INFORMATION DEPARTMENT VOLUME 10, NUMBER 12
Tax Tidbits With Biden Tax Plan, Should You Accept 2020 Pay Or Delay Until 2021? Given taxes and filing deadlines, would your prefer pay in 2020 or the first week in January? "Pay me next year" requests are common this time of year with employers, suppliers, vendors, customers, and more. After all, if you are paid in December of 2020, taxes are due April 15, 2021. If you are paid in early January 2021, taxes are due April 15, 2022. It seems like an easy decision, but many people assume that taxes may go up, which may cut the other way. President Elect Biden has proposed hiking tax rates from 37% to 39.6%, plus taxing long-term capital gains and qualified dividends at ordinary income tax rates on income above $1 million. He also proposed a big tax increase on death. Whether the Senate ends up controlled by Democrats or Republican after the Georgia run-off could be key. But even if you decide what you want, can you ever put off income you are about to receive? On a cash basis, you might assume that you can't be taxed until you actually receive money. Yet if you have a legal right to payment but decide not to receive it, the IRS can tax you under the doctrine of constructive receipt. It requires you to pay tax when you merely have a right to payment, even though you do not actually receive it. The classic example is a bonus check your employer tries to hand you at year-end. You might insist you’d rather receive it in January, thinking you can postpone the taxes. Wrong. Because you had the right to receive it in December, it is taxable then, even though you might not actually pick it up until January. As a practical matter, if your company agrees to delay the payment (and actually pays it to you and reports it on its own taxes as paid in January) you would probably be successful in putting off the income until the next year. To view the full text of the article, please click here.	Top Stories of December 2020 TAX PLANNING IRS Denies PPP Tax Deductions Even If Loan Might Be Forgiven In Future The IRS said you cannot claim tax deductions since allowing a deduction would be a double dip. But what if you pay and write off wages and rent, and later apply for loan forgiveness? Capital Gain for Inventors in Patent Infringement Disputes Today nobody can doubt the critical importance of patents and other forms of intellectual property to American and global business. Our main focus will be section 1235, which allows individual inventors to report income from the transfer of “all substantial rights” to a patent (or an undivided interest therein) as long-term capital gain. Zappos’ Tony Hsieh Death With No Will Adds Fees, Public Filing, Taxes Without a will or trust, who gets your assets depends on state law, with spouse, children, parents, and siblings being the usual suspects. But who gets what and how it is divided depends, and most people would rather decide themselves. CALIFORNIA TAXES California Says Who Gets Taxed During Covid Work In State What state taxes apply if you are stuck in California or stuck in another state during the pandemic? Do you pay taxes where you are sheltering in place, even if you don’t normally live there? Do you pay taxes in your usual home state, even though you are not sheltering there? Do you get stuck paying in both? TAXING SETTLEMENTS Lawyers, Settlements, and Forms 1099-MISC and 1099-NEC If you are a plaintiff or a contingent fee lawyer, you might not think about taxes when you are settling your case and looking forward to getting some cash. Plaintiffs are more likely to think about taxes than defendants, but even plaintiffs don’t always think about taxes until later. EXPATRIATIONS AND PASSPORTS In 2020, Record Numbers Gave Up U.S. Citizenship During the third quarter of 2020, 732 people renounced their US citizenship, making the number for the first 3 quarters of 2020 6,047. That may not sound like many, but even excluding the fourth quarter, 2020 is the longest list ever, as more Americans renounced their citizenship. PENALTIES AND DEADLINES Tax On Goldman Sachs $3 Billion Settlement, Taxes On $174 Million Pay Clawback? The massive almost $3 billion settlement with U.S. authorities is over Goldman’s role in the 1MDB debacle, where a $6.5 billion Malaysian investment fund was looted. Most people don’t think about tax issues first, but there are plenty here.
@ 2020 Wood LLP. Visit our website www.WoodLLP.com. 333 SACRAMENTO STREET | SAN FRANCISCO, CA 94111 | TEL 415-834-1800 | FAX 415-834-1888 If you no longer wish to receive the Wood LLP Tax Alert, please reply to this email or click here. If you have received this communication by mistake, please return it (and any attachments) by replying to the sender and deleting it in its entirety from your computer. It may be protected under attorney-client and/or work product privileges, and may be used only by the intended recipient.