Tax

The IRS offers tax relief to affected taxpayers (individuals and businesses) in any area designated by the Federal Emergency Management Agency (FEMA), as qualifying for individual assistance and is part of a coordinated federal response to the damage caused by severe storms and flooding and is based on local damage assessments.

Currently, the following Texas counties are eligible for relief: Aransas, Bee, Brazoria, Calhoun, Chambers, Fort Bend, Galveston, Goliad, Harris, Jackson, Kleberg, Liberty, Matagorda, Nueces, Refugio, San Patricio, Victoria, and Wharton. Taxpayers in localities added later to the disaster area will automatically receive the same filing and payment relief.

The tax relief postpones various tax filing and payment deadlines that occurred starting on August 23, 2017. As a result, affected individuals and businesses will have until January 31, 2018, to file returns and pay any taxes that were originally due during this period. This includes the September 15, 2017, and January 16, 2018, deadlines for making quarterly estimated tax payments.

For individual tax filers, it also includes 2016 income tax returns that received a tax-filing extension until October 16, 2017. The IRS noted, however, that because tax payments related to these 2016 returns were originally due on April 18, 2017, those payments are not eligible for this relief.

A variety of business tax deadlines are also affected including the October 31 deadline for quarterly payroll and excise tax returns. In addition, the IRS is waiving late-deposit penalties for federal payroll and excise tax deposits normally due on or after August 23 and before September 7, if the deposits are made by September 7, 2017. If you believe this applies to your business, please call the office as soon as possible.

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in a federally declared disaster area. As such, taxpayers do need to contact the IRS to get this relief.

Note: If an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date falling within the postponement period, the taxpayer should call the number on the notice to have the penalty abated.

In addition, the IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. Taxpayers qualifying for relief who live outside the disaster area should contact the IRS at 866-562-5227.

Note: This also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization.

Individuals and businesses who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2017 return normally filed next year) or the return for the prior year (2016).

Need Help?

If you’ve been affected by a natural disaster and have any questions or need additional information about tax relief, please call.

• By Leon Clinton
• September 19, 2017

If you filed for an extension of time to file your 2016 federal tax return and you also chose to have advance payments of the premium tax credit made to your coverage provider, it’s important you file your return sooner rather than later. Here are four things you should know:

1. If you received a six-month extension of time to file, you do not need to wait until the October 16, 2017, due date to file your return and reconcile your advance payments. You can–and should–file as soon as you have all the necessary documentation.

2. You must file to ensure you can continue having advance credit payments paid on your behalf in future years. If you do not file and reconcile your 2016 advance payments of the premium tax credit by the Marketplace’s fall re-enrollment period–even if you filed for an extension–you may not have your eligibility for advance payments of the PTC in 2018 determined for a period of time after you have filed your tax return with Form 8962.

3. Advance payments of the premium tax credit are reviewed in the fall by the Health Insurance Marketplace for the next calendar year as part of their annual re-enrollment and income verification process.

4. Use Form 8962, Premium Tax Credit, to reconcile any advance credit payments made on your behalf and to maintain your eligibility for future premium assistance.

Help is just a phone call away.

If you have any questions about filing an extended return, don’t hesitate to call.

• By Leon Clinton
• September 17, 2017

From declining sales at local retail establishments to brick and mortar store closings, almost everyone would agree that the rise of Internet sales has transformed the retail landscape. One consequence of this uptick in online sales is lost revenues in states that collect sales (or use) tax.

According to the National Conference of State Legislatures, state revenues declined by $17.2 billion due to lost sales taxes in 2016 alone. As such, states, which derive as much as one-third of their revenues from sales and use taxes, are struggling to find ways to harness this lost revenue. At least two states, North Dakota and Colorado, have turned to the US Supreme Court for relief sparking other states to take action and establish legislation governing payment of sales and use tax.

“Remote Sellers” and the “Physical Presence” Test

Referred to as “remote sales” (e-commerce to most people) retail transactions include catalog and Internet sales where the seller has no “physical presence” in the state where consumers are purchasing the goods. In the early days of Internet sales, several US Supreme Court cases (culminating with Quill v. North Dakota, 1992) ruled that sales tax could not be collected where the seller did not have a physical presence (property or employees, for example). While states do require residents to report sales tax owed on purchases made online or in another state, it is rarely enforced, resulting in lost revenue.

More recently, however, a 2015 US Supreme Court opinion by Justice Anthony Kennedy in Direct Marketing Association v. Brohl, while a major victory for online retailers, suggested that it might be time for the Supreme Court to take another look at the physical presence test.

For legal buffs, here’s what the lawsuit entailed according to SCOTUSblog:

A lawsuit by a trade association of retailers, alleging that a Colorado law requiring retailers that do not collect sales or use taxes to notify any Colorado customer of the state’s tax requirement and to report tax-related information to those customers and the Colorado Department of Revenue violates the federal and state constitutions, is not barred by the Tax Injunction Act.

And here is the plain language version:

Colorado requires internet retailers like Amazon.com to send it reports about their customers in Colorado. Colorado wants to use those reports to force those customers to pay taxes when they buy online. The district court enjoined the statute, thinking it probably is unconstitutional. Without deciding whether the statute is valid, the Court said that the injunction can stand while the parties litigate about the statute itself.

State Legislative Updates

At the state level, in the years since the Brohl opinion was issued, states have enacted or are planning to enact various regulations governing payment of sales and use tax. Several are already in place (or will be soon) and a few are proposed and/or facing court challenges. These states include Alabama, Indiana, Louisiana, Maine, Massachusetts, North Dakota, Ohio, Pennsylvania, South Dakota, Tennessee, Vermont, Washington, and Wyoming.

Federal Initiatives

Efforts to require online retailers to collect sales taxes at the federal level have stalled despite approval on both sides of the aisle but at least two new pieces of legislation have been introduced: The Marketplace Fairness Act of 2017 and the No Regulation Without Representation Act of 2017, which attempts to codify what states may and may not define as “physical presence.”

The Marketplace Fairness Act grants states the authority to compel online and catalog retailers (“remote sellers”), no matter where they are located, to collect sales tax at the time of a transaction–exactly like local retailers are already required to do. However, States are only granted this authority after they have simplified their sales tax laws in one of two ways:

A state can join the twenty-four states that have already voluntarily adopted the simplification measures of the Streamlined Sales and Use Tax Agreement (SSUTA). Alternatively, states can meet essentially five simplification mandates listed in the bill.

Amazon and other Online Retailers

To further complicate matters, as online retail giants such as Amazon expand warehouse and operational facilities to other states, they are faced with state sales tax collection requirements because they now meet the physical test. In the “good old days” anyone could order online and escape paying state sales tax. Those days are almost over, however.

For example, starting April 1, 2017, Amazon began collecting sales taxes in Hawaii, Idaho, Maine and New Mexico. While they operate in five additional states, four of them–Delaware, Montana, New Hampshire and Oregon–do not have sales tax and the fifth, Alaska, has municipal sales taxes but not statewide sales tax. Currently, items sold by Amazon.com LLC, or its subsidiaries, and shipped to destinations are subject to tax in 46 states.

State and Local Sales Taxes are Complicated

If you’re an online retailer with questions about sales tax or are simply wondering whether you should collect sales tax from customers or not–given that legislation could either be rejected by the courts or upheld, don’t hesitate to call the office today and speak to a tax and accounting professional you can trust.

• By Leon Clinton
• September 14, 2017