experienced Louisiana tax attorney Paul A. Grego.  We offer a free initial consultation so that we can answer your questions and provide an initial assessment of your situation.  Call us today at 504-302-4949 or email us.

Tax Attorney Reports Offer in Compromise Allows IRS to Retain Stimulus Rebates and Refundable Credits

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The taxpayers, attempting to settle taxes with the IRS, signed standard Offer in Compromise (“OIC”) forms, including IRS Form 656, the required form for OIC filers.  The OIC was accepted by the IRS in 2007.  For the 2007 year and on the taxpayer’s 2007 return, filed in 2008, the taxpayer’s claimed an earned income tax credit, a child tax credit.  Additionally, in 2008, the taxpayer’s were authorized an economic stimulus payment.  Under the OIC program, the IRS takes into account “additional consideration” as increases to the OIC amount.  Generally, the IRS will retain any refunds due to the taxpayer in the calendar year in which the IRS accepts the OIC.  As a result, the IRS was allowed to retain the refundable EITC and additional child tax credits as “additional consideration” as they were related to the 2007 tax year.  However, because the rebate was an advance on the 2008 tax year, the taxpayers were allowed to retain the stimulus payment.

See Sarmiento v. United States, Nos. Nos. 11–3752 (Lead), 11–4495(XAP), (2d Cir 2012)

Hurricane Isaac Tax Filing Relief Granted

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“IRS Provides Tax Relief to Victims of Hurricane Isaac; Return filing and Tax Payment Deadline Extended to Jan. 11, 2013”

In Information Release 2012-70, the IRS granted tax relief to victims of Hurricane Isaac for individuals and businesses located in certain counties and parishes that were affected by Isaac.

For tax returns due on or after Aug. 26, 2012, the affected individuals and businesses will have “until Jan. 11, 2013 to file these returns and pay any taxes due. This includes corporations and businesses that previously obtained an extension until Sept. 17, 2012, to file their 2011 returns and individuals and businesses that received a similar extension until Oct. 15. It also includes the estimated tax payment for the third quarter of 2012, normally due Sept. 17.”

Louisiana parishes include Ascension, Assumption, East Baton Rouge, East Feliciana, Iberville, Jefferson, Lafourche, Livingston, Orleans, Plaquemines, St. Bernard, St. Charles, St. Helena, St. James, St. John the Baptist, St. Mary, St. Tammany, Tangipahoa, Terrebonne, Washington and West Feliciana.

Mississippi counties include Adams, Amite, Clarke, Forrest, George, Hancock, Harrison, Hinds, Jackson, Lincoln, Marion, Pearl River, Pike, Stone, Walthall, Warren and Wilkinson.

Paul A. Grego
Attorney

3637 Canal Street
New Orleans, Louisiana 70119
Office (504) 302-4948
Fax (225) 208-1372

[email protected]
www.neworleanstaxlaw.com

Voluntary Disclosure of Foreign Held Assets

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In ongoing efforts to identify US taxpayers hiding assets overseas and raise additional tax revenue, the IRS announced changes to its Voluntary Disclosure Program and the Closing of an Offshore Loophole.  Under previous iterations of the Voluntary Disclosure program, the IRS states that it has collected in excess of 4.4 billion in additional taxes, bringing a significant number of taxpayers back into the US tax system.  The current program, announced in January of 2012, has penalty provisions ranging from 5% to 27.5 percent, depending on individual taxpayer circumstances.

IR-2012-5, Jan. 9, 2012 – http://www.irs.gov/newsroom/article/0,,id=252162,00.html

IR-2012-64, June 26, 2012 – http://www.irs.gov/newsroom/article/0,,id=258430,00.html

Gulf Coast Tax Attorney Says BP Oil Spill Payments for Lost Wages are Taxable

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A significant number of individuals in New Orleans and other parts of Southern Louisiana and Mississippi have received payments for lost wages as a result of the Deepwater Horizon BP Oil Spill.  It seems established that the payments will be taxable as income.  However, very different tax consequences are possible depending on whether the individual is an employee or is self employed.  For self employed individuals, the IRS takes the position that the payment should be included in gross income, which would make the BP payment subject to the self employment tax.

See Gulf Oil Spill: Questions and Answers, Updated: June 25, 2010, at http://www.irs.gov/pub/irs-pdf/p4873a.pdf.

However, for employees, the IRS excludes the payment from the definition of wages, reasoning that the payments are not wages under the “social security tax and Medicare tax because it is not an actual payment for employment.”  Id.  The result is that self employed individuals will have a higher employment tax obligation than their employee counterparts.  Why the different treatment by the IRS is not clear, but the result under the IRS guidance does appear equitable.  Please note that the tax court has held that certain business interruption payments are not self employment income, and because the BP payments seem similar to business interruption payments, authority may exist for self employed individuals to treat the BP Payment as non-self employment income.  If this issue is analyzed and properly reported under the guidance of a qualified tax professional, self employed individuals could take this position on their 1040, contrary to the IRS guidance.

For a general discussion of the Oil Spill tax issues, See: Tax Issues and the Gulf of Mexico Oil Spill, at http://www.nationalaglawcenter.org/assets/crs/R41323.pdf.

If you need immediate assistance, please call us at (504) 302-4949.  We Can defend you during an IRS audit. Be protected and do not give in because you are afraid. Let our experienced IRS lawyers defend you.

Standard Mileage For Taxi Cab Owners

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For the 2011 tax year, taxi cab owners (non fleet owners) may now use the standard mileage deduction on schedule C. The IRS in Rev. Proc. 2010-51 and Notice 2010-88 revised the definition of cars for hire, and included them in the vehicle types that would qualify as eligible for the standard mileage deduction. Please note that listed property, under IRC Section 274, and Reg. Section. 1.274-5T require that the taxpayer be able to substantiate the business use of the taxi by keeping adequate records documenting the business and the miles driven. Please consult your tax professional on the adequacy of your mileage records.