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No More Deductions For Confidential Sexual Harassment Settlements

Every new tax bill, no matter how simple it appears on the surface, always seems to contain a couple of surprises hidden within its innocuous exterior. In the recently passed Tax Cuts and Jobs Act, one of those little concealed hand grenades is to be found in a little-noticed amendment that bans deductibility on taxes for any sexual harassment payment or claim if the terms of the settlement provide for any form of non-disclosure agreement, or NDA.

While this provision was obviously ripped from the recent headlines, it leaves a lot of ground that is, or rather will be, subject to various interpretations and legal maneuverings. The problem is that it is not particularly explicit about what is and is not covered by its terms. The language of the amendment specifies payments “related to” sexual harassment or abuse.

One tax attorney in San Jose said “This was clearly intended to pull the plug on any lawyers that got creative ideas about denying any sexual harassment but instead shifting the complaint over to an infraction where the plaintiff is willing to accept millions for something as innocuous as a parking spot discrimination claim instead”. Since many attorneys often utilize the “kitchen sink” approach to sexual harassment claims, there is often a lengthy smorgasbord of additional allegations attached to the major one as a way of showing intent and a pattern of continuing abuse.

Yet the obscurity of the statutory language on taxes leaves a lot of issues open to interpretation. For one thing, attorney’s fees are now also non-deductible when an NDA comes into play– a provision which is certain to bring a host of court challenges from trial lawyers nationwide. Likewise, the law is silent as to whether this amendment applies to the plaintiff’s side as well as to the defendant.

It is clear that the intent of the statute is to discourage serial abusers from being able to repeat these depredations by gagging previous victims of their conduct and thus leaving others unaware of the risks they are exposed to. Of course, the most likely defendants in such actions are all primarily found in the category of those who have so-called “deep pockets”. It may well be that these individuals and institutions will simply opt to accept the elevated taxes that come from including an NDA in the settlement agreement and keep on doing things the way they have always done them in the past.

Given the likelihood of legal challenges from the trial lawyers and the possibility that the intent of the law gets ignored in favor of paying a little extra on the annual tax bill, it seems like a pretty safe bet that this issue is far from settled.

There are really two significant ways in which this measure will move forward as it gains traction. If nothing is done to modify or clarify the language, it can effectively become a dead letter that looks good on paper but results in nothing more than some

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5 Reasons The IRS Withholds Tax Refunds

Completing a tax return doesn’t necessarily mean a tax refund is on its way to you. As a tax attorney in San Jose, I hear from a lot of clients who are curious as to why they haven’t received their tax refund. I’ve put together a list of 5 possible scenarios to explain why the IRS might withhold your tax refund.

Missing the Due Date

To claim the refund for a specific year, a statute of limitations applies. If you do not file a return for a particular year during which you usually receive a refund, the IRS would certainly not volunteer to have that refund sent across to you. You could head back and have the return filed for the particular year, but if you are late to file by three years or more, you can forget about the refund. For instance, if the return due date is April 16, 2018, the return must be filed on or before April 15, 2021 for the refund to be issued to you.

The Deadline

When you owe funds to the IRS, things can soon turn ugly. The agency has multiple collection measures and one of them is seizing tax refunds and applying them to the balance due. Losing the refund this way would decrease tax debt, however. If you owe back taxes to the IRS and cannot pay, file for offer in compromise or apply for an installment scheme so that your future tax refunds remain yours.

Owing Taxes to a Government Branch

The Treasury Offset Program employs taxpayer refunds to clear their debts to government agencies belonging to other states. The program is commonly used to clear delinquent student loans, although it could also be used for state income taxes or outstanding child support.

In case you are trailing on your education loans because you do not have sufficient incoming funds to make payments, check if you are eligible to move to an income-based repayment program. These plans let you pay back your school loan payments, based on a specific portion of your income. In fact, these plans could also bring your outstanding payments down to zero. In addition, they result in automatic write-offs of balances remaining after 20 years or more.

Personal Bankruptcy

If you are right in the center of the Chapter 13 or Chapter 7 bankruptcy procedure, the bankruptcy trustee could ask the court to use a portion, or the complete tax refund sum for paying off your debts. Once the bankruptcy process is done with, and you have completely discharged your debts, your future refunds won’t be grabbed by the bankruptcy court.

Tax Return Missed

If you did not file a return the previous year, the IRS could keep future refunds in possession until the missing return has been filed. If the return has been filed and you owe taxes for the particular year, the government agency would most likely use the held refund money to clear those back taxes. And if you don’t owe any

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Wesley Snipes Sues IRS

Wesley Snipes, best known for his roles in Demolition Man, U.S. Marshals, and Blade has had some widely publicized issues with the Internal Revenue Service over the past few years. Mr. Snipes’ trouble with the IRS started in 2008 when he was convicted of three misdemeanor counts of neglecting to file his tax returns. This ignited a battle that still rages today as he attempts to force the IRS to honor its original Offer in Compromise Program and Fresh Start Initiative with a $17.5 million lawsuit.

To many, it comes as no surprise that Mr. Snipes is in court again. Over the years, he has become one of the most high-profile cases of tax evasion and has been charged with multiple felony tax evasion charges. When charged in 2008, it was a partial victory for Snipes as he was not found guilty of the most serious felony charges. He did, however, serve jail time which he carried out from December of 2010 to April of 2013. It was reported that between 1999 and 2001, Snipes owed $7 million in taxes.

While Snipes did serve his jail time, his acquittal from charges of felony tax fraud and conspiracy remained his largest legal victory. Snipes tried everything to have his sentence overturned, filing an appeal and citing reasons of race for not being able to get a fair trial in Ocala, Florida; this was rejected by the U.S. Supreme Court.

Snipes’ most current issue with the IRS is over civil tax collections. Not only does the IRS want to collect the owed amounts for the criminal court orders, it can also assign other tax bills to offenders. Snipes claimed that he was trying to work with the IRS at resolving his tax debts and move forward. When Snipes had just finished his jail time in 2013, the IRS hit him with large-scale tax assessments extending back 10 years. In response to this, Snipes sought a Collection Due Process Hearing and paid two of the assessment amounts from 1999 and 2002. He then offered to settle the amounts from five additional years.

While Snipes’ lawyers attempted to work with the IRS, an agreement was reached that Snipes would pay a total amount of $6,416,396. When the IRS increased that figure to $18,116,396, Snipes asserted that they were abusing their power. Snipes drew attention to the claimed nature of the IRS Compromise Program as he felt its goal of reaching a resolution beneficial for both the taxpayer and the government was not being prioritized. Snipes claimed that the supposed end-goal of resolving the tax disputes in an attempt to move forward with the taxpayer in compliance was not being honored, and that he was being deprived of the chance of a fresh start.

In May of 2012, the IRS launched the ‘Fresh Start Initiative’. This initiative revised the former Compromise Program to make its mandates more flexible and productive to those it aimed at helping. Under the Fresh Start Initiative, those taxpayers who are

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Taxes on Cryptocurrencies Explained

For most taxpayers, earning a tidy profit on crypto-currencies like Ethereum and Bitcoin has been relatively simple in 2017.

However, with the passage of the new tax bill, those profits will be subject to much closer scrutiny by the IRS.

For example, federal tax law is especially tricky when it comes to swaps between different types of coins (Bitcoin and Litecoin, for example), and in cases where coins do their version of a stock split, known as a “hard fork” in the crypto business.

The IRS, according to its own website at IRS.gov, is clear about the fact that they want to collect tax on every exchange, sale and split of crypto-currency.

According to Fortune and other financial media outlets, federal tax authorities have noted that very few taxpayers are reporting sales and exchanges of crypto-money.

In late November, 2017, a San Francisco federal court ruled that the largest crypto-currency platform, Coinbase, must turn over client data to the IRS. After lengthy arguments throughout the case, Coinbase was able to limit the data seizure to just 3 percent of the original number of records the IRS sought. But in the end, the feds will get Coinbase’s records on any U.S. taxpayer who traded, bought or sold in excess of $20,000 worth of crypto-currency, according to the ABA Journal.

Many CPAs and tax attorneys now specialize in crypto transactions as Bitcoin and similar assets continue to gain popularity with average investors.

If you are one of the millions of U.S. citizens that sold, exchanged, purchased, or somehow made a profit on any crypto-currency during 2017, you need to know the following:

Swaps: According to the new tax law, swapping one crypto for another is a taxable event (a capital gain, in this case), plain and simple, whether you “park” the initial sales proceeds with a third party or not.

The new tax law no longer allows crypto-currency activity to take advantage of the 1031 “like-kind property exchange” shield. That’s because lawmakers were careful to define “property” in the new legislation as real estate only.

Reporting for foreign assets in your portfolio

If you owned more than $10,000 of foreign-based assets, you will likely have to file IRS form 8938 and FinCEN report 114. The definition of “foreign-based” is a bit murky, but if your crypto-currency is held in a non-U.S. account or primarily situated in a foreign nation, you will be subject to reporting requirements.

Holding periods matter

If you hold a crypto asset for less than one year, the gain on sale will be treated as a short-term one, and be taxed at a 37 percent rate. To enjoy the lower, long-term treatment of between 0 and 20 percent, you’ll need to hold your crypto-currency for more than one year. And don’t forget about state taxes on these transactions, which can amount to something between 3 percent and 13 percent.

What is a hard fork, anyway?

Crypto-currencies often make “upgrades” for various reasons, similar to an old-fashioned stock split. For

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San Francisco And The GOP Tax Plan

What Donald Trump and his republican allies have proclaimed as an unprecedented gift for the public, may not be viewed as such in all sectors of the public. Especially in areas like San Francisco where affordable housing is already an issue, it has been predicted that the GOP tax overhaul could have ruinous effects for its low-income populace in the bay area.

California is a state known for its shortage of affordable housing. What concerns many is that the passing of the GOP tax plan will demolish the public/private partnership that last year, saw more than 20,000 affordable homes built. Without this partnership, there will be an extreme shortage in both funds and motivation to move forward with plans to increase the availability of affordable housing.

Currently, San Francisco has 6,000 affordable housing units that will become highly vulnerable if the tax bill is passed. The city has the added concern of rushing to protect the almost 5,000 units of affordable housing still in the construction stage. Developers will be scrambling to drain the available bonds before they disappear into the GOP abyss and will incur extra interest costs as a result. Those high-interest costs, of approximately $10 to $20 million, is money that would have been used to find housing for people in need: homeless, elderly, the sick, low-income families, and veterans.

In short, affordable housing advocates that have tirelessly worked for decades in securing housing tax credits to fund affordable housing projects fear the results of that work will be wiped out if the tax plan becomes a reality. Not only will housing projects not be built; projects in construction will face huge delays, when the need for these homes is current and urgent, in many cases.

Some of the far-reaching effects of a worsening shortage of affordable housing in San Francisco predicts an exodus of its residents. People will move states in search of lower rents. To extend that further, what will be the result of the absence of service workers when that happens; will the mechanization of replacing absent workers with robots become an issue in the near or distant future?

With the passing of the proposed GOP tax plan, the 4-percent low income housing tax credit would no longer be available. Without that tax credit, projects like Mercy Mission Bay apartments for low-income residents, including more than 200 children, would not have been built. That tax credit contributed more than $30 million to the building, which comprised a huge portion (40 percent) of the building’s total cost. The Mercy Mission Bay apartments represents the type of housing projects that would suffer without the benefits of the tax credit that the GOP overhaul would abolish. With the absence of these types of housing projects, the question of what happens to the displaced individuals and families that need them comes into focus. An absence of affordable housing means more people on the streets, which clearly produces a host of other potential issues relating to homelessness and crime

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