Unpaid Payroll Taxes and Potential Criminal Prosecution

Federal law requires employers who pay wages to employees to withhold and remit employment taxes to the IRS.  In addition, employers must timely file IRS Forms 941 (or Forms 943 or 944, if applicable) to report their employment taxes.  Employers who fail to comply with either requirement can face significant civil penalties for non-compliance.  Business owners, and employees hired by the employer to file and pay its employment taxes, may also be at risk for having to pay the employees’ portion of …

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Colorado’s State Tax Deduction Work-Around

Under the Tax Cuts and Jobs Act of 2017, Congress limited individuals’ deduction for state and local taxes to $10,000. Since, many states have experimented to reduce this limitation’s burden on their residents. Colorado’s attempt to lessen the impact on small business owners—the “SALT Parity Act”—was signed into law on June 23, 2021. Beginning January 1, 2022, “flow-through entities” (i.e., businesses taxed as partnerships or S-Corporations) may elect to be taxed at the entity level. By doing so, the entity’s …

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What is the Trust Fund Recovery Penalty?

The Trust Fund Recovery Penalty (“TFRP”) relates to employment taxes (IRS Form 941) due by an employer to the IRS for wages paid to its employees.  It is the employees’ portion of income tax, Social Security, and Medicare, withheld by the employer from employees’ wages.  Although referred to as a penalty, it is a tax. When an employer does not make required federal tax deposits for employment taxes, it incurs a tax liability comprised of the Trust Fund and non-Trust …

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IRS Suspends Some Automated Notices

 The IRS’s automated computer system generates certain types of notices to taxpayers, based on parameters programmed in the system and information entered and which is specific to a taxpayer.  For example, when a taxpayer files a tax return with a balance due, once the return is processed, the automated system automatically begins to generate collection notices.  The system, however, is not set-up to account for outside events, specifically the backlogs and issues that have been caused as a result of …

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More IRS Delays in 2022

The IRS was struggling to manage a high workload with fewer resources before the Covid pandemic, but its delays have greatly increased as a result of the months’ long shutdown from the pandemic in 2020.  The IRS acknowledged 2021 as one of the most challenging years it has had, but with the backlog (including millions of unprocessed income tax returns) and the return filing season having opened on January 24, 2022, this year will be plagued by even more delays. …

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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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