What’s so funny? Payroll, that’s what!
Your W-2s are due to the Social Security Administration on Thursday, Jan. 31. Most states also require you to file your W-2s by Jan. 31. And then there are all those fourth-quarter 941s and annual 940s that have to be filed by that date, too. Which means it’s time for our annual humor column. This year, we’ve roamed far and wide.
What’s that smell?
Businesses that deal with legal marijuana, either recreational or medicinal, can’t deposit their payroll taxes or pay their corporate taxes like normal businesses, because they’re primarily cash-based and the federal government continues to classify marijuana as a Schedule 1 drug under the Controlled Substances Act. That puts cannabis in the same legal category as heroin. For most banks, it’s simply not worth the mountains of legal red tape to maintain accounts for legal marijuana entrepreneurs.
The IRS has a solution: stashing pot-based businesses’ payroll and other cash deposits in safes located at Taxpayer Assistance Centers. Currently, the IRS has 15 such safes (we know where they are but we’re not telling) and it’s looking for more. However, according to Darren Guillot, director (field collection), IRS Small Business/Self-Employed Division, you just can’t show up at a TAC with wads of cash; you have to make an appointment. Well, that’s a relief.
Speaking of pot…
Security guards at a pot business in Colorado sued their employer for misclassifying them as exempt and failing to pay them overtime. Employer’s defense: The case must be dismissed; employees don’t get to take advantage of the Fair Labor Standards Act because the pot business is illegal under federal law. Editor’s note: Recreational pot is legal in Colorado.
The employer’s argument went up in a puff of smoke. Court: Employers are not excused from complying with federal laws, such as the FLSA, just because their business practices may violate federal law. (Kenny v. Helix TCS, Inc., 284 F. Supp. 3d 1186, D.C. Colo. 2018)
Maybe find another attorney
If you owe back taxes, you have 30 days after you receive notice from the IRS to ask it for a collection due process hearing before it files liens or levies against your property. If you blow that deadline, you can ask for an equivalent hearing.
An attorney admitted that he filed his request for a CDP hearing after the 30-day deadline because he wanted an equivalent hearing. The advantage: Unlike regular CDP hearings, the statute of limitations continues to run during the time an equivalent hearing is pending. Why would he want the time to run out? Because he was claiming that the statute of limitations on collections had run out.
The Tax Court ruled against the attorney. The D.C. Circuit had unkind words to say about the attorney and the IRS, which had some difficulty explaining why 30 days from the date of mailing didn’t mean 30 days from the date of mailing.
However, it affirmed the Tax Court’s decision.
D.C. Circuit: The court hopes that few taxpayers will be as anxious as the plaintiff to manipulate the law in order to attempt to extinguish tax liabilities. We further hope that few agencies will be as careless with dates and especially with the rights of the citizens as the IRS in this case. Nonetheless, unattractive as the position of the IRS may be, it does comport with the language of the statute and the apparent meaning of the word “send.” (Weiss v. Commissioner, No. 16-1407, D.C. Cir., 2018)
Withholding? The French say ‘mais oui’
If we were in France, you’d get six weeks of paid vacation every year, have a legal right to turn off your smartphone at night and, if you’re a woman, anyone who made cat calls at you could be fined and jailed. Parental leave is pretty generous, too. A perfect world, right?
But now the French are doing something retro and innovative (for them, at least) at the same time. Beginning this year, employers are for the first time withholding employees’ income taxes on a monthly basis.
Would the French balk if they knew that income tax withholding was actually a British innovation?
Tax Inspectors Without Borders
Yes, there is such a thing and it’s modeled after Doctors Without Borders, although we’re hard pressed to equate medical emergencies with systemic tax undercollections. Not here in the United States, of course, where 78% of income tax revenue is withheld, but other countries need help and TIWB programs support the transfer of tax audit knowledge, general audit practices and skills to tax administrations through a real-time, learning-by-doing approach to handling audit cases.
Tax pros providing advice to the unlucky can’t be far behind.