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Trump Administration Plans To Reverse Tip-pooling Rule

The proposal by the Trump administration to rollback the tip-pooling rule is now open for public comment. The Department of Labor’s formal publication kick-started a month-long period for the public to provide feedback. If successful, the proposal reverses the rule passed by the Obama administration in 2011.

The rule permits restaurant employees to retain tips without being forced to share with non-tipped workers.The Department of Labor’s proposal was triggered by the need to correct wage disparities between waiters and other restaurant staff. Enforcement of the rule was officially halted by the current administration in July.

According to federal law, employers are not allowed to pool tips if they pay the tipped minimum wage. The amount is lower than the standard minimum wage, which stands at $7.25 per hour. The Obama-era rule also prevented the practice for employers paying their staff the higher minimum wage.

Opponents of the proposal argue that the latest move by the Trump administration is aimed at targeting workers. The Labor Department’s actions in July were aimed at blocking extended mandatory overtime wages to over 4 million employees. It proceeded to counteract a rule, which was designed to compel businesses to submit detailed employee wage data. The information was supposed to be broken down by race and gender.

Vulnerability

According to Saru Jayaraman, president of the union-backed ROCU, tipped workers are vulnerable to manipulation. She is concerned that the rollback of the Obama-era laws would make the situation worse for the workers. This would lead to increased vulnerability, poverty and financial instability for a workforce that is dominated by females. The possibility of harassment may rise exponentially.

On the other hand, the Labor Department stated that it carried out a qualitative analysis. It also urged stakeholders to provide feedback regarding the economic effects of the proposal.

A growing number of industry groups are opposed to the proposal because they believe tip pooling is good for the workers. They argue that the practice addresses the compensation gap between untipped workers and waiters. The servers typically earn more as the prices of food increase. Many commentators warn that the Trump administration risks facing considerable legal challenges from rights groups representing workers.

Christine Owens of the National Employment Law Project said the department’s proposal omitted vital details relating to the amount of money that tipped workers could lose in the event that the repeal goes ahead. Meanwhile, the Supreme Court is reportedly reviewing a challenge lodged by the National Restaurant Association in association with other industry groups. The proposal was published in the first week of December on the Federal Register.

Impact

Heidi Shierholz of the Economic Policy Institute (EPI) is currently researching how much money employees would lose to their employers by analyzing information from the Bureau of Labor Statistics and data from the Internal Revenue Service. She asserts that this form of theft amounts to more than $15 billion annually. A significant number of employers are willing to pocket the tips when the law is on their

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How GOP Tax Reform May Impact California Housing Market

The two chambers of Congress have already passed new tax bills but the final legislation is yet to be made. Homeowners are still hoping that it would turn out to be in their favor. There are three key areas of the tax overhaul bills:

Versions: House vs. Senate

The two versions of the bill from the House and the Senate are quite different, specifically on the deduction on the mortgage amounts. For the House bill, the mortgage interest deduction is restricted to a maximum of $500,000. On the other hand, the Senate bill preserves the current deduction, which is $1,000,000.

It should be noted that many of the expensive homes do not even have mortgage interest that goes over $500,000, although there are some states where homes are high-priced. An example is Hawaii where more than 60% of the homes have mortgages over $500,000. Only 13% of homes exceed the $1,000,000 threshold for the mortgages.

Clearly, more people will be affected by the tax code presented by the House.

Property Tax Deductions

The House bill also restricts the property tax deductions at only $10,000. Meanwhile, the Senate bill proposed that there should not be any tax deductions on properties. The initial proposal was amended and the deductions are maintained at $10,000.

If the Senate did not change the original bill they introduced, it would have affected almost 98% of the homeowners who pay their property taxes. This means that a good part of the population would have been compelled to pay additional tax, specifically the itemize deductions and not the standard deductions.

People with large mortgages, as well as those who give to charitable institutions, would not have the capacity to deduct property tax. With the $10,000 limit, the number of affected homeowners is fewer. However, some states with people who exceed the property tax limit will definitely feel the financial pain.

Capital Gains Exclusion Taxes

Assessing this next part of the tax code is difficult. The required eight-year residency in a home was reduced to five years for the capital gains exclusion taxes. It can be problematic for people who want to move whenever they want as the federal government would collect a tax revenue amount.

Homeowners would no longer behave like before, mainly because a quarter of home sales would face the tax. The possible outcome for this is that homeowners would stay put for a minimum of five years so that they would not pay the tax.

Weakened Home Prices in California and the Other States

While there are differences in the two bills, both the versions of the Senate and the House would have a negative impact on the home prices. This is a result of the decrease in mortgage interest deduction if ever the House’s plan becomes law. It can be bad for new homeowners, especially those in high-cost markets like San Jose.

Home prices may start decreasing because there is lack of demand. However, when it comes to the more-expensive real estate markets, such

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How Tax Reform Could Impact San Jose

President Trump’s efforts to significantly reform the American tax code took a step forward a few weeks ago, as a bill exited the Senate Finance Committee for public debate.

When compared to the House’s equivalent bill, the Senate bill benefits San Jose homebuyers by eliminating the latter’s proposed reduction in the mortgage interest deduction limit. This limit is $1,000,000 both currently and in the Senate bill, while the House bill decreases it to $500,000.

On the downside, the Senate bill also eliminates State And Local Tax Deductions, or SALT, used by roughly one third of Californians to save an average of $18,000 on their annual tax bill.

Here is a closer look at how everything breaks down for San Jose residents:

Mortgage Interest Deduction Limits

The change in the maximum mortgage interest deduction limit does not affect most Americans, as the new $500,000 cap is still significantly higher than the national median home price of around $200,000. According to CoreLogic, less than three percent of current American homeowners have more than $500,000 in outstanding home loans.

However, this number is significantly higher in the Bay Area. The median price for a Bay Area home is approximately $752,000, much more than the cap proposed by the House but still comfortably beneath the current $1,000,000 cap.

The California Building Industry Association vehemently opposes any alteration to the existing deduction limit, arguing that increasing the tax burden in expensive states such as California could depress the housing market in those areas. In turn, this could trickle down and decrease property values across the entire nation.

The real estate industry concurs with the California Building Industry Association and has lobbyists actively campaigning against the House’s proposed changes.

It is worth noting that no bill has been passed yet, as the House and Senate bills would need to be reconciled before either could be signed into law.

Assuming something is signed into law, current homeowners would not be affected by any of the proposed changes. The new legislation would cover only new mortgage loans, leaving the tax burden faced by existing homeowners completely unaltered.

State and Local Tax Reduction Reform

The Senate bill attempts to compensate for the higher mortgage interest deduction limit by eliminating SALT deductions. This would impact the East Coast more than San Jose residents due to the higher property taxes out east, but some Californians would still feel it.

According to a report in the LA Times, East Coast moderates are attempting to broker a compromise in which homeowners are allowed to deduct up to $10,000 in state and local property taxes and nothing on income taxes. This would be the worst case scenario for San Jose, where income taxes are high but property taxes relatively low.

Senator John Thune, R-South Dakota, was quoted in a recent interview on CBS This Morning arguing that tax breaks for expensive areas such as California and New York have been law for a long time but may not be for the

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San Jose Woman Sentenced in Homeless Tax Fraud Case

Diep Vo, a 71-year old woman living in San Jose, has been sentenced to four and a half years in prison for her role in a tax fraud scheme involving the local homeless population. The crime took place from May 2012 to December 2013.

According to prosecutors, Vo (also known as Nancy Vo) and 57-year old co-conspirator Trong Minh Nguyen (alternatively John Nguyen) conducted the tax fraud by convincing homeless and unemployed individuals that a new government program would provide them with stimulus money. Vo located these individuals by canvassing homeless shelters and halfway houses throughout the San Jose area.

These individuals typically did not file taxes, but were told that they were required to provide their Social Security number and sign a blank income tax return in order to receive their benefits from the government program.

No such program existed. Instead, Vo would obtain the signed tax return form and give it to Nguyen. Nguyen then filled it out with false tax information, claiming an average income of about $7,000 on each one. He then claimed that this money was subject to fraudulent tax withholding, ultimately raking in a total of $3.4 million, stemming from 1,743 fraudulent tax refunds.

The IRS was directed to send the refund checks to private mail boxes owned by Vo and Nguyen. The pair rented private mailboxes throughout the Senter Road area of San Jose to avoid any suspicion from a couple of addresses receiving too much mail from the IRS. The individuals whose names appeared on the fraudulent documentation were required to pay the pair for their trouble, severely mitigating any financial benefit they derived from the scheme.

Vo pleaded guilty to one count of conspiracy to file false tax claims, three counts of aiding and abetting such false claims, two counts of aggravated identity theft, and two counts of mail fraud back in June. The only question for presiding Judge Beth Labson Freeman was what sentence her crimes warranted.

The verdict was determined on Tuesday, November 14, when U.S. District Court Judge Labson ordered Vo to serve 54 months in prison, provide restitution to the IRS in the amount of $701,000, and serve an additional three years of supervised release following her prison sentence. Vo has until January 4, 2018 to self-surrender and begin serving her sentence.

This sentence is light compared to the penalties she could have faced. Each instance of mail fraud in San Jose carries a maximum sentence of 20 years imprisonment, while each count of aiding and abetting fraudulent tax claims carries a maximum sentence of five years. Aggravated identity theft carries a minimum sentence of two years.

Co-defendant Nguyen was sentenced to more than two years in prison for his role in the tax fraud plot. He previously pleaded guilty to submitting and conspiring to submit false tax claims to the IRS in an effort to obtain fraudulent tax refunds in May. The particulars of his sentence came on July 25.

To date, no charges have been

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Gas Tax And The Bay Area

The Gas Tax

In general, democracy means government rule via the majority opinion of the people. California is currently in the middle of an interesting conflict between the decision of state legislators to raise gas taxes and vehicle registrations fees, and a group of organizers who plan on appealing to what is hopefully a majority of voters to overturn this measure.

Despite having what is already one of the highest motor vehicle tax and fee structures in the country, the legislature and governor contend that an additional 5.2 billion dollars is necessary to address deferred maintenance issues on the state’s surface transportation infrastructure and to fund a wish list of additional new mass transit programs. This money is raised via an additional 12 cent a gallon gas tax, an additional 20 cents a gallon on diesel, up to another $175 on each vehicle registration fee, and an additional 4% tax on sales of diesel-fueled vehicles.

Powerless in the face of large Democratic majorities in the legislature, Assemblyman Travis Allen (R- Huntington Beach) has proposed an initiative that would place the matter in the hands of the voters themselves. This would serve as a test as to whether the legislative majorities do in fact comprise a democratic majority in the larger sense of the word, at least on this one issue of the gas tax.

San Francisco

In the San Francisco Bay area, the gas tax as it currently stands offers a mixture of benefits and drawbacks. Fixing bad roads would be a positive. Enduring the frustrations of large amounts of additional road construction delays while they are being repaired would be less welcome.

Raising California’s already-legendary gas prices even higher imposes a particular burden on the Bay Area’s many less-affluent residents who work in the city but must endure long commutes out to the areas where semi-affordable housing is still in vogue. Improving and expanding mass transit options on the increasingly rickety BART system would no doubt be welcomed by its ridership.

The issue therefore comes down to a choice on several different levels. In a large societal sense, voters may have to decide if the overall benefits to the state’s residents outweighs the loss of 5.2 billion dollars that would otherwise be available to spend on other things. An initiative, if it does in fact make the ballot, will also serve as a referendum on the current management of the state’s transportation affairs.

Since, in all honesty, the state government has short-changed its transportation budget in favor of other priorities for many years, voters may or may not render a verdict as to whether they should be favored with additional money after mis-allocation of the funds already available for decades. They may also choose to ratify that decision to prioritize other matters as being more urgent and bite the bullet in this one instance to catch up.

In a narrower sense, the battle lines may be drawn between the various direct winners and losers of the gas tax itself.

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Legal Marijuana Taxes in California

California Recreational Cannabis Taxes

Recent reports have revealed that the cost of purchasing legal marijuana in California could be high enough to drive away potential consumers — and keep the black market thriving. According to a Fitch Ratings report, taxes for legal cannabis in California could be up to 45% in certain parts of the state, among growers, retailers and customers.

Consumers of marijuana in California must pay a combination of local and state taxes that will vary depending on location. In addition, sellers and growers are also taxed at a specific rate. The consumer tax rate will go all the way up to 24%  including a 15% state excise tax along with other local and state sales taxes.

Taxes for businesses will range between 1% and 20% of gross sales, or $1-$50 per square foot of cannabis plants. Additionally, farmers will be taxed at a rate of $2.75 per ounce of marijuana leaves, and $9.25 per ounce for cannabis flowers.

The Other States

Although California legalized medical marijuana over 20 years ago, recreational marijuana retailers have only recently begun to ramp up their production. The bill to legalize recreational cannabis use in California was passed over a year ago during the 2016 election, but the new legislature does not take effect until January 1, 2018.

It’s worth noting that Washington is the only one of the eight states where recreational marijuana was legalized has a higher tax rate than California, with a tax rate of 50%.

Washington and Colorado have tried multiple different tax structures resulting in conflicting results. For example, in 2015, Oregon began with a weight-based tax of a flat $35 per ounce. However, the state eventually changed this tax structure to a flat sales tax of 20%. Colorado eliminated its 2.9% sales tax, but escalated its excise tax to 15% from its former amount of 10%. This obviously raised the overall tax rate on marijuana.

Critics

The recent legislature to legalize recreational marijuana hasn’t done much to ease the controversy among citizens. The debate continues to rage on among politicians, community leaders, and private citizens.

There has been some backlash from different public interest groups and religious leaders regarding the upcoming January 1st landmark. Critics have been outspoken about the message this new legislation sends, and what the long term effects will be to California.

According to Citizens Against Legalizing Marijuana (CALM) has the following to say “We affirm the 2006 FDA finding and vast scientific evidence that marijuana causes harm. The normalization, expanded use, and increased availability of marijuana in our communities are detrimental to our youth, to public health, and to the safety of our society.”

While the critics have certainly been loud, there has also been overwhelming support for the new law. When asked for comment, one business owner in Sunnyvale said “Listen, I don’t touch the stuff myself, but I also don’t think it’s any of my business what other people do with their lives. The studies I’ve seen suggest that marijuana

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IRS Extends Certain Tax Deadlines For Bay Area Fire Victims

As wildfires continue to ravage the Bay Area and other California counties, taxes are not foremost on the mind of most victims. With a variety of tax deadlines rapidly approaching, the Internal Revenue Service (IRS) has announced a tax extension for individuals affected by the ongoing disaster.

This relief will take the form of an extension of all tax-related filing and payment deadlines starting from October 8, 2017 to January 31, 2018. This means that any deadlines between October 8 and January 31 are pushed back to the later date for this year only, amounting to approximately an extra three months for victims to get their documentation in order. This includes the deadline for making quarterly estimated tax payments, which was January 16, 2018 before the extension was announced.

In addition, tax penalties for late deposits and federal payroll excise taxes are waived for those in the affected areas during the first 15 days of the disaster period.

Businesses and individuals residing in the following California counties are eligible for this extension: Lake, Butte, Napa, Nevada, Mendocino, Yuba, and Sonoma. Additional counties may be added to the affected area in the future. Residents with IRS addresses of record in these areas will have the extension automatically applied, requiring no direct action on their part. Any eligible individual who receives either a late filing notice or late payment notice despite this announcement can call the phone number printed on their document to have it abated.

Firefighters and other relief workers who do not live in the affected area but have spent a lot of time on relief work there may also qualify for this extension. Such individuals should contact the IRS at 1-866-562-5227 to claim their benefits, as it will not be applied automatically. These relief workers must be affiliated with a recognized government agency or charitable organization in order to qualify for this extension.

Individuals with a primary residence outside the affected area maintaining a residential or commercial presence in the affected area may also qualify for the extension by calling the number above. This is likely the smallest group of eligible taxpayers though.

Taxpayers in the affected areas also receive an additional extension if they had previously filed an extension for last year’s tax returns. Tax-exempt organizations on extension through November 15, 2017 and individuals with an extension through Monday, October 16 2017 now have until January 31, 2018 to submit their returns. However, this is a filing extension, not a payment extension. Payments on 2016 tax returns will still be keyed to the original due date of April 18, 2017.

Tax law offered some relief for disaster victims before this extension was announced. For example, victims of the Bay Area fires may choose to claim any uninsured and/or unreimbursed property losses related to the wildfires in either the year the damage occurred (2017) or the year prior (2016). These are called “casualty losses” and pertain to a broad variety of natural disasters, including hurricanes. Additional tax information for

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IRS To Block, Suspend Returns Without Health Insurance Information

The IRS has something to say about Obamacare. 

As debates rage and tensions rise in Congress over the state of healthcare and whether or not the Affordable Care Act, commonly known as Obamacare, will stay in place, or face another repeal attempt, the American public now has something else to consider. The disclosure of health insurance information is an absolute requirement.

The Internal Revenue Service has announced they will be more vigilant in checking whether filers had health insurance for the filing year. In fact, they will suspend and refuse to accept any filings that do not indicate whether taxpayers had insurance. This disclosure has been required since Obamacare went into effect, but now the IRS is stressing the importance of compliance.

The Affordable Care Act requires individuals to purchase health insurance or pay a penalty for not being insured. There was a long public discussion about whether that penalty is actually a fee or a tax. Call it either; the penalty gets calculated into the taxes owed or the refund received at the end of every tax year.

The tax penalty is $695 for adults and $347.50 for children who are not covered, or 2.5 percent of the adjusted gross household income – whichever number is higher. Skipping the part about health insurance during the filing of taxes will no longer be tolerated. The tax agency says the move is meant to encourage compliance with the individual mandate part of the law.

This new policy has been announced as Americans begin to think about their tax returns and how much they may be paying or receiving once all the math is done. Anyone who counts on an annual tax refund will need to make sure all the proper health insurance information is disclosed and documented.

On the IRS form 1040, there is a line that requires filers to mark whether they had health insurance for the filing year. Checking the box that indicates there is no health insurance in place will lead filers to another box where they are required to disclose what excludes them from the individual mandate. Or, they can simply acknowledge the penalty for not having health insurance and pay the tax.

Some of the acceptable reasons for not having insurance and being exempt from the mandate include: homelessness, eviction, bankruptcy, a death in the family, and a lack of access to any affordable plans. There may be documentation required for filers who believe they are entitled to an exemption.

The IRS announced this move by sending an online notification to professional tax accountants and attorneys, telling preparers that filings would not be accepted if they neglected to include this information. The IRS noted that this could lead to delays in the processing of refunds, and said the measure would apply to returns that are filed electronically as well as paper returns.

This may bring a new dimension to the attempts by Washington to overhaul the nation’s healthcare system. The individual mandate is one of the

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Forest Whitaker’s Tax Troubles

People often get surprised when they hear about celebrities being punished for tax evasion. One might assume that celebrities with all their popularity are treated differently from other citizens, however our tax attorneys can tell you that nothing could be farther from the truth. For the IRS, everyone is the same and it treats each case purely based on its merit. No inch given, no quarter asked for. The laws are the same for everyone.

That is why it didn’t come as a major surprise when the IRS recently rejected star actor and director, Robert Whitaker ‘s plea that he be allowed to pay back overdue taxes in installments. The tax irregularities in the case of the Award-winning actor have been going on since 2013. Since the court felt that neither the actor or his representative agencies seemed to show any intent that they would ultimately pay up or showed any solid evidence that they could pay the dues, the court ruled in favor of the IRS.

Whitaker and his spouse Keisha’s joint income tax return for 2013 reported a gross income of $1,491,974. The tax liability reported was $426,812. However, only $10,579 was sent as his wage withholding. The actor is also reported to have added another $4,500 as tax payments. The IRS on its part assessed the taxes on Whitaker’s 2013 tax returns on December, 2014. This was not an audit done by the tax collection agency. It was an investigation into tax returns. Subsequently the IRS sent a ‘intent to levy’ notice to the actor.

After receiving the notice, a Collection Due Process hearing was requested by the actor’s representative. The representative cited reasons of the actor’s movie business not doing well, as well as Whitaker’s need to project a lavish lifestyle, for holding onto his position as a leading Hollywood star, which is the only way he would be able to pay his tax dues, as reasons for letting Whitaker pay his tax dues in monthly installments.

The IRS meanwhile checked on Whitaker’s tax liabilities for 2014. It found out that the actor’s wages in the year amounted to $ 1, 865,077 but his reported tax withholding was a mere $2,267. For the tax collection agency, things were seemingly going from bad to worse in this particular case. So, it asked the actor that he better improve his tax withholding, without which he can forget about negotiating an installment deal.

The actor then proposed a 72-month installment plan at $20,000 per month to clear off his IRS liabilities to the tune of $1.2 million, for 2013 and 2014. The IRS wanted the actor to pay $40,000 per month, while also paying his 2014 taxes for the deal to be fixed, which his representative did not agree to.
Subsequently Whitaker reported an income of about $2.5 million for 2014 with a tax due of over $800K. The IRS then made an easement of the actor’s income tax returns for 2014. However, the IRS officer was not aware

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Ivanka Trump Pushes For Child Tax Credit Expansion

Ivanka Trump may finally have a chance to make her mark in shaping American policy. Since formally joining her father’s administration, Ivanka Trump has yet to have any strong influence in making any major policy decisions, but that could all change with current plans to reform the American tax code.

Her efforts may work this time because of what she has learned on the job over the last seven months. What she’s doing is trying to make sure that reforms to federal income taxes include an expanded child tax credit, something she campaigned for during the 2016 election. How she is going about gaining support for her efforts has also changed, indicating that she could be successful this time around.

That change involves performing extensive outreach through private phone calls and meetings with top GOP lawmakers, which has already produced results. Senators Marco Rubio of Florida and Mike Lee of Utah are backing her efforts. Ivanka isn’t stopping there, however, as she is reaching out to prominent House Republicans, the U.S. Chamber of Commerce and the Heritage Foundation to garner more support. Another part of the effort is two dinners she’ll host at her home, one for Rubio and Lee, the other for House Republications to help cement support.

Ivanka Trump has previously operated in this manner when promoting STEM education and parental leave. She has been vocal about expanding the Child Tax credit as she feels giving parents more money while raising children will give them more flexibility in their lives while also helping them with the costs of care.

The consensus among conservative policy experts is that Trump is attempting to push through a version of the child care tax credit that will satisfy orthodox Republicans yet still pass in Congress. Michael Strain of the American Economic Institute has indicated that any Republican tax plan would have included some kind of expanded child tax credit.

Ivanka Trump’s detractors say this is another instance of her promoting pro-female and pro-family issues while producing little or no substance. Along those lines, the Center for American Progress recently gave her failing marks on issues concerning women and families. Neera Tanden, president of the left-leaning organization, pointed out that the Trump administration’s recent rollback on the Obama-era mandate requiring most employers to pay for contraception as part of their health care plans is another indication that the current administration is not favorable towards women. Analysis of issues from equal pay to paid leave, Tanden said, indicate the Trump administration is regressive on women’s issues and that Ivanka Trump hasn’t been much of a voice.

Ivanka Trump’s original idea called for tax deductions for formal child care arrangements, but those on the far right and far left hated the idea because it was geared towards more wealthier families using daycare settings. KaraMcKee of the Domestic Policy Council and Shahira Knight of the National Economic Council helped Trump move toward increasing the amount of credit and widening eligibility for the child tax credit. In

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