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Tax Presentation Highlights
Tax Amnesty, Worker Classification, and other tidbits…
Continuing Professional Education
Ober | Kaler •
Seth Kossman, Esquire
[email protected]
Ober | Kaler •
Tax Amnesty
The states need your money
Ober | Kaler •
Tax Amnesty
A. Different Meanings –
in Different States –
and at Different Times
B. Current Amnesties
Ober | Kaler •
State Tax Amnesty
Minimize/Abate Interest
Minimize/Abate Penalties
Limited Look-back Period
Civil and Criminal Prosecution
Ober | Kaler •
State Tax Amnesty
Not available to everyone
Typically requires full payment
in a short period of time
May open a “can of worms”
May exchange info with the IRS
Must contact state first
Ober | Kaler •
States and Dates
5/1/09 – 6/25/09
9/1/09 – 10/30/09
No current ending date
9/1/09 – 10/30/09
New Jersey
5/4/09 – 6/15/09
New York
No current ending date
Pennsylvania No current ending date
Est. 10/1/09
(60-75 days)
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Maryland Tax Amnesty
Amnesty Period:
 September 1 to October 30, 2009
Types of Taxes:
individual taxes
corporate income taxes
withholding taxes
sales and use taxes
admissions and amusement taxes
Applies to:
 Taxpayers who, on or before Dec. 31, 2008,
failed to file a tax return OR pay the tax owed
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Maryland Tax Amnesty
Basics Continued
Program Provides:
 The state will waive all civil penalties
(except any previously assessed fraud penalties)
 The state will waive one-half of the interest levied
Taxpayer Must:
 Pay the tax owed or enter into an installment
agreement to pay the tax by Dec. 31, 2010
Ober | Kaler •
Maryland Tax Amnesty
Basics Continued
Not for Everyone:
Any business that, as of September 1, 2009, has
more than 500 employees in the U.S. or is a
member of a corporate group that does
Any tax for which one was granted amnesty
previously (i.e. as part of the 2001 program)
Anyone who was eligible for the amnesty that
Maryland allowed in 2004 regarding Delaware
holding companies
No amnesty for returns due after December 31, 2008
(ex. the December 2008 SUT return, which was due on
January 20, 2009). To qualify, returns must be due on
or before December 31, 2008.
Ober | Kaler •
Maryland Tax Amnesty
Basics Continued
Pre-September 1:
 The Comptroller’s office will not accept any
applications before or after the deadline
 The State expects to receive millions of dollars of
tax revenue through the amnesty program, yet,
the legislature has not authorized any funding for
advertising the program
Work in Progress:
 The Comptroller’s office is still working on the
relevant procedures for the amnesty program
 The amnesty application will be online August 14
Ober | Kaler •
Maryland Tax Amnesty
Take Note:
• If you require an Installment Agreement, at least 10% of
the amnesty amount due must be paid with the
• File amnesty applications as early as possible after
September 1… in case the state discovers a discrepancy
in your application and your application is not considered
to be completed by the due date.
• Any payment made before September 1 will NOT be
eligible for amnesty.
• Any payment made before September 1 will be applied to
penalties, interest, then tax, in accordance with statutory
• If all that is owed is accrued penalties and interest (i.e.
no outstanding tax liability), then amnesty will not apply.
• No refunds and/or credit will be granted for interest and
penalties paid prior to the amnesty period (even if paid
on taxes which are eligible for amnesty).
Ober | Kaler •
Maryland Tax Amnesty
Take Note:
• A non-filer will only have amnesty for those periods
listed on the amnesty application.
– For example, if the non-filer has not filed for 15 years, but
can only file accurate returns for 10 years, the non-filer
should fill out the application with respect to those 10
years and file the returns with the application. Amnesty
will apply to those periods listed on the application.
Periods not listed on the application will not be eligible for
• The MD Amnesty program does not provide for a
specific look-back period.
• If a client currently has a deferred payment
arrangement with the Comptroller, he can still apply for
– However, no previous payments made will be reallocated,
but the deferred payment can be established for existing
liabilities and adjusted for the waiver of one-half the
interest and penalties. This will be calculated on the
amount owed at the time of the application.
Ober | Kaler •
Maryland Tax Amnesty
Will your client’s tax return
information be disclosed to the IRS?
To the extent information received under the program is subject
to the Comptroller’s exchange agreement with the IRS, the
information will be disclosed.
 Nevertheless, the disclosure of much of the information
received under Amnesty may not result in a corresponding
federal tax liability because:
 Taxpayers may have filed federal tax returns, but failed to
file all necessary state tax returns.
 Many of the taxes eligible for amnesty have no comparable
federal tax (ex. Sales Tax).
 Maryland tax law differs from federal tax law in some important
aspects (ex. municipal bonds, different states of residency).
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Maryland Tax Amnesty
If you have any questions
regarding your client’s tax
liability or eligibility for
amnesty, email the
Comptroller’s office at
[email protected]
or call 1-800-MD TAXES.
Ober | Kaler •
Fraud Act of
and the
Task Force
(effective October 1, 2009)
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Workplace Fraud Act of 2009
Why does the State care?
 Reality:
 Political agenda rewarding the major union constituency
 State / Union Talking Points:
 When an employer fails to properly classify workers as
"employees," the employer avoids paying their share of:
 payroll taxes,
 unemployment insurance taxes, and
 workers' compensation premiums
 It puts competitors at a disadvantage because they have
to cover the unpaid costs of those who cheat
 It deprives the general fund and the Unemployment
Insurance Trust Fund of critical revenues
 It denies workers access to protections only guaranteed to
Ober | Kaler •
Workplace Fraud Act of 2009
Possible Harm Caused by this Act
 The Act may drive many businesses out of MD
into neighboring states
 Enforcement costs may exceed additional
revenue generated by the Act
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Workplace Fraud Act of 2009
ABC Test
 Maryland uses the “ABC test” to determine whether a
worker is an employee or an independent contractor.
 The ABC test is a three pronged test, under which an
employer-employee relationship is presumed unless the
individual performing the work is an exempt person or
the employer demonstrates that:
A. The individual is free from control and direction;
B. The individual customarily is engaged in an independent
business of the same nature; and
C. The work is outside of the usual course of business of the
employer or performed outside of any place of business of
the employer.
 Work is "outside the usual course of business" if the individual:
 1) performs the work off the employer's premises;
 2) performs work that is not integrated into the
employer's operation; or
 3) performs work unrelated to the employer's business
Ober | Kaler •
Workplace Fraud Act of 2009
Federal Test - The IRS uses the Common Law Rules
 Facts that provide evidence of the degree of control and
independence fall into three categories:
 Behavioral: Does the company control or have the right to control what
the worker does and how the worker does his or her job?
 Illustrative factors include instructions & training provided by the company
 Financial: Are the business aspects of the worker’s job controlled by the
 Illustrative factors include how worker is paid, whether expenses are
reimbursed, who provides tools/supplies, did the worker make a significant
investment in the company, whether there is an opportunity for profit or loss
 Type of Relationship: Are there written contracts or employee type
 Illustrative factors include whether there is a company pension plan, employee
benefits, insurance, vacation pay, intent of parties/written contracts
 Businesses must weigh all these factors when determining whether
a worker is an employee or independent contractor.
 There is no “magic” or set number of factors that “makes” the
worker an employee or an independent contractor, and no one
factor stands alone in making this determination.
Ober | Kaler •
Workplace Fraud Act of 2009
 Commissioner of Labor and Industry has legal
authority to investigate workplace fraud in the
construction and landscaping industries.
 The Commissioner may:
 1) enter the employer's place of business (or worksite)
for purposes of investigation;
 2) require the production of records;
 3) issue subpoenas for records and testimony; and
 4) pursue judicial relief and the assessment of fines for
an employer's failure to comply
 The State's UI division investigates employee
classification through both random and targeted
audits and when a person claims UI benefits but is not
listed as a covered employee.
Ober | Kaler •
Workplace Fraud Act of 2009
 Current Law - no penalties for misclassification.
 New law - allows an employer who misclassifies an
employee, but does not do so knowingly, to come into
compliance within 45 days without penalty.
 If an employer does nothing to comply in the required time
period, a penalty of up to $1,000 per misclassified employee
may be imposed.
 Employers who "knowingly" misclassify employees, however,
may be subject to a penalty of up to $5,000 per misclassified
 An employer may be assessed up to double the $5,000 penalty
if it has previously been found in violation by a final order of a
court or administrative unit.
 An employer in violation three or more times may be assessed
up to $20,000 per misclassified employee.
Ober | Kaler •
Workplace Fraud Act of 2009
Mistake vs. Knowing Violation
 A misclassification that is not found to be "knowing"
will not result in a penalty; however, the employer
will be required to come into compliance.
 “Knowingly” requires actual knowledge, deliberate
ignorance or reckless disregard for the truth.
 Factors include whether the employer sought, prior to
hiring the employee, documentation showing:
 1) a sole proprietor's reporting of business income and
losses on his personal income tax returns;
 2) an independent contractor's withholding of payroll
taxes and payment of unemployment insurance
contributions and worker's compensation premiums on
behalf of all individuals working for him; and
 3) the employer provided written notice to individuals of
their status or classification and all implications of that
status or classification.
 The State bears the burden of proving a knowing
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