Colorado Department of Revenue: Payment Options for Individual Income Taxes

If you have outstanding income tax liabilities with the Colorado Department of Revenue (the “Department”) and cannot pay them in full, the payment options are limited.  They also vary from those accepted by the Internal Revenue Service for payment of the same or most other types of taxes. The Department does not have any type of temporary hardship status when a taxpayer is not showing the ability to make pay its outstanding income tax liabilities, even when that person is …

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Understanding Federal Tax Liens When A Deceased Taxpayer Possesses A Power of Appointment

A federal tax lien is the government’s legal claim against a taxpayer’s property when the taxpayer neglects or fails to pay a tax debt.  The lien protects the government’s interest in all the taxpayer’s property, including real estate, personal property, and financial assets.  So what happens when a taxpayer who possesses a power of appointment[1] passes away owing federal income taxes?  The following explains how tax liens arise, what they attach to, and their impact on a decedent’s estate.  A …

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Premature Assessments and Tax Court Cases

A premature assessment occurs when the IRS assesses (or makes record in its system) tax, and penalties and interest, without authority to do so.  When the IRS proposes adjustments to a taxpayer’s tax return (and tax is a type subject to deficiency procedures, like income tax), the IRS is required to issue the taxpayer a Statutory Notice of Deficiency, giving the taxpayer an opportunity to dispute the proposed adjustments in the United States Tax Court. Assuming a taxpayer timely and …

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Taxation of Non-Fungible Tokens

A non-fungible token (“NFT”) is a type of digital asset, representing something unique.  Because it is unique, it cannot be replaced by any other item or asset—like a piece of original art (The Mona Lisa), or an original Michael Jordan rookie basketball card.  Something fungible can be replaced with another item.  For example, a Bitcoin can be replaced by another Bitcoin, because a Bitcoin is not unique.  Or a print of the Mona Lisa can be replaced by another print.  …

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Colorado Department of Revenue Goes Live With Sales and Use Tax Sourcing and Reporting

Beginning July 1, 2021, both in-state and out-of-state retailers will be required to implement the “destination-based” sourcing rules for collecting and remitting State, Special District, state-collected county and city, and participating home-rule jurisdictions sales taxes.             To assist retailers, the DOR has now gone live with its Geographic Information System (“GIS”), as part of its new Sales and Use Tax System (“SUTS”), a “a one-stop portal that will allow taxpayers to do all manner of tasks related to collecting and …

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2020 Form 1040 Virtual Currency Question

Taxpayers who own virtual currency, also known as “cryptocurrency,” may be confused about how to respond to a question on the 2020 Form 1040, U.S. Individual Tax Return, now due May 17, 2021 (extended from April 15, 2021).  The IRS recently clarified part of the question, but did not answer all the questions taxpayers have about the inquiry, nor how the IRS will use taxpayer responses for enforcement purposes. The 2019 Form 1040 was the first time any question was …

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Two Biden Administration Proposals May Increase The Amount of Tax Collected From A Decedent’s Estate

First, the Biden Administration has proposed significantly reducing the current gift and estate tax exemption, which will result in increases of gift and estate tax imposed on large estates.  Second, a proposal to eliminate the “step-up in cost basis” benefit for taxpayers on assets at death, which will result in more capital gain taxes being paid when those assets are sold.  The IRS imposes tax on certain gifts made during life and property transferred at death. Gifts during life are …

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2021 Income Tax Return Filing Season Deadlines

Because of the global pandemic, the IRS extended the filing deadline for taxpayers’ 2019 Income Tax Returns.  This left many wondering whether the IRS would extend the filing deadlines for 2020 tax returns—generally March 15, 2021 for entity returns, and April 15, 2021 for individual returns.  The IRS recently announced the filing deadlines for the 2021 filing season will not be automatically extended, like they were last year. The IRS announced last week that the upcoming 2021 filing deadlines (for …

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COVID-19 and Recent IRS Relief to Taxpayers Having Payment Problems

On November 2, 2020, the Internal Revenue Service announced a new program, the Taxpayer Relief Initiative (“TRI”), to help taxpayers who are unable to pay their taxes because of the pandemic. Taxpayers who owe taxes and cannot not pay have always had options such as installment agreements and offers in compromise, but now they have more flexible options. Currently, there are over 20 million taxpayers (individual, business, and specialty taxpayers) who owe the IRS back tax debt. Here are some …

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IRS Makes it Easier to Qualify for an Installment Agreement

The IRS recently changed its rules regarding monthly Installment Agreements, making it easier for individual taxpayers to get into one.  Now, taxpayers with unpaid balance of assessments (total balance not including accruing but unassessed penalties and interest) less than $250,000 can pay their balance over 72 months (or the remaining time on the collection statute, whichever is less), without having to provide any financial information. Previously, the IRS only allowed taxpayers with unpaid balance of assessments below $100,000 to qualify …

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