IRS provides relief to victims of severe storms and flooding in Connecticut and New York.

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On September 10, 2024 the Internal Revenue Service (IRS) announced tax relief for individuals and businesses in Connecticut and New York affected by severe storms and flooding from torrential rainfalls that began on August 18, 2024. These taxpayers now have until February 3, 2025, to file various federal individual and business tax returns and make tax payments.

The February 3, 2025, deadline will apply to:

  • Any individual, business or tax-exempt organization that has a valid extension to file their 2023 federal return; however, that payments on these returns are not eligible for the extra time because they were due last spring before the storm occurred.
  • Quarterly estimated income tax payments normally due on September 16, 2024, and January 15, 2025.
  • Quarterly payroll and excise tax returns normally due on October 31, 2024, and January 31, 2025.

In addition, penalties for failing to make payroll and excise tax deposits due on or after August 18, 2024, and before September 3, 2024, will be abated, as long as the deposits are made by September 3, 2024.

Other Areas Having Extended Deadlines:

The IRS announced (Kentucky) announced (West Virginia) on May 31, 2024 tax relief for individuals and businesses affected by severe storms, straight-line winds, tornadoes, flooding, landslides and mudslides that began on April 2, 2024 in Kentucky and West Virginia now have until November 1, 2024, to file various federal individual and business tax returns and make tax payments.

The IRS announced on August 12, 2024 tax relief for individuals and businesses in 25 Minnesota counties affected by severe storms and flooding that began on June 16, 2024 now have until February 3, 2025, to file various federal individual and business tax returns and make tax payments.

The IRS announced on August 9, 2024 tax relief for individuals and businesses in four states (South Carolina, Florida, North Carolina and Georgia) and on August 13, 2024 the IRS announced tax relief for individuals and businesses in the state of Vermont affected by Hurricane Debby now have until February 3, 2025, to file various federal individual and business tax returns and make tax payments.

The IRS announced on August 23, 2024 tax relief for individuals and businesses in Puerto Rico affected by Tropical Storm Ernesto that began on August 13, 2024 now have until February 3, 2025, to file various federal individual and business tax returns and make tax payments.

The IRS announced on August 23, 2024 tax relief for individuals and businesses in South Dakota affected severe storms, straight-line winds and flooding that began on June 16, 2024 now have until February 3, 2025, to file various federal individual and business tax returns and make tax payments.

The IRS announced on August 28, 2024 tax relief for individuals and businesses in the U.S. Virgin Islands affected Tropical Storm Ernesto that began on August 13, 2024 now have until February 3, 2025, to file various federal individual and business tax returns and make tax payments.

IRS Tax Relief Details

The IRS is offering this relief to any area designated by the Federal Emergency Management Agency (FEMA), as qualifying for individual assistance.

For Connecticut – Individuals and households that reside or have a business in Fairfield, Litchfield, and New Haven counties.

For New York – Individuals and households that reside or have a business in Suffolk County.

For the U.S. Virgin Islands – Individuals and households that reside or have a business in any of the U.S. Virgin Islands’ four islands.

For South Dakota – Individuals and households that reside or have a business in Aurora, Bennett, Bon Homme, Brule, Buffalo, Charles Mix, Clay, Davison, Douglas, Gregory, Hand, Hanson, Hutchinson, Jackson, Lake, Lincoln, McCook, Miner, Minnehaha, Moody, Sanborn, Tripp, Turner, Union and Yankton counties

For Puerto Rico – Individuals and households that reside or have a business in any of Puerto Rico’s 78 municipalities.

For Minnesota – Individuals and households that reside or have a business in Blue Earth, Carver, Cass, Cook, Cottonwood, Faribault, Fillmore, Freeborn, Goodhue, Itasca, Jackson, Lake, Le Sueur, Mower, Murray, Nicollet, Nobles, Pipestone, Rice, Rock, St. Louis, Steele, Wabasha, Waseca and Watonwan counties.

For North Carolina – Individuals and businesses and the following 66 counties: Alamance, Anson, Beaufort, Bertie, Bladen , Brunswick, Camden, Carteret, Caswell, Chatham, Chowan, Columbus, Craven, Cumberland, Currituck, Dare, Davie, Davidson, Duplin, Durham, Edgecombe, Forsyth, Franklin, Gates, Granville, Greene, Guilford, Halifax, Harnett, Hertford, Hoke, Hyde, Johnston, Jones, Lee, Lenoir, Martin, Montgomery, Moore, Nash, New Hanover, Northampton, Onslow, Orange, Pamlico, Pasquotank, Pender, Perquimans, Person, Pitt, Randolph, Richmond, Robeson, Rockingham, Sampson, Scotland, Stokes, Surry, Tyrrell, Vance, Wake, Warren, Washington, Wayne, Wilson and Yadkin.

For South Carolina – Individuals and businesses in all 46 counties.

For Georgia – Individuals and businesses in the following 55 counties: Appling, Atkinson, Bacon, Ben Hill, Berrien, Brantley, Brooks, Bryan, Bulloch, Burke, Camden, Candler, Charlton, Chatham, Clinch, Coffee, Colquitt, Cook, Crisp, Decatur, Dodge, Echols, Effingham, Emanuel, Evans, Glynn, Grady, Irwin, Jeff Davis, Jefferson, Jenkins, Johnson, Lanier, Laurens, Liberty, Long, Lowndes, McIntosh, Mitchell, Montgomery, Pierce, Richmond, Screven, Tattnall, Telfair, Thomas, Tift, Toombs, Treutlen, Turner, Ware, Wayne, Wheeler, Wilcox and Worth.

For Florida – Individuals and businesses in the following 61 counties: Alachua, Baker, Bay, Bradford, Brevard, Calhoun, Charlotte, Citrus, Clay, Collier, Columbia, DeSoto, Dixie, Duval, Escambia, Flagler, Franklin, Gadsden, Gilchrist, Glades, Gulf, Hamilton, Hardee, Hendry, Hernando, Highlands, Hillsborough, Holmes, Jackson, Jefferson, Lafayette, Lake, Lee, Leon, Levy, Liberty, Madison, Manatee, Marion, Monroe, Nassau, Okaloosa, Okeechobee, Orange, Osceola, Pasco, Pinellas, Polk, Putnam, Santa Rosa, Sarasota, Seminole, St. Johns, Sumter, Suwannee, Taylor, Union, Volusia, Walton, Wakulla and Washington.

For Vermont – Individuals and businesses in all 14 counties.

For Kentucky – Currently, relief is available to affected taxpayers who live or have a business in Boyd, Carter, Fayette, Greenup, Henry, Jefferson, Jessamine, Mason, Oldham, Union and Whitley counties.

For West Virginia – Currently, relief is available to affected taxpayers who live or have a business in Boone, Brooke, Cabell, Fayette, Hancock, Kanawha, Lincoln, Marshall, Nicholas, Ohio, Preston, Putnam, Tyler, Wayne and Wetzel counties.

The current list of eligible localities is always available on the disaster relief page on IRS.gov.  The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area.

Tax Planning Tip

Individuals and businesses in a federally declared disaster area who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2024 return normally filed next year), or the return for the current year (2023).

Be sure to write the FEMA declaration number on any return claiming a loss.  That number being: “4782-DR“ for Kentucky or “4783-DR” for West Virginia or “3605-EM” for Florida or “3606-EM” for South Carolina or “3607-EM” for Georgia or “3608-EM” for North Carolina or “3609-EM” for Vermont or “4797-DR” for Minnesota or “3610-EM” for Puerto Rico or “4807-DR” for South Dakota or “3611-EM” for the U.S. Virgin Islands or “3612-EM” for Connecticut or “3613-EM” for New York.

Qualified disaster relief payments are generally excluded from gross income. In general, this means that affected taxpayers can exclude from their gross income amounts received from a government agency for reasonable and necessary personal, family, living or funeral expenses, as well as for the repair or rehabilitation of their home, or for the repair or replacement of its contents.

Additional relief may be available to affected taxpayers who participate in a retirement plan or individual retirement arrangement (IRA). For example, a taxpayer may be eligible to take a special disaster distribution that would not be subject to the additional 10% early distribution tax and allows the taxpayer to spread the income over three years. Taxpayers may also be eligible to make a hardship withdrawal. Each plan or IRA has specific rules and guidance for their participants to follow.

Importance To Preserve Records

Keep in mind that the IRS has up to three years to select a tax return for audit. The FTB has up to four years to select a tax return for audit. In some cases this period is extended to six years. When a taxpayer is selected for audit, the taxpayer has the burden of proof to show that expenses claimed are properly deductible. Having the evidence handy and organized makes meeting this burden of proof much easier.

Essential Records to Have for a Tax Audit

If you are getting ready for a tax audit, one of the most important things to do is gather and organize your tax records and receipts. There’s a good chance that you have a large amount of documents and receipts in your possession. No matter how organized you are, it can be a daunting task to collect the right pieces and make sure that you have them organized and handy for the audit conference.

We have seen many tax audits that hinge on whether or not the taxpayer can provide proper documentation for their previous tax filings. A tax lawyer in Orange County or elsewhere can make sure that the documentation is complete and proper.  By submitting this to your tax attorney in advance of the audit, your tax attorney can review your documentation and determine if there are any gaps that need to be addressed before starting the dialogue with the IRS agent.

So what are the most essential tax records to have ahead of your audit? Here are a few must-have items:

  • Any W-2 forms from the previous year. This can include documents from full-time and part-time work, large casino and lottery winnings and more.
  • Form 1098 records from your bank or lender on mortgage interest paid from the previous year.
  • Records of any miscellaneous money you earned and reported to the IRS including work done as an independent contractor or freelancer, interest from savings accounts and stock dividends.
  • Written letters from charities confirming your monetary donations from the previous year.
  • Receipts for business expenses you claimed.
  • Mileage Logs for business use of vehicle.
  • Entertainment and Travel Logs for business

Tips On Reconstructing Records

Reconstructing records after a disaster is important for several reasons including insurance reimbursement and taxes. Most importantly, records can help people prove their disaster-related losses. More accurately estimated losses can help people get more recovery assistance like loans or grants.

Whether it’s personal or business property that has been lost or destroyed, here are some steps that can help people reconstruct important records.

Tax records

Get free tax return transcripts immediately using the Get Transcript on IRS.gov or through the IRS2Go app.  Tax return transcripts show line-by-line the entries made on your Federal income tax returns.  The most three recent tax years are available.

Financial statements

People can gather past statements from their credit card company or bank. These records may be available online. People can also contact their bank to get paper copies of these statements.

Property records

  • To get documents related to property, homeowners can contact the title company, escrow company or bank that handled the purchase of their home or other property.
  • Taxpayers who made home improvements can get in touch with the contractors who did the work and ask for statements to verify the work and cost. They can also get written descriptions from friends and relatives who saw the house before and after any improvements.
  • For inherited property, taxpayers can check court records for probate values. If a trust or estate existed, taxpayers can contact the attorney who handled the trust.
  • When no other records are available, people should check the county assessor’s office for old records that might address the value of the property.
  • Car owners can research the current fair-market value for most vehicles. Resources are available online and at most libraries. These include Kelley’s Blue Book, the National Automobile Dealers Association and Edmunds.

Develop And Implement Your Backup Plan

Do not wait for the next disaster to come for then it may be too late to retrieve your important records for a tax audit or for that matter any legal or business matter. And if you do get selected for audit and do not have all the records to support what was claimed on your tax returns, you should contact an experienced tax attorney who can argue the application of your facts and circumstances to pursue the least possible changes in an audit.

The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income.  Also if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in cryptocurrency, check out what a bitcoin tax attorney can do for you.

IRS tax relief now available to U.S. Virgin Islands victims of Tropical Storm Ernesto.

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On August 28, 2024 the Internal Revenue Service (IRS) announced tax relief for individuals and businesses in the U.S. Virgin Islands affected Tropical Storm Ernesto that began on August 13, 2024. These taxpayers now have until February 3, 2025, to file various federal individual and business tax returns and make tax payments.

The tax relief postpones various tax filing and payment deadlines that occurred from June 16, 2024, through February 3, 2025 (postponement period). As a result, affected individuals and businesses will have until February 3, 2025, to file returns and pay any taxes that were originally due during this period.

This means, for example, that the February 3, 2025, deadline will now apply to:

  • Any individual, business or tax-exempt organization that has a valid extension to file their 2023 federal return; however, that payments on these returns are not eligible for the extra time because they were due last spring before the storm occurred.
  • Quarterly estimated income tax payments normally due on September 16, 2024, and January 15, 2025.
  • Quarterly payroll and excise tax returns normally due on October 31, 2024, and January 31, 2025.

In addition, penalties for failing to make payroll and excise tax deposits due on or after August 13, 2024, and before August 28, 2024, will be abated, as long as the deposits are made by August 28, 2024.

Other Areas Having Extended Deadlines:

The IRS announced on May 16, 2024 that individuals and businesses affected by tornadoes that began on March 14, 2024 in Ohio now have until September 3, 2024, to file various federal individual and business tax returns and make tax payments.

The IRS announced (Kentucky) announced (West Virginia) on May 31, 2024 tax relief for individuals and businesses affected by severe storms, straight-line winds, tornadoes, flooding, landslides and mudslides that began on April 2, 2024 in Kentucky and West Virginia now have until November 1, 2024, to file various federal individual and business tax returns and make tax payments.

The IRS announced on August 12, 2024 tax relief for individuals and businesses in 25 Minnesota counties affected by severe storms and flooding that began on June 16, 2024 now have until February 3, 2025, to file various federal individual and business tax returns and make tax payments.

The IRS announced on August 9, 2024 tax relief for individuals and businesses in four states (South Carolina, Florida, North Carolina and Georgia) and on August 13, 2024 the IRS announced tax relief for individuals and businesses in the state of Vermont affected by Hurricane Debby now have until February 3, 2025, to file various federal individual and business tax returns and make tax payments.

The IRS announced on August 23, 2024 tax relief for individuals and businesses in Puerto Rico affected by Tropical Storm Ernesto that began on August 13, 2024 now have until February 3, 2025, to file various federal individual and business tax returns and make tax payments.

The IRS announced on August 23, 2024 tax relief for individuals and businesses in South Dakota affected severe storms, straight-line winds and flooding that began on June 16, 2024 now have until February 3, 2025, to file various federal individual and business tax returns and make tax payments.

IRS Tax Relief Details

The IRS is offering this relief to any area designated by the Federal Emergency Management Agency (FEMA), as qualifying for individual assistance.

For the U.S. Virgin Islands – Individuals and households that reside or have a business in any of the U.S. Virgin Islands’ four islands.

For South Dakota – Individuals and households that reside or have a business in Aurora, Bennett, Bon Homme, Brule, Buffalo, Charles Mix, Clay, Davison, Douglas, Gregory, Hand, Hanson, Hutchinson, Jackson, Lake, Lincoln, McCook, Miner, Minnehaha, Moody, Sanborn, Tripp, Turner, Union and Yankton counties

For Puerto Rico – Individuals and households that reside or have a business in any of Puerto Rico’s 78 municipalities.

For Minnesota – Individuals and households that reside or have a business in Blue Earth, Carver, Cass, Cook, Cottonwood, Faribault, Fillmore, Freeborn, Goodhue, Itasca, Jackson, Lake, Le Sueur, Mower, Murray, Nicollet, Nobles, Pipestone, Rice, Rock, St. Louis, Steele, Wabasha, Waseca and Watonwan counties.

For North Carolina – Individuals and businesses and the following 66 counties: Alamance, Anson, Beaufort, Bertie, Bladen , Brunswick, Camden, Carteret, Caswell, Chatham, Chowan, Columbus, Craven, Cumberland, Currituck, Dare, Davie, Davidson, Duplin, Durham, Edgecombe, Forsyth, Franklin, Gates, Granville, Greene, Guilford, Halifax, Harnett, Hertford, Hoke, Hyde, Johnston, Jones, Lee, Lenoir, Martin, Montgomery, Moore, Nash, New Hanover, Northampton, Onslow, Orange, Pamlico, Pasquotank, Pender, Perquimans, Person, Pitt, Randolph, Richmond, Robeson, Rockingham, Sampson, Scotland, Stokes, Surry, Tyrrell, Vance, Wake, Warren, Washington, Wayne, Wilson and Yadkin.

For South Carolina – Individuals and businesses in all 46 counties.

For Georgia – Individuals and businesses in the following 55 counties: Appling, Atkinson, Bacon, Ben Hill, Berrien, Brantley, Brooks, Bryan, Bulloch, Burke, Camden, Candler, Charlton, Chatham, Clinch, Coffee, Colquitt, Cook, Crisp, Decatur, Dodge, Echols, Effingham, Emanuel, Evans, Glynn, Grady, Irwin, Jeff Davis, Jefferson, Jenkins, Johnson, Lanier, Laurens, Liberty, Long, Lowndes, McIntosh, Mitchell, Montgomery, Pierce, Richmond, Screven, Tattnall, Telfair, Thomas, Tift, Toombs, Treutlen, Turner, Ware, Wayne, Wheeler, Wilcox and Worth.

For Florida – Individuals and businesses in the following 61 counties: Alachua, Baker, Bay, Bradford, Brevard, Calhoun, Charlotte, Citrus, Clay, Collier, Columbia, DeSoto, Dixie, Duval, Escambia, Flagler, Franklin, Gadsden, Gilchrist, Glades, Gulf, Hamilton, Hardee, Hendry, Hernando, Highlands, Hillsborough, Holmes, Jackson, Jefferson, Lafayette, Lake, Lee, Leon, Levy, Liberty, Madison, Manatee, Marion, Monroe, Nassau, Okaloosa, Okeechobee, Orange, Osceola, Pasco, Pinellas, Polk, Putnam, Santa Rosa, Sarasota, Seminole, St. Johns, Sumter, Suwannee, Taylor, Union, Volusia, Walton, Wakulla and Washington.

For Vermont – Individuals and businesses in all 14 counties.

For Kentucky – Currently, relief is available to affected taxpayers who live or have a business in Boyd, Carter, Fayette, Greenup, Henry, Jefferson, Jessamine, Mason, Oldham, Union and Whitley counties.

For West Virginia – Currently, relief is available to affected taxpayers who live or have a business in Boone, Brooke, Cabell, Fayette, Hancock, Kanawha, Lincoln, Marshall, Nicholas, Ohio, Preston, Putnam, Tyler, Wayne and Wetzel counties.

For Ohio – Currently, relief is available to affected taxpayers who live or have a business in Auglaize, Crawford, Darke, Delaware, Hancock, Licking, Logan, Mercer, Miami, Richland and Union counties.

The current list of eligible localities is always available on the disaster relief page on IRS.gov.  The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area.

Tax Planning Tip

Individuals and businesses in a federally declared disaster area who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2024 return normally filed next year), or the return for the current year (2023).

Be sure to write the FEMA declaration number on any return claiming a loss.  That number being: “4777-DR” for Ohio or “ 4782-DR“ for Kentucky or “4783-DR” for West Virginia or “3605-EM” for Florida or “3606-EM” for South Carolina or “3607-EM” for Georgia or “3608-EM” for North Carolina or “3609-EM” for Vermont or “4797-DR” for Minnesota or “3610-EM” for Puerto Rico or “4807-DR” for South Dakota or “3611-EM” for the U.S. Virgin Islands.

Qualified disaster relief payments are generally excluded from gross income. In general, this means that affected taxpayers can exclude from their gross income amounts received from a government agency for reasonable and necessary personal, family, living or funeral expenses, as well as for the repair or rehabilitation of their home, or for the repair or replacement of its contents.

Additional relief may be available to affected taxpayers who participate in a retirement plan or individual retirement arrangement (IRA). For example, a taxpayer may be eligible to take a special disaster distribution that would not be subject to the additional 10% early distribution tax and allows the taxpayer to spread the income over three years. Taxpayers may also be eligible to make a hardship withdrawal. Each plan or IRA has specific rules and guidance for their participants to follow.

Importance To Preserve Records

Keep in mind that the IRS has up to three years to select a tax return for audit. The FTB has up to four years to select a tax return for audit. In some cases this period is extended to six years. When a taxpayer is selected for audit, the taxpayer has the burden of proof to show that expenses claimed are properly deductible. Having the evidence handy and organized makes meeting this burden of proof much easier.

Essential Records to Have for a Tax Audit

If you are getting ready for a tax audit, one of the most important things to do is gather and organize your tax records and receipts. There’s a good chance that you have a large amount of documents and receipts in your possession. No matter how organized you are, it can be a daunting task to collect the right pieces and make sure that you have them organized and handy for the audit conference.

We have seen many tax audits that hinge on whether or not the taxpayer can provide proper documentation for their previous tax filings. A tax lawyer in Orange County or elsewhere can make sure that the documentation is complete and proper.  By submitting this to your tax attorney in advance of the audit, your tax attorney can review your documentation and determine if there are any gaps that need to be addressed before starting the dialogue with the IRS agent.

So what are the most essential tax records to have ahead of your audit? Here are a few must-have items:

  • Any W-2 forms from the previous year. This can include documents from full-time and part-time work, large casino and lottery winnings and more.
  • Form 1098 records from your bank or lender on mortgage interest paid from the previous year.
  • Records of any miscellaneous money you earned and reported to the IRS including work done as an independent contractor or freelancer, interest from savings accounts and stock dividends.
  • Written letters from charities confirming your monetary donations from the previous year.
  • Receipts for business expenses you claimed.
  • Mileage Logs for business use of vehicle.
  • Entertainment and Travel Logs for business

Tips On Reconstructing Records

Reconstructing records after a disaster is important for several reasons including insurance reimbursement and taxes. Most importantly, records can help people prove their disaster-related losses. More accurately estimated losses can help people get more recovery assistance like loans or grants.

Whether it’s personal or business property that has been lost or destroyed, here are some steps that can help people reconstruct important records.

Tax records

Get free tax return transcripts immediately using the Get Transcript on IRS.gov or through the IRS2Go app.  Tax return transcripts show line-by-line the entries made on your Federal income tax returns.  The most three recent tax years are available.

Financial statements

People can gather past statements from their credit card company or bank. These records may be available online. People can also contact their bank to get paper copies of these statements.

Property records

  • To get documents related to property, homeowners can contact the title company, escrow company or bank that handled the purchase of their home or other property.
  • Taxpayers who made home improvements can get in touch with the contractors who did the work and ask for statements to verify the work and cost. They can also get written descriptions from friends and relatives who saw the house before and after any improvements.
  • For inherited property, taxpayers can check court records for probate values. If a trust or estate existed, taxpayers can contact the attorney who handled the trust.
  • When no other records are available, people should check the county assessor’s office for old records that might address the value of the property.
  • Car owners can research the current fair-market value for most vehicles. Resources are available online and at most libraries. These include Kelley’s Blue Book, the National Automobile Dealers Association and Edmunds.

Develop And Implement Your Backup Plan

Do not wait for the next disaster to come for then it may be too late to retrieve your important records for a tax audit or for that matter any legal or business matter. And if you do get selected for audit and do not have all the records to support what was claimed on your tax returns, you should contact an experienced tax attorney who can argue the application of your facts and circumstances to pursue the least possible changes in an audit.

The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income.  Also if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in cryptocurrency, check out what a bitcoin tax attorney can do for you.

DEA Sets Hearing On Cannabis Rescheduling Thus Delaying Its Decision Until After The Election

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The prime benefits of reclassifying cannabis from a Schedule 1 substance to a Schedule 3 substance is that the Federal government would recognize medical benefits of cannabis, make Section 280E inapplicable to licensed cannabis operators, and open up financial and banking markets.

On August 26, 2024 the Drug Enforcement Administration (“DEA”) released its notice scheduling a hearing for December 2, 2024 on its proposal to lower the classification of marijuana to the less-dangerous level of Schedule 3.  DEA Administrator Anne Milgram said she would determine who will participate in the hearing and name a presiding officer to run the meeting.  If approved, the agency can then publish the final rule in the Federal Register.

How We Got Here …

The Associated Press reported on April 30, 2024 that the Drug Enforcement Administration (“DEA”) will propose a rule to reschedule cannabis to Schedule III under the Controlled Substance Act. The proposed rule has since been reviewed by the Department Of Justice and on May 16, 2024 has been published in the Federal Register. This publication then opened the period of time to July 22, 2024 for the DEA to take public comment on the plan to move marijuana from its current classification as a Schedule I drug, alongside heroin and LSD. The proposed rule moves cannabis to Schedule III, alongside ketamine and some anabolic steroids, following a recommendation from the federal Health and Human Services Department. More than 40,000 people submitted comment with a vast majority indicating favor of the proposed rule reclassifying cannabis.

The Growing Trend In Legalizing Cannabis – Current Standings:

Medical marijuana is legal in 38 states.

The medical use of cannabis is legal (with a doctor’s recommendation) in 38 states and Washington DC. Those 38 states being Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Illinois, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, Utah, Vermont, Virginia, Washington and West Virginia. The medical use of cannabis is also legal in the territories of the Northern Mariana Islands, Guam and Puerto Rico.

Recreational marijuana is legal in 24 states.

Twenty-three states and Washington DC, have legalized marijuana for recreational use — no doctor’s letter required — for adults over the age of 21. Those 23 states being Alaska, Arizona, California, Colorado, Connecticut, Delaware, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nevada, New Jersey, New Mexico, New York, Ohio, Oregon, Rhode Island, Vermont, Virginia and Washington and the territories of the Northern Mariana Islands and Guam.

Recreational marijuana is legal in 6 tribal nations.

Six Tribal nations have legalized marijuana for recreational use.  Those 6 tribes being the Flandreau Santee Sioux Tribe (South Dakota), Oglala Lakota Sioux Tribe (South Dakota), Suquamish Tribe (Washington state), Squaxin Island Tribe (Washington State), Eastern Band of Cherokee Indians (North Carolina) and St. Regis Mohawk Tribe (New York).

The New Rule If Approved Will Put Federal Law More In Line With State Laws.

Currently, under Federal law (Controlled Substances Act 21 U.S.C. 801) marijuana is designated as a Schedule I controlled substance due to the historical belief that it has a high potential for abuse, no currently accepted medical use in treatment, and lack of accepted safety for use under medical supervision.

The New Rule If Approved Will Result In A Tax Regime Similar To What Non-Cannabis Businesses Face.

Generally, businesses can deduct ordinary and necessary business expenses under I.R.C. §162. This includes wages, rent, supplies, etc. However, in 1982 Congress added I.R.C. §280E. Under §280E, taxpayers cannot deduct any amount for a trade or business where the trade or business consists of trafficking in controlled substances…which is currently prohibited by Federal law. Marijuana, including medical marijuana, is a controlled substance. What this means is that dispensaries and other businesses trafficking in marijuana have to report all of their income and cannot deduct rent, wages, and other expenses, making their marginal tax rate substantially higher than most other businesses.  Therefore, under current law, the Internal Revenue Code which treats businesses in the marijuana industry differently resulting in such business paying at least 3-times as much in taxes as ordinary businesses.

The New Rule If Approved DOES NOT Change Reporting Of Cash Payments.

The Bank Secrecy Act of 1970 (“BSA”) requires financial institutions in the United States to assist U.S. government agencies to detect and prevent money laundering. Specifically, the act requires financial institutions to keep records of cash purchases of negotiable instruments, and file reports of cash purchases of these negotiable instruments of more than $10,000 (daily aggregate amount), and to report suspicious activity that might signify money laundering, tax evasion, or other criminal activities. The BSA requires any business receiving one or more related cash payments totaling more than $10,000 to file IRS Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business.

The minimum penalty for failing to file EACH Form 8300 is $25,000 if the failure is due to an intentional or willful disregard of the cash reporting requirements. Penalties may also be imposed for causing, or attempting to cause, a trade or business to fail to file a required report; for causing, or attempting to cause, a trade or business to file a required report containing a material omission or misstatement of fact; or for structuring, or attempting to structure, transactions to avoid the reporting requirements. These violations may also be subject to criminal prosecution which, upon conviction, may result in imprisonment of up to 5 years or fines of up to $250,000 for individuals and $500,000 for corporations or both.

Marijuana-related businesses operate in an environment of cash transactions as many banks remain reluctant to do business with many in the marijuana industry. Like any cash-based business the IRS scrutinizes the amount of gross receipts to report and it is harder to prove to the IRS expenses paid in cash. So it is of most importance that the proper facilities and procedures be set up to maintain an adequate system of books and records.

So with all these potential benefits, what forces are present to block this proposed rule?

  1. Chevron Doctrine repealed by U.S. Supreme Court. The regulatory state has been in full force since, ironically, 1984, with the institution of the Chevron Doctrine. The Chevron Doctrine has required courts to defer to the expertise of administrative agencies when the legislative intent of an underlying law is ambiguous, which made it a cornerstone of how regulators and businesses interact. But on June 28, 2024, the Supreme Court’s Republican-appointed majority demolished the doctrine in its rulings in the Relentless v. Department of Commerce and Loper Bright Enterprises v. Raimondo appeals, overturning the broad authority of the administrative state and raising fresh questions about how cannabis will be regulated moving forward. Keep in mind that rescheduling has been moving forward as a regulatory, rather than a legislative, change, and now, regulations do not hold the same force of law as they did since 1984. But even if the Chevron Doctrine was not repealed, the normal rule making process still faces certain congressional and judicial challenges explained further below.
  2. Congressional Challenges. Under the Small Business Regulatory Enforcement Fairness Act (also known as the Congressional Review Act), new final rules must be sent to Congress and the Government Accountability Office for review before they can take effect. “Major rules” (ones that are economically significant and require OIRA review) must be made effective at least 60 days after the date of publication in the Federal Register, allowing time for Congressional review. In emergency situations, a major rule can be made effective before 60 days. If the House and Senate pass a resolution of disapproval and the President signs it (or if both houses override a presidential veto), the rule becomes void and cannot be republished by an agency in the same form without Congressional approval. Since 1996, when this process started, Congress has disapproved only one rule. Congress may also exercise its oversight in other ways, by holding hearings and posing questions to agency heads, by enacting new legislation, or by imposing funding restrictions.
  3. Judicial Challenges. Individuals and corporate entities may go into the courts to make a claim that they have been, or will be, damaged or adversely affected in some manner by a regulation. The reviewing court can consider whether a rule: is unconstitutional; goes beyond the agency’s legal authority; was made without following the notice-and-comment process required by the Administrative Procedure Act or other law; or was arbitrary, capricious, or an abuse of discretion. An agency head can also be sued for failing to act in a timely manner in certain cases. If a court sets aside (vacates) all or part of a rule, it usually sends the rule back to the agency to correct the deficiencies. The agency may have to reopen the comment period, publish a new statement of basis and purpose in the Federal Register to explain and justify its decisions, or re­start the rulemaking process from the beginning by issuing a new proposed rule.

The most certain way that cannabis can be legalized and thus be treated like any other lawful business is by Congress enacting legislation. 

Top Democratic senators, including Senate Majority Leader Chuck Schumer (D-NY), continue to push the DEA to ‘promptly finalize” the rule to reschedule marijuana.  On August 2, 2024 Sen. Schumer, Sen. Cory Booker (D-NJ), Sen. Ron Wyden (D-OR) and others sent a letter to Attorney General Merrick Garland and DEA Administrator Anne Milgram imploring the administration to follow through on a proposal to move cannabis from Schedule I to Schedule III of the Controlled Substances Act (CSA), as the Justice Department formally proposed in May.  What is so surprising is that these legislators have the power to enact legislation completely bypassing the DEA’s rule-making authority and potential judicial challenges and send a bill to the President rescheduling cannabis or even excluding cannabis from the application of IRC Sec. 280E.

How Do You Know Which Cannabis Tax Attorney Is Best For You?

Given that cannabis is still illegal under existing Federal law you need to protect yourself and your marijuana business from all challenges created by the U.S. government so it is best to be proactive and engage an experienced cannabis tax attorney in your area who is highly skilled in the different legal and tax issues that cannabis businesses face.  Let the cannabis tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), the Inland Empire (Ontario and Palm Springs) and other California locations protect you and maximize your net profits.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

Did You Receive Funds From The Employee Retention Credit Program That You Were Not Eligible To Receive? Here are the five new red flags that IRS is looking for.

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IRS opens second Employee Retention Credit Voluntary Disclosure Program sending up to 30,000 letters to address more than $1 billion in errant claims

Thousands of new recapture letters going out for improper ERC claims made for Tax Year 2021, some Tax Year 2020.

As part of ongoing compliance work, the IRS announced on August 15, 2024 plans to mail thousands of additional letters reversing or recapturing improperly paid ERC claims. The IRS currently anticipates this round of mailings could reach up to 30,000 letters this fall. These “clawback” notices potentially represent more than $1 billion in claims from Tax Year 2021 and some additional, later-filed Tax Year 2020 claims. These letters notify taxpayers that the IRS is reversing or recapturing their previous credit. Several thousand of the letters have been mailed, with more coming in upcoming weeks and into the fall.

This is the second round of these letters. Previously, the IRS determined that more than 12,000 entities filed claims that were improper for Tax Year 2020, resulting in $572 million in assessments.

The latest letters generally involve larger claims than earlier letters regarding 2020 because Congress increased the maximum ERC in 2021. Congress increased the maximum ERC from $5,000 per employee per year in 2020 to $7,000 per employee for each quarter of the year in 2021.

“This new round of letters serves as another incentive for businesses that believe they received an erroneous Employee Retention Credit payment to come forward and participate in the disclosure program and resolve the matter on more favorable terms,” IRS Commissioner Danny Werfel said. “The disclosure program provides a limited, unique opportunity to avoid future IRS compliance problems as well as sidestep a significant repayment fee with penalties and interest.”

Red Flags The IRS Is Looking For –

When the IRS identifies an employer that has received excessive or erroneous ERC, the agency will reclaim that ERC through normal tax assessment and collection procedures.

The five new red flags cover these areas:

  • Essential businesses during the pandemic that could fully operate and didn’t have a decline in gross receipts.Promoters convinced many essential businesses to claim the ERC when, in many instances, essential businesses weren’t eligible because their operations weren’t fully or partially suspended by a qualifying government order.
  • Businesses unable to support how a government order fully or partially suspended business operations.Whether a business was fully or partially suspended depends on its specific situation. When asked for proof on how the government order suspended more than a nominal portion of their business operations, many businesses haven’t provided enough information to confirm eligibility.
  • Businesses reporting family members’ wages as qualified wages.If business owners claimed the ERC using wages paid to related individuals, those claims are likely for the wrong amount or ineligible.
  • Businesses using wages already used for Paycheck Protection Program loan forgiveness.Businesses can’t claim the ERC on wages that they reported as payroll costs to get PPP loan forgiveness.
  • Large employers claiming wages for employees who provided services.Large eligible employers can only claim wages paid to employees who were not providing services. Many large employers’ claims incorrectly included wages for employees who were providing services during these periods.

The IRS previously issued warnings involving these seven areas:

  • Too many quarters being claimed.
  • Government orders that don’t qualify.
  • Too many employees and wrong calculations.
  • Businesses citing supply chain issues.
  • Businesses claiming ERC for too much of a tax period.
  • Businesses didn’t pay wages or didn’t exist during eligibility period.
  • Promoter says there’s nothing to lose.

Reopening Of ERC-VDP.

If you claimed and received funds from the Employee Retention Credit (“ERC”) Program and now realize that you were not entitled to receive those funds, you should consider entering into the Employee Retention Credit Voluntary Disclosure Program (“ERC-VDP”). The IRS believes that there are taxpayers who were lured by promoters to apply to the IRS to get funds from the ERC Program even though the promoters knew that the taxpayer did not qualify to get funds from the ERC Program.  If such a taxpayer is selected for examination by the IRS and the IRS determines that the ERC claim is erroneous, such taxpayer will be required to repay the ERC funds with penalties and interest.  Criminal prosecution is also possible where egregious circumstances and willful intent are present.

Criminal exposure and a reduced amount of payback is available by entering into ERC-VDP.  The SECOND ERC-VDP allows filers of erroneous ERC claims to voluntarily disclose ERC claims made in error and pay only 85% of the amount received without any worry of criminal exposure.  The FIRST ERC-VDP which required an 80% payback had a deadline of March 22, 2024 to file for participation.  Even though the SECOND ERC-VDP provides a slightly higher payback than the FIRST ERC-VDP, the SECOND ERC-VDP can still protect businesses from potential costly compliance action in the future, such as audits, full repayment, penalties and interest.

Details Of The Second ERC-VDP.

The program requires you to:

  • Voluntarily pay back the ERC funds received, minus 15%,
  • Cooperate with any requests from the IRS for more information, and
  • Sign a closing agreement.

Benefits Of ERC-VDP.

There are several benefits to using the ERC-VDP if you received the ERC funds but were not entitled to them.

  • You need to repay only 85% of the ERC funds (the First ERC-VDP was 80%) you received as a credit on your return or as a refund.
  • You do not need to repay any interest you received on your ERC refund.
  • You do not have to amend income tax returns to reduce wage expense.
  • The 15% retention of ERC funds (the First ERC-VDP was 20%) is not taxable as income.
  • The IRS will not charge penalties or interest on the claimed ERC amount if you pay it in full (claimed ERC minus 15% under the Second ERC-VCP) by the time you return your signed closing agreement to IRS.
  • The IRS will not examine ERC on your employment tax return for tax period(s) resolved within the terms of ERC-VDP.

Who can apply to the ERC-VDP.

Businesses, tax-exempt organizations, and government entities are eligible to apply for the ERC-VDP for each tax period that meets all the following requirements:

  • Your ERC claimed on an employment tax return has been processed and paid as a refund, which you have cashed or deposited, or paid in the form of a credit applied to the tax period or another tax period.
  • You now think that you were entitled to $0 ERC.
  • You are not under employment tax examination (audit) by the IRS.
  • You are not under criminal investigation by the IRS.
  • The IRS has not reversed or notified you of intent to reverse your ERC to $0. For example, you received a letter or notice from the IRS disallowing your ERC.

If you used a third-party payer to file your employment tax returns or claim your ERC, you cannot apply to the ERC-VDP yourself. You must contact the third-party payer to apply.  Also, if you have applied for ERC and have yet to receive the ERC funds, you cannot participate in ERC-VDP.  Instead you would need to pursue the ERC claim withdrawal process.

How to apply to ERC Voluntary Disclosure Program.

The submission of Form 15434, Application for Employee Retention Credit Voluntary Disclosure Program, will start the process which must be filed no later than November 22, 2024.  Additionally, if your application includes tax periods ending in 2020, you must include ERC-VDP Form SS-10. By utilizing qualified tax counsel, you should have the greatest likelihood of meeting the ERC-VDP requirements and thus securing all the program’s benefits.

IMPORTANT NOTE – Any taxpayer receiving a recapture letter from IRS before applying will be ineligible to participate in the Voluntary Disclosure Program for the calendar quarter that the letter covers. SO DON’T DELAY.

What Should You Do?

We encourage taxpayers who are concerned about their ERC funding awards to come in voluntarily before the IRS commences any examination or investigation.  By then, it will be too late to avoid the risk of returning all ERC funds awarded plus interest and penalties.

Let the tax attorneys of the  Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), San Diego County (Carlsbad) and elsewhere in California can help you with your ERC-VDP application, give advice about this process, or advice on the ERC. You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes. Tax problems are usually a serious matter and must be handled appropriately so it is important to that you have hired the best lawyer for your situation. We are experts in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income. Also, if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

IRS tax relief now available to Tropical Storm Ernesto victims in Puerto Rico

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On August 23, 2024 the Internal Revenue Service (IRS) announced tax relief for individuals and businesses in Puerto Rico affected by Tropical Storm Ernesto that began on August 13, 2024. These taxpayers now have until February 3, 2025, to file various federal individual and business tax returns and make tax payments.

The tax relief postpones various tax filing and payment deadlines that occurred from August 13, 2024, through February 3, 2025 (postponement period). As a result, affected individuals and businesses will have until February 3, 2025, to file returns and pay any taxes that were originally due during this period.

This means, for example, that the February 3, 2025, deadline will now apply to:

  • Any individual, business or tax-exempt organization that has a valid extension to file their 2023 federal return; however, that payments on these returns are not eligible for the extra time because they were due last spring before the storm occurred.
  • Quarterly estimated income tax payments normally due on September 16, 2024, and January 15, 2025.
  • Quarterly payroll and excise tax returns normally due on October 31, 2024, and January 31, 2025.

In addition, penalties for failing to make payroll and excise tax deposits due on or after August 13, 2024, and before August 28, 2024, will be abated, as long as the deposits are made by August 28, 2024.

Other Areas Having Extended Deadlines:

The IRS announced on May 16, 2024 that individuals and businesses affected by tornadoes that began on March 14, 2024 in Ohio now have until September 3, 2024, to file various federal individual and business tax returns and make tax payments.

The IRS announced (Kentucky) announced (West Virginia) on May 31, 2024 tax relief for individuals and businesses affected by severe storms, straight-line winds, tornadoes, flooding, landslides and mudslides that began on April 2, 2024 in Kentucky and West Virginia now have until November 1, 2024, to file various federal individual and business tax returns and make tax payments.

The IRS announced on August 12, 2024 tax relief for individuals and businesses in 25 Minnesota counties affected by severe storms and flooding that began on June 16, 2024 now have until February 3, 2025, to file various federal individual and business tax returns and make tax payments.

The IRS announced on August 9, 2024 tax relief for individuals and businesses in four states (South Carolina, Florida, North Carolina and Georgia) and on August 13, 2024 the IRS announced tax relief for individuals and businesses in the state of Vermont affected by Hurricane Debby now have until February 3, 2025, to file various federal individual and business tax returns and make tax payments.

IRS Tax Relief Details

The IRS is offering this relief to any area designated by the Federal Emergency Management Agency (FEMA), as qualifying for individual assistance.

For Puerto Rico – Individuals and households that reside or have a business in any of Puerto Rico’s 78 municipalities.

For Minnesota – Individuals and households that reside or have a business in Blue Earth, Carver, Cass, Cook, Cottonwood, Faribault, Fillmore, Freeborn, Goodhue, Itasca, Jackson, Lake, Le Sueur, Mower, Murray, Nicollet, Nobles, Pipestone, Rice, Rock, St. Louis, Steele, Wabasha, Waseca and Watonwan counties.

For North Carolina – Individuals and businesses and the following 66 counties: Alamance, Anson, Beaufort, Bertie, Bladen , Brunswick, Camden, Carteret, Caswell, Chatham, Chowan, Columbus, Craven, Cumberland, Currituck, Dare, Davie, Davidson, Duplin, Durham, Edgecombe, Forsyth, Franklin, Gates, Granville, Greene, Guilford, Halifax, Harnett, Hertford, Hoke, Hyde, Johnston, Jones, Lee, Lenoir, Martin, Montgomery, Moore, Nash, New Hanover, Northampton, Onslow, Orange, Pamlico, Pasquotank, Pender, Perquimans, Person, Pitt, Randolph, Richmond, Robeson, Rockingham, Sampson, Scotland, Stokes, Surry, Tyrrell, Vance, Wake, Warren, Washington, Wayne, Wilson and Yadkin.

For South Carolina – Individuals and businesses in all 46 counties.

For Georgia – Individuals and businesses in the following 55 counties: Appling, Atkinson, Bacon, Ben Hill, Berrien, Brantley, Brooks, Bryan, Bulloch, Burke, Camden, Candler, Charlton, Chatham, Clinch, Coffee, Colquitt, Cook, Crisp, Decatur, Dodge, Echols, Effingham, Emanuel, Evans, Glynn, Grady, Irwin, Jeff Davis, Jefferson, Jenkins, Johnson, Lanier, Laurens, Liberty, Long, Lowndes, McIntosh, Mitchell, Montgomery, Pierce, Richmond, Screven, Tattnall, Telfair, Thomas, Tift, Toombs, Treutlen, Turner, Ware, Wayne, Wheeler, Wilcox and Worth.

For Florida – Individuals and businesses in the following 61 counties: Alachua, Baker, Bay, Bradford, Brevard, Calhoun, Charlotte, Citrus, Clay, Collier, Columbia, DeSoto, Dixie, Duval, Escambia, Flagler, Franklin, Gadsden, Gilchrist, Glades, Gulf, Hamilton, Hardee, Hendry, Hernando, Highlands, Hillsborough, Holmes, Jackson, Jefferson, Lafayette, Lake, Lee, Leon, Levy, Liberty, Madison, Manatee, Marion, Monroe, Nassau, Okaloosa, Okeechobee, Orange, Osceola, Pasco, Pinellas, Polk, Putnam, Santa Rosa, Sarasota, Seminole, St. Johns, Sumter, Suwannee, Taylor, Union, Volusia, Walton, Wakulla and Washington.

For Vermont – Individuals and businesses in all 14 counties.

For Kentucky – Currently, relief is available to affected taxpayers who live or have a business in Boyd, Carter, Fayette, Greenup, Henry, Jefferson, Jessamine, Mason, Oldham, Union and Whitley counties.

For West Virginia – Currently, relief is available to affected taxpayers who live or have a business in Boone, Brooke, Cabell, Fayette, Hancock, Kanawha, Lincoln, Marshall, Nicholas, Ohio, Preston, Putnam, Tyler, Wayne and Wetzel counties.

For Ohio – Currently, relief is available to affected taxpayers who live or have a business in Auglaize, Crawford, Darke, Delaware, Hancock, Licking, Logan, Mercer, Miami, Richland and Union counties.

The current list of eligible localities is always available on the disaster relief page on IRS.gov.  The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area.

Tax Planning Tip

Individuals and businesses in a federally declared disaster area who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2024 return normally filed next year), or the return for the current year (2023).

Be sure to write the FEMA declaration number on any return claiming a loss.  That number being: “4777-DR” for Ohio or “ 4782-DR“ for Kentucky or “4783-DR” for West Virginia or “3605-EM” for Florida or “3606-EM” for South Carolina or “3607-EM” for Georgia or “3608-EM” for North Carolina or “3609-EM” for Vermont or “4797-DR” for Minnesota or “3610-EM” for Puerto Rico.

Qualified disaster relief payments are generally excluded from gross income. In general, this means that affected taxpayers can exclude from their gross income amounts received from a government agency for reasonable and necessary personal, family, living or funeral expenses, as well as for the repair or rehabilitation of their home, or for the repair or replacement of its contents.

Additional relief may be available to affected taxpayers who participate in a retirement plan or individual retirement arrangement (IRA). For example, a taxpayer may be eligible to take a special disaster distribution that would not be subject to the additional 10% early distribution tax and allows the taxpayer to spread the income over three years. Taxpayers may also be eligible to make a hardship withdrawal. Each plan or IRA has specific rules and guidance for their participants to follow.

Importance To Preserve Records

Keep in mind that the IRS has up to three years to select a tax return for audit. The FTB has up to four years to select a tax return for audit. In some cases this period is extended to six years. When a taxpayer is selected for audit, the taxpayer has the burden of proof to show that expenses claimed are properly deductible. Having the evidence handy and organized makes meeting this burden of proof much easier.

Essential Records to Have for a Tax Audit

If you are getting ready for a tax audit, one of the most important things to do is gather and organize your tax records and receipts. There’s a good chance that you have a large amount of documents and receipts in your possession. No matter how organized you are, it can be a daunting task to collect the right pieces and make sure that you have them organized and handy for the audit conference.

We have seen many tax audits that hinge on whether or not the taxpayer can provide proper documentation for their previous tax filings. A tax lawyer in Orange County or elsewhere can make sure that the documentation is complete and proper.  By submitting this to your tax attorney in advance of the audit, your tax attorney can review your documentation and determine if there are any gaps that need to be addressed before starting the dialogue with the IRS agent.

So what are the most essential tax records to have ahead of your audit? Here are a few must-have items:

  • Any W-2 forms from the previous year. This can include documents from full-time and part-time work, large casino and lottery winnings and more.
  • Form 1098 records from your bank or lender on mortgage interest paid from the previous year.
  • Records of any miscellaneous money you earned and reported to the IRS including work done as an independent contractor or freelancer, interest from savings accounts and stock dividends.
  • Written letters from charities confirming your monetary donations from the previous year.
  • Receipts for business expenses you claimed.
  • Mileage Logs for business use of vehicle.
  • Entertainment and Travel Logs for business

Tips On Reconstructing Records

Reconstructing records after a disaster is important for several reasons including insurance reimbursement and taxes. Most importantly, records can help people prove their disaster-related losses. More accurately estimated losses can help people get more recovery assistance like loans or grants.

Whether it’s personal or business property that has been lost or destroyed, here are some steps that can help people reconstruct important records.

Tax records

Get free tax return transcripts immediately using the Get Transcript on IRS.gov or through the IRS2Go app.  Tax return transcripts show line-by-line the entries made on your Federal income tax returns.  The most three recent tax years are available.

Financial statements

People can gather past statements from their credit card company or bank. These records may be available online. People can also contact their bank to get paper copies of these statements.

Property records

  • To get documents related to property, homeowners can contact the title company, escrow company or bank that handled the purchase of their home or other property.
  • Taxpayers who made home improvements can get in touch with the contractors who did the work and ask for statements to verify the work and cost. They can also get written descriptions from friends and relatives who saw the house before and after any improvements.
  • For inherited property, taxpayers can check court records for probate values. If a trust or estate existed, taxpayers can contact the attorney who handled the trust.
  • When no other records are available, people should check the county assessor’s office for old records that might address the value of the property.
  • Car owners can research the current fair-market value for most vehicles. Resources are available online and at most libraries. These include Kelley’s Blue Book, the National Automobile Dealers Association and Edmunds. 

Develop And Implement Your Backup Plan

Do not wait for the next disaster to come for then it may be too late to retrieve your important records for a tax audit or for that matter any legal or business matter. And if you do get selected for audit and do not have all the records to support what was claimed on your tax returns, you should contact an experienced tax attorney who can argue the application of your facts and circumstances to pursue the least possible changes in an audit.

The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income.  Also if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in cryptocurrency, check out what a bitcoin tax attorney can do for you.

IRS tax relief now available to Hurricane Debby victims in all of South Carolina, most of Florida and North Carolina, part of Georgia and all of Vermont

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On August 9, 2024 the Internal Revenue Service (IRS) announced tax relief for individuals and businesses in four states (South Carolina, Florida, North Carolina and Georgia) affected by Hurricane Debby.  On August 13, 2024 the IRS announced tax relief for individuals and businesses in the state of Vermont affected by Hurricane Debby.  These taxpayers now have until February 3, 2025, to file various federal individual and business tax returns and make tax payments.

The tax relief postpones various tax filing and payment deadlines that occurred beginning on August 1, 2024, in Florida, August 4, 2024, in Georgia and South Carolina, August 5, 2024, in North Carolina and August 8, 2024 in Vermont. The relief period continues through February 3, 2025 (postponement period), in all five states. As a result, affected individuals and businesses will have until February 3, 2025, to file returns and pay any taxes that were originally due during this period.

This means, for example, that the February 3, 2025, deadline will now apply to:

  • Any individual, business or tax-exempt organization that has a valid extension to file their 2023 federal return; however, that payments on these returns are not eligible for the extra time because they were due last spring before the hurricane occurred.
  • Quarterly estimated income tax payments normally due on September 16, 2024, and January 15, 2025.
  • Quarterly payroll and excise tax returns normally due on October 31, 2024, and January 31, 2025.

In addition, in Florida, penalties for failing to make payroll and excise tax deposits due on or after August 1, 2024, and before August 16, 2024, will be abated, as long as the deposits are made by August 16, 2024. Similarly, in South Carolina and Georgia, penalties for failing to make payroll and excise tax deposits due on or after August 4, 2024, and before August 19, 2024, will be abated, as long as the deposits are made by August 19, 2024. In North Carolina, penalties for failing to make payroll and excise tax deposits due on or after August 5, 2024, and before August 20, 2024, will be abated, as long as the deposits are made by August 20, 2024.  In Vermont, penalties for failing to make payroll and excise tax deposits due on or after August 8, 2024, and before August 23, 2024, will be abated, as long as the deposits are made by August 23, 2024.

Other Areas Having Extended Deadlines:

The IRS announced on May 16, 2024 that individuals and businesses affected by tornadoes that began on March 14, 2024 in Ohio now have until September 3, 2024, to file various federal individual and business tax returns and make tax payments.

The IRS announced (Kentucky) announced (West Virginia) on May 31, 2024 tax relief for individuals and businesses affected by severe storms, straight-line winds, tornadoes, flooding, landslides and mudslides that began on April 2, 2024 in Kentucky and West Virginia now have until November 1, 2024, to file various federal individual and business tax returns and make tax payments.

The IRS announced on August 12, 2024 tax relief for individuals and businesses in 25 Minnesota counties affected by severe storms and flooding that began on June 16, 2024 now have until February 3, 2025, to file various federal individual and business tax returns and make tax payments.

IRS Tax Relief Details

The IRS is offering this relief to any area designated by the Federal Emergency Management Agency (FEMA), as qualifying for individual assistance.

For Minnesota – Individuals and households that reside or have a business in Blue Earth, Carver, Cass, Cook, Cottonwood, Faribault, Fillmore, Freeborn, Goodhue, Itasca, Jackson, Lake, Le Sueur, Mower, Murray, Nicollet, Nobles, Pipestone, Rice, Rock, St. Louis, Steele, Wabasha, Waseca and Watonwan counties.

For North Carolina – Individuals and businesses and the following 66 counties: Alamance, Anson, Beaufort, Bertie, Bladen , Brunswick, Camden, Carteret, Caswell, Chatham, Chowan, Columbus, Craven, Cumberland, Currituck, Dare, Davie, Davidson, Duplin, Durham, Edgecombe, Forsyth, Franklin, Gates, Granville, Greene, Guilford, Halifax, Harnett, Hertford, Hoke, Hyde, Johnston, Jones, Lee, Lenoir, Martin, Montgomery, Moore, Nash, New Hanover, Northampton, Onslow, Orange, Pamlico, Pasquotank, Pender, Perquimans, Person, Pitt, Randolph, Richmond, Robeson, Rockingham, Sampson, Scotland, Stokes, Surry, Tyrrell, Vance, Wake, Warren, Washington, Wayne, Wilson and Yadkin.

For South Carolina – Individuals and businesses in all 46 counties.

For Georgia – Individuals and businesses in the following 55 counties: Appling, Atkinson, Bacon, Ben Hill, Berrien, Brantley, Brooks, Bryan, Bulloch, Burke, Camden, Candler, Charlton, Chatham, Clinch, Coffee, Colquitt, Cook, Crisp, Decatur, Dodge, Echols, Effingham, Emanuel, Evans, Glynn, Grady, Irwin, Jeff Davis, Jefferson, Jenkins, Johnson, Lanier, Laurens, Liberty, Long, Lowndes, McIntosh, Mitchell, Montgomery, Pierce, Richmond, Screven, Tattnall, Telfair, Thomas, Tift, Toombs, Treutlen, Turner, Ware, Wayne, Wheeler, Wilcox and Worth.

For Florida – Individuals and businesses in the following 61 counties: Alachua, Baker, Bay, Bradford, Brevard, Calhoun, Charlotte, Citrus, Clay, Collier, Columbia, DeSoto, Dixie, Duval, Escambia, Flagler, Franklin, Gadsden, Gilchrist, Glades, Gulf, Hamilton, Hardee, Hendry, Hernando, Highlands, Hillsborough, Holmes, Jackson, Jefferson, Lafayette, Lake, Lee, Leon, Levy, Liberty, Madison, Manatee, Marion, Monroe, Nassau, Okaloosa, Okeechobee, Orange, Osceola, Pasco, Pinellas, Polk, Putnam, Santa Rosa, Sarasota, Seminole, St. Johns, Sumter, Suwannee, Taylor, Union, Volusia, Walton, Wakulla and Washington.

For Vermont – Individuals and businesses in all 14 counties.

For Kentucky – Currently, relief is available to affected taxpayers who live or have a business in Boyd, Carter, Fayette, Greenup, Henry, Jefferson, Jessamine, Mason, Oldham, Union and Whitley counties.

For West Virginia – Currently, relief is available to affected taxpayers who live or have a business in Boone, Brooke, Cabell, Fayette, Hancock, Kanawha, Lincoln, Marshall, Nicholas, Ohio, Preston, Putnam, Tyler, Wayne and Wetzel counties.

For Ohio – Currently, relief is available to affected taxpayers who live or have a business in Auglaize, Crawford, Darke, Delaware, Hancock, Licking, Logan, Mercer, Miami, Richland and Union counties.

The current list of eligible localities is always available on the disaster relief page on IRS.gov.  The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area.

Tax Planning Tip

Individuals and businesses in a federally declared disaster area who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2024 return normally filed next year), or the return for the current year (2023).

Be sure to write the FEMA declaration number on any return claiming a loss.  That number being: “4777-DR” for Ohio or “ 4782-DR“ for Kentucky or “4783-DR” for West Virginia or “3605-EM” for Florida or “3606-EM” for South Carolina or “3607-EM” for Georgia or “3608-EM” for North Carolina or “3609-EM” for Vermont or “4797-DR” for Minnesota.

Qualified disaster relief payments are generally excluded from gross income. In general, this means that affected taxpayers can exclude from their gross income amounts received from a government agency for reasonable and necessary personal, family, living or funeral expenses, as well as for the repair or rehabilitation of their home, or for the repair or replacement of its contents.

Additional relief may be available to affected taxpayers who participate in a retirement plan or individual retirement arrangement (IRA). For example, a taxpayer may be eligible to take a special disaster distribution that would not be subject to the additional 10% early distribution tax and allows the taxpayer to spread the income over three years. Taxpayers may also be eligible to make a hardship withdrawal. Each plan or IRA has specific rules and guidance for their participants to follow.

Importance To Preserve Records

Keep in mind that the IRS has up to three years to select a tax return for audit. The FTB has up to four years to select a tax return for audit. In some cases this period is extended to six years. When a taxpayer is selected for audit, the taxpayer has the burden of proof to show that expenses claimed are properly deductible. Having the evidence handy and organized makes meeting this burden of proof much easier.

Essential Records to Have for a Tax Audit

If you are getting ready for a tax audit, one of the most important things to do is gather and organize your tax records and receipts. There’s a good chance that you have a large amount of documents and receipts in your possession. No matter how organized you are, it can be a daunting task to collect the right pieces and make sure that you have them organized and handy for the audit conference.

We have seen many tax audits that hinge on whether or not the taxpayer can provide proper documentation for their previous tax filings. A tax lawyer in Orange County or elsewhere can make sure that the documentation is complete and proper.  By submitting this to your tax attorney in advance of the audit, your tax attorney can review your documentation and determine if there are any gaps that need to be addressed before starting the dialogue with the IRS agent.

So what are the most essential tax records to have ahead of your audit? Here are a few must-have items:

  • Any W-2 forms from the previous year. This can include documents from full-time and part-time work, large casino and lottery winnings and more.
  • Form 1098 records from your bank or lender on mortgage interest paid from the previous year.
  • Records of any miscellaneous money you earned and reported to the IRS including work done as an independent contractor or freelancer, interest from savings accounts and stock dividends.
  • Written letters from charities confirming your monetary donations from the previous year.
  • Receipts for business expenses you claimed.
  • Mileage Logs for business use of vehicle.
  • Entertainment and Travel Logs for business

Tips On Reconstructing Records

Reconstructing records after a disaster is important for several reasons including insurance reimbursement and taxes. Most importantly, records can help people prove their disaster-related losses. More accurately estimated losses can help people get more recovery assistance like loans or grants.

Whether it’s personal or business property that has been lost or destroyed, here are some steps that can help people reconstruct important records.

Tax records

Get free tax return transcripts immediately using the Get Transcript on IRS.gov or through the IRS2Go app.  Tax return transcripts show line-by-line the entries made on your Federal income tax returns.  The most three recent tax years are available.

Financial statements

People can gather past statements from their credit card company or bank. These records may be available online. People can also contact their bank to get paper copies of these statements.

Property records

  • To get documents related to property, homeowners can contact the title company, escrow company or bank that handled the purchase of their home or other property.
  • Taxpayers who made home improvements can get in touch with the contractors who did the work and ask for statements to verify the work and cost. They can also get written descriptions from friends and relatives who saw the house before and after any improvements.
  • For inherited property, taxpayers can check court records for probate values. If a trust or estate existed, taxpayers can contact the attorney who handled the trust.
  • When no other records are available, people should check the county assessor’s office for old records that might address the value of the property.
  • Car owners can research the current fair-market value for most vehicles. Resources are available online and at most libraries. These include Kelley’s Blue Book, the National Automobile Dealers Association and Edmunds.

Develop And Implement Your Backup Plan

Do not wait for the next disaster to come for then it may be too late to retrieve your important records for a tax audit or for that matter any legal or business matter. And if you do get selected for audit and do not have all the records to support what was claimed on your tax returns, you should contact an experienced tax attorney who can argue the application of your facts and circumstances to pursue the least possible changes in an audit.

The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income.  Also if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in cryptocurrency, check out what a bitcoin tax attorney can do for you.

IRS provides tax relief to Minnesota victims of severe storms, flooding

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On August 12, 2024 the Internal Revenue Service (IRS) announced tax relief for individuals and businesses in 25 Minnesota counties affected by severe storms and flooding that began on June 16, 2024.  These taxpayers now have until February 3, 2025, to file various federal individual and business tax returns and make tax payments.

The tax relief postpones various tax filing and payment deadlines that occurred from June 16, 2024, through February 3, 2025 (postponement period). As a result, affected individuals and businesses will have until February 3, 2025, to file returns and pay any taxes that were originally due during this period.

This means, for example, that the February 3, 2025, deadline will now apply to:

  • Any individual, business or tax-exempt organization that has a valid extension to file their 2023 federal return. The IRS noted, however, that payments on these returns are not eligible for the extra time because they were due last spring before the storms occurred.
  • Quarterly estimated income tax payments normally due on June 17 and September 16, 2024, and January 15, 2025.
  • Quarterly payroll and excise tax returns normally due on July 31 and October 31, 2024, and January 31, 2025.

In addition, penalties for failing to make payroll and excise tax deposits due on or after June 16, 2024, and before July 1, 2024, will be abated, as long as the deposits were made by July 1, 2024.

Other Areas Having Extended Deadlines:

The IRS announced on May 16, 2024 that individuals and businesses affected by tornadoes that began on March 14, 2024 in Ohio now have until September 3, 2024, to file various federal individual and business tax returns and make tax payments.

The IRS announced (Kentucky) announced (West Virginia) on May 31, 2024 tax relief for individuals and businesses affected by severe storms, straight-line winds, tornadoes, flooding, landslides and mudslides that began on April 2, 2024 in Kentucky and West Virginia now have until November 1, 2024, to file various federal individual and business tax returns and make tax payments.

The IRS announced on August 9, 2024 tax relief for individuals and businesses in Florida, Georgia, South Carolina and North Carolina affected by Hurricane Debby now have until February 3, 2025, to file various federal individual and business tax returns and make tax payments.

IRS Tax Relief Details

The IRS is offering this relief to any area designated by the Federal Emergency Management Agency (FEMA), as qualifying for individual assistance.

For Minnesota – Individuals and households that reside or have a business in Blue Earth, Carver, Cass, Cook, Cottonwood, Faribault, Fillmore, Freeborn, Goodhue, Itasca, Jackson, Lake, Le Sueur, Mower, Murray, Nicollet, Nobles, Pipestone, Rice, Rock, St. Louis, Steele, Wabasha, Waseca and Watonwan counties.

For North Carolina – Individuals and businesses and the following 66 counties: Alamance, Anson, Beaufort, Bertie, Bladen , Brunswick, Camden, Carteret, Caswell, Chatham, Chowan, Columbus, Craven, Cumberland, Currituck, Dare, Davie, Davidson, Duplin, Durham, Edgecombe, Forsyth, Franklin, Gates, Granville, Greene, Guilford, Halifax, Harnett, Hertford, Hoke, Hyde, Johnston, Jones, Lee, Lenoir, Martin, Montgomery, Moore, Nash, New Hanover, Northampton, Onslow, Orange, Pamlico, Pasquotank, Pender, Perquimans, Person, Pitt, Randolph, Richmond, Robeson, Rockingham, Sampson, Scotland, Stokes, Surry, Tyrrell, Vance, Wake, Warren, Washington, Wayne, Wilson and Yadkin.

For South Carolina – Individuals and businesses in all 46 counties.

For Georgia – Individuals and businesses in the following 55 counties: Appling, Atkinson, Bacon, Ben Hill, Berrien, Brantley, Brooks, Bryan, Bulloch, Burke, Camden, Candler, Charlton, Chatham, Clinch, Coffee, Colquitt, Cook, Crisp, Decatur, Dodge, Echols, Effingham, Emanuel, Evans, Glynn, Grady, Irwin, Jeff Davis, Jefferson, Jenkins, Johnson, Lanier, Laurens, Liberty, Long, Lowndes, McIntosh, Mitchell, Montgomery, Pierce, Richmond, Screven, Tattnall, Telfair, Thomas, Tift, Toombs, Treutlen, Turner, Ware, Wayne, Wheeler, Wilcox and Worth.

For Florida – Individuals and businesses in the following 61 counties: Alachua, Baker, Bay, Bradford, Brevard, Calhoun, Charlotte, Citrus, Clay, Collier, Columbia, DeSoto, Dixie, Duval, Escambia, Flagler, Franklin, Gadsden, Gilchrist, Glades, Gulf, Hamilton, Hardee, Hendry, Hernando, Highlands, Hillsborough, Holmes, Jackson, Jefferson, Lafayette, Lake, Lee, Leon, Levy, Liberty, Madison, Manatee, Marion, Monroe, Nassau, Okaloosa, Okeechobee, Orange, Osceola, Pasco, Pinellas, Polk, Putnam, Santa Rosa, Sarasota, Seminole, St. Johns, Sumter, Suwannee, Taylor, Union, Volusia, Walton, Wakulla and Washington.

For Kentucky – Currently, relief is available to affected taxpayers who live or have a business in Boyd, Carter, Fayette, Greenup, Henry, Jefferson, Jessamine, Mason, Oldham, Union and Whitley counties.

For West Virginia – Currently, relief is available to affected taxpayers who live or have a business in Boone, Brooke, Cabell, Fayette, Hancock, Kanawha, Lincoln, Marshall, Nicholas, Ohio, Preston, Putnam, Tyler, Wayne and Wetzel counties.

For Ohio – Currently, relief is available to affected taxpayers who live or have a business in Auglaize, Crawford, Darke, Delaware, Hancock, Licking, Logan, Mercer, Miami, Richland and Union counties.

The current list of eligible localities is always available on the disaster relief page on IRS.gov.  The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area.

Tax Planning Tip

Individuals and businesses in a federally declared disaster area who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2024 return normally filed next year), or the return for the current year (2023).

Be sure to write the FEMA declaration number on any return claiming a loss.  That number being: “4777-DR” for Ohio or “ 4782-DR“ for Kentucky or “4783-DR” for West Virginia or “3605-EM” for Florida or “3606-EM” for South Carolina or “3607-EM” for Georgia or “3608-EM” for North Carolina or “4797-DR” for Minnesota.

Qualified disaster relief payments are generally excluded from gross income. In general, this means that affected taxpayers can exclude from their gross income amounts received from a government agency for reasonable and necessary personal, family, living or funeral expenses, as well as for the repair or rehabilitation of their home, or for the repair or replacement of its contents.

Additional relief may be available to affected taxpayers who participate in a retirement plan or individual retirement arrangement (IRA). For example, a taxpayer may be eligible to take a special disaster distribution that would not be subject to the additional 10% early distribution tax and allows the taxpayer to spread the income over three years. Taxpayers may also be eligible to make a hardship withdrawal. Each plan or IRA has specific rules and guidance for their participants to follow.

Importance To Preserve Records

Keep in mind that the IRS has up to three years to select a tax return for audit. The FTB has up to four years to select a tax return for audit. In some cases this period is extended to six years. When a taxpayer is selected for audit, the taxpayer has the burden of proof to show that expenses claimed are properly deductible. Having the evidence handy and organized makes meeting this burden of proof much easier.

Essential Records to Have for a Tax Audit

If you are getting ready for a tax audit, one of the most important things to do is gather and organize your tax records and receipts. There’s a good chance that you have a large amount of documents and receipts in your possession. No matter how organized you are, it can be a daunting task to collect the right pieces and make sure that you have them organized and handy for the audit conference.

We have seen many tax audits that hinge on whether or not the taxpayer can provide proper documentation for their previous tax filings. A tax lawyer in Orange County or elsewhere can make sure that the documentation is complete and proper.  By submitting this to your tax attorney in advance of the audit, your tax attorney can review your documentation and determine if there are any gaps that need to be addressed before starting the dialogue with the IRS agent.

So what are the most essential tax records to have ahead of your audit? Here are a few must-have items:

  • Any W-2 forms from the previous year. This can include documents from full-time and part-time work, large casino and lottery winnings and more.
  • Form 1098 records from your bank or lender on mortgage interest paid from the previous year.
  • Records of any miscellaneous money you earned and reported to the IRS including work done as an independent contractor or freelancer, interest from savings accounts and stock dividends.
  • Written letters from charities confirming your monetary donations from the previous year.
  • Receipts for business expenses you claimed.
  • Mileage Logs for business use of vehicle.
  • Entertainment and Travel Logs for business

Tips On Reconstructing Records

Reconstructing records after a disaster is important for several reasons including insurance reimbursement and taxes. Most importantly, records can help people prove their disaster-related losses. More accurately estimated losses can help people get more recovery assistance like loans or grants.

Whether it’s personal or business property that has been lost or destroyed, here are some steps that can help people reconstruct important records.

Tax records

Get free tax return transcripts immediately using the Get Transcript on IRS.gov or through the IRS2Go app.  Tax return transcripts show line-by-line the entries made on your Federal income tax returns.  The most three recent tax years are available.

Financial statements

People can gather past statements from their credit card company or bank. These records may be available online. People can also contact their bank to get paper copies of these statements.

Property records

  • To get documents related to property, homeowners can contact the title company, escrow company or bank that handled the purchase of their home or other property.
  • Taxpayers who made home improvements can get in touch with the contractors who did the work and ask for statements to verify the work and cost. They can also get written descriptions from friends and relatives who saw the house before and after any improvements.
  • For inherited property, taxpayers can check court records for probate values. If a trust or estate existed, taxpayers can contact the attorney who handled the trust.
  • When no other records are available, people should check the county assessor’s office for old records that might address the value of the property.
  • Car owners can research the current fair-market value for most vehicles. Resources are available online and at most libraries. These include Kelley’s Blue Book, the National Automobile Dealers Association and Edmunds.

Develop And Implement Your Backup Plan

Do not wait for the next disaster to come for then it may be too late to retrieve your important records for a tax audit or for that matter any legal or business matter. And if you do get selected for audit and do not have all the records to support what was claimed on your tax returns, you should contact an experienced tax attorney who can argue the application of your facts and circumstances to pursue the least possible changes in an audit.

The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income.  Also if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in cryptocurrency, check out what a bitcoin tax attorney can do for you.

IRS tax relief now available to Hurricane Debby victims in all of South Carolina, most of Florida and North Carolina, and part of Georgia

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On August 9, 2024 the Internal Revenue Service (IRS) announced tax relief for individuals and businesses in four states affected by Hurricane Debby.  These taxpayers now have until February 3, 2025, to file various federal individual and business tax returns and make tax payments.

The tax relief postpones various tax filing and payment deadlines that occurred beginning on August 1, 2024, in Florida, August 4, 2024, in Georgia and South Carolina, and August 5, 2024, in North Carolina. The relief period continues through February 3, 2025 (postponement period), in all four states. As a result, affected individuals and businesses will have until February 3, 2025, to file returns and pay any taxes that were originally due during this period.

This means, for example, that the February 3, 2025, deadline will now apply to:

  • Any individual, business or tax-exempt organization that has a valid extension to file their 2023 federal return; however, that payments on these returns are not eligible for the extra time because they were due last spring before the hurricane occurred.
  • Quarterly estimated income tax payments normally due on September 16, 2024, and January 15, 2025.
  • Quarterly payroll and excise tax returns normally due on October 31, 2024, and January 31, 2025.

In addition, in Florida, penalties for failing to make payroll and excise tax deposits due on or after August 1, 2024, and before August 16, 2024, will be abated, as long as the deposits are made by August 16, 2024. Similarly, in South Carolina and Georgia, penalties for failing to make payroll and excise tax deposits due on or after August 4, 2024, and before August 19, 2024, will be abated, as long as the deposits are made by August 19, 2024. In North Carolina, penalties for failing to make payroll and excise tax deposits due on or after August 5, 2024, and before August 20, 2024, will be abated, as long as the deposits are made by August 20, 2024.

Other Areas Having Extended Deadlines:

The IRS announced on May 16, 2024 that individuals and businesses affected by tornadoes that began on March 14, 2024 in Ohio now have until September 3, 2024, to file various federal individual and business tax returns and make tax payments.

The IRS announced (Kentucky) announced (West Virginia) on May 31, 2024 tax relief for individuals and businesses affected by severe storms, straight-line winds, tornadoes, flooding, landslides and mudslides that began on April 2, 2024 in Kentucky and West Virginia now have until November 1, 2024, to file various federal individual and business tax returns and make tax payments.

IRS Tax Relief Details

The IRS is offering this relief to any area designated by the Federal Emergency Management Agency (FEMA), as qualifying for individual assistance.

For North Carolina – Individuals and businesses and the following 66 counties: Alamance, Anson, Beaufort, Bertie, Bladen , Brunswick, Camden, Carteret, Caswell, Chatham, Chowan, Columbus, Craven, Cumberland, Currituck, Dare, Davie, Davidson, Duplin, Durham, Edgecombe, Forsyth, Franklin, Gates, Granville, Greene, Guilford, Halifax, Harnett, Hertford, Hoke, Hyde, Johnston, Jones, Lee, Lenoir, Martin, Montgomery, Moore, Nash, New Hanover, Northampton, Onslow, Orange, Pamlico, Pasquotank, Pender, Perquimans, Person, Pitt, Randolph, Richmond, Robeson, Rockingham, Sampson, Scotland, Stokes, Surry, Tyrrell, Vance, Wake, Warren, Washington, Wayne, Wilson and Yadkin.

For South Carolina – Individuals and businesses in all 46 counties.

For Georgia – Individuals and businesses in the following 55 counties: Appling, Atkinson, Bacon, Ben Hill, Berrien, Brantley, Brooks, Bryan, Bulloch, Burke, Camden, Candler, Charlton, Chatham, Clinch, Coffee, Colquitt, Cook, Crisp, Decatur, Dodge, Echols, Effingham, Emanuel, Evans, Glynn, Grady, Irwin, Jeff Davis, Jefferson, Jenkins, Johnson, Lanier, Laurens, Liberty, Long, Lowndes, McIntosh, Mitchell, Montgomery, Pierce, Richmond, Screven, Tattnall, Telfair, Thomas, Tift, Toombs, Treutlen, Turner, Ware, Wayne, Wheeler, Wilcox and Worth.

For Florida – Individuals and businesses in the following 61 counties: Alachua, Baker, Bay, Bradford, Brevard, Calhoun, Charlotte, Citrus, Clay, Collier, Columbia, DeSoto, Dixie, Duval, Escambia, Flagler, Franklin, Gadsden, Gilchrist, Glades, Gulf, Hamilton, Hardee, Hendry, Hernando, Highlands, Hillsborough, Holmes, Jackson, Jefferson, Lafayette, Lake, Lee, Leon, Levy, Liberty, Madison, Manatee, Marion, Monroe, Nassau, Okaloosa, Okeechobee, Orange, Osceola, Pasco, Pinellas, Polk, Putnam, Santa Rosa, Sarasota, Seminole, St. Johns, Sumter, Suwannee, Taylor, Union, Volusia, Walton, Wakulla and Washington.

For Kentucky – Currently, relief is available to affected taxpayers who live or have a business in Boyd, Carter, Fayette, Greenup, Henry, Jefferson, Jessamine, Mason, Oldham, Union and Whitley counties.

For West Virginia – Currently, relief is available to affected taxpayers who live or have a business in Boone, Brooke, Cabell, Fayette, Hancock, Kanawha, Lincoln, Marshall, Nicholas, Ohio, Preston, Putnam, Tyler, Wayne and Wetzel counties.

For Ohio – Currently, relief is available to affected taxpayers who live or have a business in Auglaize, Crawford, Darke, Delaware, Hancock, Licking, Logan, Mercer, Miami, Richland and Union counties.

The current list of eligible localities is always available on the disaster relief page on IRS.gov.  The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area.

Tax Planning Tip

Individuals and businesses in a federally declared disaster area who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2024 return normally filed next year), or the return for the current year (2023).

Be sure to write the FEMA declaration number on any return claiming a loss.  That number being: “4777-DR” for Ohio or “ 4782-DR“ for Kentucky or “4783-DR” for West Virginia or “3605-EM” for Florida or “3606-EM” for South Carolina or “3607-EM” for Georgia or “3608-EM” for North Carolina.

Qualified disaster relief payments are generally excluded from gross income. In general, this means that affected taxpayers can exclude from their gross income amounts received from a government agency for reasonable and necessary personal, family, living or funeral expenses, as well as for the repair or rehabilitation of their home, or for the repair or replacement of its contents.

Additional relief may be available to affected taxpayers who participate in a retirement plan or individual retirement arrangement (IRA). For example, a taxpayer may be eligible to take a special disaster distribution that would not be subject to the additional 10% early distribution tax and allows the taxpayer to spread the income over three years. Taxpayers may also be eligible to make a hardship withdrawal. Each plan or IRA has specific rules and guidance for their participants to follow.

Importance To Preserve Records

Keep in mind that the IRS has up to three years to select a tax return for audit. The FTB has up to four years to select a tax return for audit. In some cases this period is extended to six years. When a taxpayer is selected for audit, the taxpayer has the burden of proof to show that expenses claimed are properly deductible. Having the evidence handy and organized makes meeting this burden of proof much easier.

Essential Records to Have for a Tax Audit

If you are getting ready for a tax audit, one of the most important things to do is gather and organize your tax records and receipts. There’s a good chance that you have a large amount of documents and receipts in your possession. No matter how organized you are, it can be a daunting task to collect the right pieces and make sure that you have them organized and handy for the audit conference.

We have seen many tax audits that hinge on whether or not the taxpayer can provide proper documentation for their previous tax filings. A tax lawyer in Orange County or elsewhere can make sure that the documentation is complete and proper.  By submitting this to your tax attorney in advance of the audit, your tax attorney can review your documentation and determine if there are any gaps that need to be addressed before starting the dialogue with the IRS agent.

So what are the most essential tax records to have ahead of your audit? Here are a few must-have items:

  • Any W-2 forms from the previous year. This can include documents from full-time and part-time work, large casino and lottery winnings and more.
  • Form 1098 records from your bank or lender on mortgage interest paid from the previous year.
  • Records of any miscellaneous money you earned and reported to the IRS including work done as an independent contractor or freelancer, interest from savings accounts and stock dividends.
  • Written letters from charities confirming your monetary donations from the previous year.
  • Receipts for business expenses you claimed.
  • Mileage Logs for business use of vehicle.
  • Entertainment and Travel Logs for business

Tips On Reconstructing Records

Reconstructing records after a disaster is important for several reasons including insurance reimbursement and taxes. Most importantly, records can help people prove their disaster-related losses. More accurately estimated losses can help people get more recovery assistance like loans or grants.

Whether it’s personal or business property that has been lost or destroyed, here are some steps that can help people reconstruct important records.

Tax records

Get free tax return transcripts immediately using the Get Transcript on IRS.gov or through the IRS2Go app.  Tax return transcripts show line-by-line the entries made on your Federal income tax returns.  The most three recent tax years are available.

Financial statements

People can gather past statements from their credit card company or bank. These records may be available online. People can also contact their bank to get paper copies of these statements.

Property records

  • To get documents related to property, homeowners can contact the title company, escrow company or bank that handled the purchase of their home or other property.
  • Taxpayers who made home improvements can get in touch with the contractors who did the work and ask for statements to verify the work and cost. They can also get written descriptions from friends and relatives who saw the house before and after any improvements.
  • For inherited property, taxpayers can check court records for probate values. If a trust or estate existed, taxpayers can contact the attorney who handled the trust.
  • When no other records are available, people should check the county assessor’s office for old records that might address the value of the property.
  • Car owners can research the current fair-market value for most vehicles. Resources are available online and at most libraries. These include Kelley’s Blue Book, the National Automobile Dealers Association and Edmunds.

Develop And Implement Your Backup Plan

Do not wait for the next disaster to come for then it may be too late to retrieve your important records for a tax audit or for that matter any legal or business matter. And if you do get selected for audit and do not have all the records to support what was claimed on your tax returns, you should contact an experienced tax attorney who can argue the application of your facts and circumstances to pursue the least possible changes in an audit.

The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income.  Also if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in cryptocurrency, check out what a bitcoin tax attorney can do for you.

New Rule Proposed By DEA Rescheduling Cannabis To Allow Businesses More Deductions With IRS Receives Support From Legislators

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The prime benefits of classifying cannabis as a Class 3 substance is that the Federal government would recognize medical benefits of cannabis, make Section 280E inapplicable to licensed cannabis operators, and open up financial and banking markets.

The Associated Press reported on April 30, 2024 that the Drug Enforcement Administration (“DEA”) will propose a rule to reschedule cannabis to Schedule III under the Controlled Substance Act. The proposed rule has since been reviewed by the Department Of Justice and on May 16, 2024 has been published in the Federal Register. This publication then opened the period of time to July 22, 2024 for the DEA to take public comment on the plan to move marijuana from its current classification as a Schedule I drug, alongside heroin and LSD. The proposed rule moves cannabis to Schedule III, alongside ketamine and some anabolic steroids, following a recommendation from the federal Health and Human Services Department. More than 40,000 people submitted comment with a vast majority indicating favor of the proposed rule reclassifying cannabis.  The proposed rule is now up for review by an administrative judge.  If approved, the agency can then publish the final rule in the Federal Register.

The Growing Trend In Legalizing Cannabis – Current Standings:

Medical marijuana is legal in 38 states.

The medical use of cannabis is legal (with a doctor’s recommendation) in 38 states and Washington DC. Those 38 states being Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Illinois, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, Utah, Vermont, Virginia, Washington and West Virginia. The medical use of cannabis is also legal in the territories of the Northern Mariana Islands, Guam and Puerto Rico.

Recreational marijuana is legal in 24 states.

Twenty-three states and Washington DC, have legalized marijuana for recreational use — no doctor’s letter required — for adults over the age of 21. Those 23 states being Alaska, Arizona, California, Colorado, Connecticut, Delaware, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nevada, New Jersey, New Mexico, New York, Ohio, Oregon, Rhode Island, Vermont, Virginia and Washington and the territories of the Northern Mariana Islands and Guam.

Recreational marijuana is legal in 6 tribal nations.

Six Tribal nations have legalized marijuana for recreational use.  Those 6 tribes being the Flandreau Santee Sioux Tribe (South Dakota), Oglala Lakota Sioux Tribe (South Dakota), Suquamish Tribe (Washington state), Squaxin Island Tribe (Washington State), Eastern Band of Cherokee Indians (North Carolina) and St. Regis Mohawk Tribe (New York).

The New Rule If Approved Will Put Federal Law More In Line With State Laws.

Currently, under Federal law (Controlled Substances Act 21 U.S.C. 801) marijuana is designated as a Schedule I controlled substance due to the historical belief that it has a high potential for abuse, no currently accepted medical use in treatment, and lack of accepted safety for use under medical supervision.

The New Rule If Approved Will Result In A Tax Regime Similar To What Non-Cannabis Businesses Face.

Generally, businesses can deduct ordinary and necessary business expenses under I.R.C. §162. This includes wages, rent, supplies, etc. However, in 1982 Congress added I.R.C. §280E. Under §280E, taxpayers cannot deduct any amount for a trade or business where the trade or business consists of trafficking in controlled substances…which is currently prohibited by Federal law. Marijuana, including medical marijuana, is a controlled substance. What this means is that dispensaries and other businesses trafficking in marijuana have to report all of their income and cannot deduct rent, wages, and other expenses, making their marginal tax rate substantially higher than most other businesses.  Therefore, under current law, the Internal Revenue Code which treats businesses in the marijuana industry differently resulting in such business paying at least 3-times as much in taxes as ordinary businesses.

The New Rule If Approved DOES NOT Change Reporting Of Cash Payments.

The Bank Secrecy Act of 1970 (“BSA”) requires financial institutions in the United States to assist U.S. government agencies to detect and prevent money laundering. Specifically, the act requires financial institutions to keep records of cash purchases of negotiable instruments, and file reports of cash purchases of these negotiable instruments of more than $10,000 (daily aggregate amount), and to report suspicious activity that might signify money laundering, tax evasion, or other criminal activities. The BSA requires any business receiving one or more related cash payments totaling more than $10,000 to file IRS Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business.

The minimum penalty for failing to file EACH Form 8300 is $25,000 if the failure is due to an intentional or willful disregard of the cash reporting requirements. Penalties may also be imposed for causing, or attempting to cause, a trade or business to fail to file a required report; for causing, or attempting to cause, a trade or business to file a required report containing a material omission or misstatement of fact; or for structuring, or attempting to structure, transactions to avoid the reporting requirements. These violations may also be subject to criminal prosecution which, upon conviction, may result in imprisonment of up to 5 years or fines of up to $250,000 for individuals and $500,000 for corporations or both.

Marijuana-related businesses operate in an environment of cash transactions as many banks remain reluctant to do business with many in the marijuana industry. Like any cash-based business the IRS scrutinizes the amount of gross receipts to report and it is harder to prove to the IRS expenses paid in cash. So it is of most importance that the proper facilities and procedures be set up to maintain an adequate system of books and records.

So with all these potential benefits, what forces are present to block this proposed rule?

  • Chevron Doctrine repealed by U.S. Supreme Court. The regulatory state has been in full force since, ironically, 1984, with the institution of the Chevron Doctrine. The Chevron Doctrine has required courts to defer to the expertise of administrative agencies when the legislative intent of an underlying law is ambiguous, which made it a cornerstone of how regulators and businesses interact. But on June 28, 2024, the Supreme Court’s Republican-appointed majority demolished the doctrine in its rulings in the Relentless v. Department of Commerce and Loper Bright Enterprises v. Raimondo appeals, overturning the broad authority of the administrative state and raising fresh questions about how cannabis will be regulated moving forward. Keep in mind that rescheduling has been moving forward as a regulatory, rather than a legislative, change, and now, regulations do not hold the same force of law as they did since 1984. But even if the Chevron Doctrine was not repealed, the normal rule making process still faces certain congressional and judicial challenges explained further below.
  • Congressional Challenges. Under the Small Business Regulatory Enforcement Fairness Act (also known as the Congressional Review Act), new final rules must be sent to Congress and the Government Accountability Office for review before they can take effect. “Major rules” (ones that are economically significant and require OIRA review) must be made effective at least 60 days after the date of publication in the Federal Register, allowing time for Congressional review. In emergency situations, a major rule can be made effective before 60 days. If the House and Senate pass a resolution of disapproval and the President signs it (or if both houses override a presidential veto), the rule becomes void and cannot be republished by an agency in the same form without Congressional approval. Since 1996, when this process started, Congress has disapproved only one rule. Congress may also exercise its oversight in other ways, by holding hearings and posing questions to agency heads, by enacting new legislation, or by imposing funding restrictions.
  • Judicial Challenges. Individuals and corporate entities may go into the courts to make a claim that they have been, or will be, damaged or adversely affected in some manner by a regulation. The reviewing court can consider whether a rule: is unconstitutional; goes beyond the agency’s legal authority; was made without following the notice-and-comment process required by the Administrative Procedure Act or other law; or was arbitrary, capricious, or an abuse of discretion. An agency head can also be sued for failing to act in a timely manner in certain cases. If a court sets aside (vacates) all or part of a rule, it usually sends the rule back to the agency to correct the deficiencies. The agency may have to reopen the comment period, publish a new statement of basis and purpose in the Federal Register to explain and justify its decisions, or re­start the rulemaking process from the beginning by issuing a new proposed rule.

The most certain way that cannabis can be legalized and thus be treated like any other lawful business is by Congress enacting legislation. 

Top Democratic senators, including Senate Majority Leader Chuck Schumer (D-NY), continue to push the DEA to ‘promptly finalize” the rule to reschedule marijuana.  On August 2, 2024 Sen. Schumer, Sen. Cory Booker (D-NJ), Sen. Ron Wyden (D-OR) and others sent a letter to Attorney General Merrick Garland and DEA Administrator Anne Milgram imploring the administration to follow through on a proposal to move cannabis from Schedule I to Schedule III of the Controlled Substances Act (CSA), as the Justice Department formally proposed in May.  What is so surprising is that these legislators have the power to enact legislation completely bypassing the DEA’s rule-making authority and potential judicial challenges and send a bill to the President rescheduling cannabis or even excluding cannabis from the application of IRC Sec. 280E.

How Do You Know Which Cannabis Tax Attorney Is Best For You?

Given that cannabis is still illegal under existing Federal law you need to protect yourself and your marijuana business from all challenges created by the U.S. government so it is best to be proactive and engage an experienced cannabis tax attorney in your area who is highly skilled in the different legal and tax issues that cannabis businesses face.  Let the cannabis tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), the Inland Empire (Ontario and Palm Springs) and other California locations protect you and maximize your net profits.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

What To Do If Someone Dies While They Have A Lawsuit Pending Or A Lawsuit Needs To Be Brought On Behalf Of A Decedent?

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Probate is the field of law that determines how an estate must be divided. Each state has its own laws and statutes requirements to determine if and how an estate must be probated. The probate court will supervise the process when a deceased person (a decedent) leaves assets to distribute, such as bank accounts, real estate, and financial investments with or without a will. The probate court provides the final ruling on the division and distribution of assets to beneficiaries.

In many cases, the decedent has established documentation, which contains instructions on how their assets should be distributed after death and designates in such documents who oversees implementing this process.  This involves collecting the deceased’s assets to pay any remaining liabilities on their estate and distributing the assets to beneficiaries. Where a decedent fails to establish such documents while alive, State law and the probate courts will dictate how the estate is administered and to whom assets get distributed to.

Probate With a Will 

A deceased person with a Will is known as a testator and he or she is deemed to have died “testate.” When a testator dies, the person designated as the executor under the Will is responsible for initiating the probate process. The probate process for a testate estate includes distributing the decedent’s assets according to the Will.

Probate Without a Will 

When a person dies without a Will, a person is to have died intestate. An intestate estate can also occur when a written Will is presented to the probate court and the probate court has been deemed the Will to be invalid. The probate process for an intestate estate includes distributing the decedent’s assets according to State law.

What Is The Probate Process?

A probate court proceeding begins with the appointment of an administrator or executor to oversee the estate of the deceased person. Such personal is typically called the “personal representative.”  The personal representative receives all legal claims against the estate and paying off the outstanding debts. Also, the personal representative is tasked with locating any legal heirs of the deceased, including surviving spouses, children, and parents. Then the probate court will assess what assets need to be distributed among the legal heirs and how to distribute them.

The probate process can take a long time to finalize and can become costly, therefore it is important to know whether a probate is required following the death of an individual. The more complex or contested the estate is the more time it will take to settle and distribute the assets. Furthermore, the proceedings of probate court are publicly recorded so avoiding probate would ensure that all settlements are done privately.

Note though that having a Will does not mean that probate is avoided, it just serves a roadmap for the probate court.

With the proper planning while during a person’s life, the need for probate can be avoided.  But what happens if someone dies while a lawsuit is pending or if a lawsuit needs to be brought on behalf of decedent?

Personal Injury Lawsuit

A personal injury case does not die with the person who is injured. However, a person’s death does change the parties to the case given that the injured person’s personal representative takes over for the decedent as the plaintiff, but, it does not change the fact that this person suffered injuries and damages as a result of the at-fault motorist’s actions. Thus, the decedent’s estate can still receive compensation for the injuries and damages suffered by that person prior to her death as a result of someone else’s negligence.

If a plaintiff files a personal injury lawsuit against an at-fault party and then dies for reasons unrelated to their case the plaintiff’s surviving family members would have grounds for a survival action on behalf of the deceased. If successful, they could recover compensation for losses incurred up to the plaintiff’s death. However, the estate would not have grounds for a wrongful death lawsuit in this case. Depending on the state a survival action is a legal process that allows another person to begin or continue an injury claim on behalf of a deceased victim. When someone files a survival action, they essentially act as a substitute for the deceased, and any money they recover will go to the deceased person’s estate.

Furthermore, if the at-fault person passes away before the plaintiff’s personal injury lawsuit has concluded it is still possible to get compensation from the at-fault deceased person’s estate. However, a plaintiff will need to go through the probate process to get money from the estate and become a creditor.

Wrongful death claim

In contrast to a personal injury lawsuit with a decedent, a wrongful death claim allows certain eligible survivors to seek compensation for the losses they incur as a result of their loved one’s death. These losses include medical costs, funeral expenses, loss of the deceased future income and financial support, loss of companionship, loss of emotional support from the deceased, and burial expenses. California’s wrongful death law outlined in the statute Code of Civil Procedure 377.60  allows surviving family members or the estate to sue for damages when a person dies as the result of someone else’s wrongful act- whether the act was negligent, reckless, or intentional.

Medical Malpractice

Different states have different laws that govern who is eligible to bring a wrongful death action on behalf of a loved one who died from a medical error or a doctor’s negligence. Some states only allow a surviving spouse or a child under age 25 to sue for medical malpractice damages, whereas some states give a broader reach to various family members of the decedent. In California the statute of limitations for medical malpractice suit is typically three years.

Every state is different, but generally, there are two types of lawsuits you may file on behalf of a loved one who died due to medical malpractice: a wrongful death action and a survivor action. Since each type of lawsuit entitles you to a different set of damages, many plaintiffs file both.

  • Wrongful death claim

In contrast to a personal injury lawsuit with a decedent, a wrongful death claim allows certain eligible survivors to seek compensation for the losses they incur as a result of their loved one’s death. These losses include medical costs, funeral expenses, loss of the deceased future income and financial support, loss of companionship, loss of emotional support from the deceased, and burial expenses.

  • Survivor Lawsuit

A survivor lawsuit is filed because if the survivor had lived, they would have been eligible to file a claim for damages against the negligent doctor or healthcare provider. It refers to the principle that the deceased’s right to sue survives their death. The damages recoverable in a survivor lawsuit include, pain and suffering, emotional anguish, fear, anxiety, and humiliation, grief, and loss of enjoyment of life.

Loss of Chance Doctrine

Depending on the state a wrongful death or survivor lawsuit may be brought if the decedent was suffering from a terminal illness or injury and may have died from medical malpractice, even if they had a low chance of survival. Some states have the loss of chance doctrine. This doctrine may allow the decedent’s loved ones to sue if a doctor’s actions or inactions took away a legitimate chance at the decedent’s survival, even if the chance of survival was small. Since California is a comparative negligence state, it does not follow the “last clear chance” doctrine. California allows you to recover damages even if you are primarily responsible for your injuries. However, your damages will be reduced by your own degree of fault.

Civil Lawsuit

If plaintiff or defendant in a civil lawsuit dies before the case is settled, the court will usually put the lawsuit on a temporary hold whereby a “Suggestion Of Death” is filed with the Court. This hold is intended to give the probate court the time it needs to appoint a personal representative for the deceased plaintiff’s estate or for the defendant’s estate. As soon as a personal representative is appointed, the personal representative can continue with the civil lawsuit.

What Should You Do?

Don’t let the death of a loved one freeze or prevent lawsuits from moving forward and thus delay the compensation you deserve.  The probate process can be expensive and complex especially during a time of grief. That is why you should reach out to a Trusts and Estates and/or Probate Attorney such as the attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. . We are always thinking of ways that our clients can save on taxes, trusts and estates planning, and probate matters. Whether or not a will or trust exists, the expertise of a skilled lawyer at the  Law Offices Of Jeffrey B. Kahn, P.C. is needed to help protect the interests of the parties involved. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles and elsewhere in California are highly skilled in handling tax and probate matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income. Also, if you are involved in cannabis, check out what our cannabis tax attorney can do for you. Additionally, if you are involved in cryptocurrency, check out what a bitcoin tax attorney can do for you.