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Ndamukong Suh Complains About Being Heavily Taxed

As one of the most controversial stars in the National Football League, Ndamukong Suh is not one to mince words. In a recent interview with Business Insider, Suh went on record with his displeasure regarding the amount of taxes he is expected to pay as a professional athlete.

A breakdown of the Tax structure

As per the law, athletes in the U.S pay 37% of their gross income as taxes. On top of that, individual states also charge taxes. Players also pay what is commonly referred to as “jock tax”. This is tax paid by an athlete to individual states where the athlete has played during the year. Additionally, taxation also applies to bonuses an athlete earns even if they were competing overseas.

According to Ndamukong Suh, if you factor in all these taxes and add other expenses such as agent fees, close to half of a player’s salary is accounted for before they end up seeing a dime.

Implications of the exorbitant tax structure

According to Ndamukong Suh, an athlete can easily end up broke even if they earn a 9 figure salary with such a tax structure in place.

In Ndamukong Suh’s view, the effects of high taxation also trickle down to family members. Many athletes are bread winners and their families rely on them for a living. With the government taxing athletes at such rates, it is putting the lives of many of their dependents at risk.

The Backlash

As you can imagine, there was a substantial amount of citizens who did not appreciate Mr. Suh’s point of view. One gentleman commented “Let’s assume his income truly is cut in half. That reduced amount is still exponentially more than I could make in my entire life time. I don’t feel bad for him in the slightest, and I think it’s incredibly tone deaf for him to complain about a contract worth well over $100 million.”

Supporters

The response to Suh’s comments was not all negative. In fact, there were multiple people on social media who came out in support of Suh’s statements.

One Facebook user stated “If you take the fame and the amount of the contract out of the equation, this is just a guy who is unhappy that he is losing nearly half of his paycheck to the government. I think that’s something that most of us could relate to, and we should celebrate that a public figure has come forward to initiate a conversation about how heavily we are taxed.”

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Tax Reform Bill Riddled With Errors

Tax code sheetsPresident Donald J. Trump speaks often about his tax reform bill that became law in December of 2017, creating a $1.5 trillion tax cut for a broad swath of American taxpayers. However, the legislation contains numerous unintentional errors that may prevent the bill from having the effects intended.

Our San Francisco tax attorneys believe that dozens of errors made the final edit of the new bill, each of which have the potential to dramatically alter the legislation’s ultimate impact.

Worse, many of the errors occur in the most controversial sections of the law. This could make it more difficult to secure the votes necessary to rectify these unintentional errors.

For example, lawmakers intended to create a short-term tax deduction that retailers, restaurants, and real estate firms could use to deduct the costs of expansion and renovations from their federal tax returns. According to a New York Times report, however, a typo requires these businesses to spread the tax break out over a period of up to 39 years instead of claiming it all immediately, removing the financial incentive for expansion lawmakers intended to include.

Ironically, President Trump’s own real estate empire is expected to be adversely affected by this mistake.

Another error creates an unintentional loophole allowing money managers to get around provisions intended to limit their access to potentially lucrative tax breaks. This will allow them to pay a lower marginal tax rate than typical wage earners on some of their income despite the fact that many money managers are already independently wealthy.

Congress could fix all of these errors by passing a “technical corrections bill” to amend the previous legislation, but Republicans would need votes from Democratic senators to pass it. The original bill did not receive a single Democratic vote, and reports indicate that Democrats are in no hurry to help their colleagues out on this issue.

For instance, Senator Sherrod Brown, D-Ohio, recently told Politico that his party has no interest in fixing the tax reform law’s typographical errors when they feel the law itself is fundamentally flawed. Sen. Brown sits on the Senate Finance Committee responsible for writing tax laws, so his opinion is likely valid for the vast majority of his Democratic colleagues.

Alternatively, the Treasury Department could issue “regulations” to fix some of the errors in the existing legislation. However, experts note that it is impossible to alter the underlying statute in this manner. Any attempt to do so could also invite litigation pertaining to what was actually intended in the legislation, potentially creating a lengthy legal battle.

Lawmakers and taxpayers alike are confused about how President Trump’s reform bill has so many errors in the first place. Legislation typically contains a few typographical mistakes, but the tax reform law has many more than the average bill.

Some experts have argued that the rush to get this bill in front of congress is to blame for the high volume of errors. The last bill to make a comparable number of changes to existing

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What The New Tax Plan Will Mean for Divorce

Couple in Divorce CourtIn late 2017, President Trump signed a tax bill that is set to change the tax code considerably. Family Law is one area that has been affected by the new tax codes. Alimony payments have undergone some changes that experts predict will have a critical impact on how couples negotiate divorce settlements. The tax code changes take effect in 2019, so couples planning to divorce only have 2018 to reap the benefits of the current tax laws.

Where the Divorce Difference Lies

The new tax bill gets rid of the alimony deduction that was allowed for the higher-earning spouse, and the recipient is not required to pay taxes. Before these changes, the requirements were reversed. The spouse paying the alimony could deduct it and the one getting it had to pay 15% tax. With the new laws, spousal support and child support will be similar. The structure of the current alimony payment system allowed couples to have more money between them, which made it possible to afford separate households. This new system will give the government a larger share of a couple’s money than before.

To put it in numbers, if one spouse pays alimony to the tune of $100,000 in a year, this amount would be deducted in full under the old taxation structure. At the highest tax bracket rate of approximately 40%, it means that this spouse will have spent $60,000. On the other end, the recipient pays 15% on the $100,000 and is left with $85,000. With the new tax bill, the higher earning spouse would have to pay the $100,000 without any relief.

The Cause of these Changes

This alimony deduction, according to the House Ways and Means Committee, is a “divorce subsidy.” It is a technique to cover the tax cuts that come with the new bill, which are approximated to be in the vicinity of $1.5 trillion. The tax writers had to find ways to bring in revenue and alimony is one method. Estimations by the Joint Committee on Taxation reveal that the deduction repeal will raise $6.9 billion towards the $1.5 trillion tax cut.

The Potential Repercussions

Matrimonial lawyers figure that the new changes will make divorce negotiations that much more difficult. For one, because higher-earning spouses do not have any tax advantages to look forward to, they will be more careful about how much they give. The payer has a bigger financial burden to bear under the new tax bill, which can complicate settlement talks. In the original draft, the new changes were supposed to take effect at the start of 2018, and that saw a lot of people rush to their lawyers to finalize their divorces. The reconciled bill gave divorcing couples until the end of 2018. What this means is that parties that benefit from deductions will rush to pay alimony while those who pay taxes may want to extend negotiations.

Does the Lower Tax Burden Matter

Under the newly signed tax reform bill in 2018, individuals will incur

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Will Tax Reform Generate Higher Take-Home Pay?

boss holding paycheckTrump’s signature tax plan promises to deliver immediate results for many middle-class families and those with even smaller annual incomes. A recent article explained the new tax withholding tables for the tax plan passed in December of 2017. According to Yahoo Finance, a worker earning $60,000 per year—which is the median income of American citizens—would save $112 per month, or about $1,344 per year. [1]

Borrowing from Peter to Pay Paul

Any tax changes are certain to result in winners and losers, and critics of Trump’s tax plan insist that it benefits the wealthy more than the middle and lower classes. Many people’s paychecks will; immediately begin to get larger, but not everyone will see higher take-home pay. The tax bill eliminates the deduction for state and local taxes, so taxpayers in high-tax states will seldom realize big benefits from the changes. The new withholding tables are scheduled to take place in middle February of 2018. However, there are potential savings based on changes in the inheritance tax. The so-called “death tax” has long been a target of Republicans who’ve tried to enable wealthy supporters to pass on their wealth without high taxes.

Most Americans Expect Significant Cuts in Tax Liability

Our San Jose tax attorneys spoke with a gentleman from Milpitas who said “I’ve got a wife and 3 kids to look after, so I could definitely use a few extra dollars on my paycheck. The cost of living in the bay area is difficult to keep up with even with a great job.”

Although most groups can expect lower taxes and less withholding, the new tax tables don’t reflect traditional deductions for larger families. [2] The Newsweek study estimated that a single person earning $50,000 per year would have a tax bill that’s $974 lower than in 2017. Married couples earning $75,000 per year would pay $1,033 less, which is a 59% savings. A wealthy couple earning $1.5 million annually paid about $439,275 in taxes under the old tax regulations. Trump’s plan would result in a 20% increase in tax liability, or a bill of $527,268.

House Speaker Representative Paul Ryan (R-Wisconsin) commented on the new withholding tables.Ryan suggests that these savings would be a big boon for most families. Unfortunately, not everyone agrees. Taxpayers in states with high state income tax rates and local income taxes won’t be able to deduct their taxes from their federal tax bill. That means that those taxpayers could end up paying even more taxes.[3]

Inaccurate Withholding Risks of Trump Tax Plan

The total tax liability is hard to predict because so many common deductions have been eliminated. Many people who accept the new withholding strategy could end up owing higher taxes than withholding covers as well as penalties and interest. There’s no guarantee that the new tables will be 100% accurate. Every change in IRS policies generates thousands of hours of extra work for tax preparers, and even Trump’s simplified taxes are no exception.

Some Democratic members of Congress have complained

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California May Start Taxing Business Services

CA Flag and Credit CardA bill was proposed in California’s State Senate this past Monday that would add a new tax on businesses to help offset the impact of the federal tax bill passed by Congress and President Trump back in December, according to CourtHouseNews.com.

Senate Bill 993 was proposed by State Sen. Bob Hertzberg, D-Van Nays, to increase California’s state revenues through “a modest tax” on consultant services purchased by companies with more than $100,000 in sales receipts. Law firms and accountants are among the services that would be taxed under the proposed legislation.

The resulting revenue would be placed in a “Retail Sales Tax on Services Fund” that the state treasurer could distribute as needed for education, infrastructure projects, and programs to benefit California’s middle-lower income residents.

The exact tax rate will be determined at an unspecified date by a policy committee. Hertzberg’s office notes that other states with comparable taxes already in place charge between 4-6 percent on corporate consulting services.

Sen. Hertzberg also notes that this new tax could be used as a deduction on affected business’s federal tax return to the IRS, potentially lowering their total tax burden. He also cited the need to diversify the state of California’s revenue streams as a reason to support the bill.

This new bill is an effort to undo some of the impact of the federal tax law President Trump signed in December. That law capped state-level tax deductions at $10,000, a figure residents of blue states such as California and New York exceed with regularity. Some believe that this is an effort by President Trump to play political favorites in his tax bill.

This is not the first bill aimed at easing the tax burden on Californians. Another bill was passed last week allowing California residents to make charitable contributions to a fund within the state’s budget used for publicly funded colleges and universities. Since any donations are charitable and not a state tax, they act as a work-around to the $10,000 cap in the federal bill.

California state law requires any new tax to receive a super majority in both the State Senate and State Legislature before heading to the governor’s desk for final approval. Time will tell if Hertzberg can get the votes he needs.

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Supreme Court to Rule on Mandatory Online Sales Tax

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San Jose Car Dealer Convicted of Tax Evasion

Aerial View of Car DealershipOur San Jose tax attorneys recently learned that a high-end car dealer who did not pay $400,000 worth of sales tax due to under-reporting sales in San Jose, was sentenced to prison for three years.

Mohammad Hassan Mostavfi, the 31-year-old salesman, was convicted after the California Tax department, as well as the Fee Administration and Criminal Investigation, identified his inpropriety. The results of the investigations and audits yielded more than enough evidence to convict Mr. Mostavfi.

In his tax documents, Mr Mostavfi had reported having earned $1.8 million in vehicle sales; while in truth he had earned $6.8 million, as per the office of the attorney in the district.

On October 24, the prosecutor had said that Mostafvi was convicted for three years based on the three counts of sales tax evasion he had committed. A restitution hearing has been scheduled by the Superior county judge in Santa Clara, Drew Takaichi to be held on March 9th.

Mostafvi’s business had been operating on West San Carlos street from June 2006 until May 2012.

The original state audit revealed that the defendant was late in filing his tax returns and sales payments.

They would go on to discover the tax fraud shortly thereafter. The San Jose district attorney has confirmed that Mr. Mostafvi’s car selling license has been revoked, and his business has been closed.

The Deputy District attorney, Erica Engin made it clear that tax fraud is by no means a victim-less crime. Sales taxes go toward public interests like protecting neighborhoods, filling potholes and keeping our parks beautiful. Fraud of this sort is a crime against the community; not just the government.

Our tax lawyers are committed to informing the public about matters concerning tax law and the Internal Revenue Service. If you have a tax related story you would like us to cover on our blog, feel free to write to us, or send a link to info@taxhelpers.com

San Francisco Improves Self Service Tax Portal

Not every upgrade of a municipality's infrastructure is genuinely newsworthy. In some ways, the recent announcement by the City of San Francisco that it has streamlined and improved its self service tax payment portal falls into this category of announcement. In...

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What Happens If I Pay My Taxes Late?

Failing to file your federal income tax return by the filing deadline could be costly if you owe the IRS money. You could be assessed penalties and interest on the money you owe and this can really add up over time. If you are due a refund from...

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IRS Collects Billions in Cannabis Taxes; Mostly in Cash

cash in a brief caseAs the medical merits of marijuana have moved into the forefront of the health industry, more and more people are obtaining prescriptions for its use accompanied by a medical cannabis card. From pain to inflammation relief, to appetite stimulation, epilepsy treatment, and killing certain cancer cells, marijuana is being hailed as a miracle drug by many. Seen as the U.S.’ fastest growing industry, many are wondering how the IRS and tax law will regulate it, and our San Jose tax attorneys have been watching the stories as they develop.

Business Owners and Banking

While anyone with their eye on current events is aware of the rising medical marijuana industry, many people don’t quite understand how basic principles like banking and taxes will apply. It is interesting that an industry as large and growing as the marijuana industry still endures growing pains when it comes to the basics of banking and paying taxes. As marijuana is still, officially, declared illegal by the federal government, it is illegal for banks to provide basic services to businesses whose profits come from state-legal marijuana. Thus marijuana business owners have difficulty even getting bank accounts or have had their accounts closed by the banks. The result is that marijuana business owners who wish to pay their taxes, must do so in cash.

Earnings

According to ‘New Frontier Data’, it is projected that this year, the U.S. alone will see marijuana business owners owing close to $3 million in taxes. While the federal government still designates the marijuana industry as an illicit one, its business owners are obligated to pay taxes under a provisional tax code: 280E. This provision demands that drug dealers and business owners alike making money off illegal substances are obligated to pay taxes on their earnings just like Joe Public.

The IRS

According to the federal government and the IRS, income made is income reported and taxes paid. New Frontier Data predicts that if marijuana is officially legalized throughout the U.S., Feds will increase marijuana taxes upwards of $18 billion by 2025. While this prediction does not take into account the fluctuating business tax rates, the message is clear: there will be major tax revenue generated by the marijuana industry, and the federal government is certain to get their chunk of the pie.

Safe Banking and Protection for Business Owners

Moving into 2018, legislation amendments regarding the legitimization of marijuana are predicted to be under way in Congress. A 2017 Oregon bill, the SAFE Banking Act, is a perfect example of these legislative changes as it acknowledged the need and allowed for financial institutions to provide services to marijuana businesses. The vastness of the marijuana cash economy has prompted questions and concerns regarding the costs of it remaining an unbanked economy. How would businesses with such huge cash flows exist without basic banking services? Where would these billions of dollars be stored, protected? How much would money laundering crimes increase? Many in the U.S. question if their country will follow

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No More Deductions For Confidential Sexual Harassment Settlements

Judge with gavelEvery 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

Tax Refund PapersCompleting 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 SnipesWesley 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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