NYC Tax Advocates

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Specializing in IRS and NYS Tax Representation. Workers Compensation Audits, Payroll, Sales and Income Tax representation for Businesses, Individuals, Restaurants and Construction Companies. Civil and Criminal Workers Comp Audit representation includes: NYSIF Examinations, Premium Disputes, Employee Misclassification, Underreporting, Unreported Income, and Failure to Keep Accurate Payroll Records.

Tuesday, August 30, 2016

IRS Declares “OPEN SEASON” on Small Businesses and Medical Doctors



The IRS launched a new offensive against small business-owners in New York, LA, DC, Philly and other swanky metropolitan areas. Accordingly, a phalanx of jacked up specially-trained tax examiners and collectors are hitting the streets and shaking down delinquent taxpayers. People who own cash businesses, e.g. restaurants, body & repair shops, barbershops, bars, liquor stores, convenience stores, etc., are being audited like never before. The IRS is concomitantly cracking down on payroll withholding violations and has singled out medical doctors and medical practices with a vengeance.  Moreover says David Selig of Selig & Associates, the IRS now shares information with various State Agencies. Specifically, the IRS state partnering program, facilitates and expands joint tax administration relationships between the IRS and state taxing authorities, such as departments of revenue and state workforce agencies. IRS and state/local agencies share data with each other through a variety of ongoing initiatives. The information includes: Audit Results; Federal Individual and Business Tax Return Information and Employment Tax Information. A recent recipient of this “joint operation” said that it was akin to being financially gang-raped, a sentiment that we find offensive and in extremely bad taste.

Todays Tax Law Tutorial: The IRS is the only federal agency that can investigate potential criminal violations of the Internal Revenue Code. Compliance with the tax laws in the United States relies heavily on self-assessments of taxes owed. This is called voluntary compliance. When individuals and corporations make deliberate decisions not to comply with the law, they face the possibility of a civil audit or criminal investigation which could result in the assessment of costly tax penalties or prosecution and possible jail time. A financial analysis, or investigation, of the individual’s financial history often determines whether the omission is unintended or a willful attempt to evade payment of taxes.

What is a Financial Investigation?

Financial investigations are usually very document-intensive. Specifically, they involve records, such as bank account information, real estate files, motor vehicle records, etc., which point to the movement of money. Any record that pertains to or shows the paper trail of events involving money is important. The major goal in a financial investigation is to identify and document the movement of money. The link between where the money comes from, who gets it, when it is received and where it is stored or deposited, can provide proof of criminal activity. Tax evasion, public corruption, health care fraud, telemarketing fraud and terrorist financing are just a few of the types of crimes that revolve around money. In these cases, a financial investigation often becomes the key to a conviction. Traditional law enforcement relies on investigative tools such as crime scene analysis, physical evidence, fingerprint identification or eyewitness accounts. The limitations of these techniques become obvious to those who are trying to prove wrongdoing in a sophisticated financial crime. With no proof, there is no conviction.

What are the Major Areas of Financial Investigations?

IRS Criminal Investigation’s focus on financial investigations falls into three interdependent categories: Legal Source Tax Crimes, Illegal Source Financial Crimes, and Narcotics-Related Financial Crimes/Counterterrorism Financing. These three areas are mutually supportive and create a well-rounded law enforcement program for IRS which addresses the growing fraud in legal industries as well as penetrates the nucleus of money laundering operations and drug trafficking/terrorist financing organizations.

Focusing on Legal Source Tax Crimes


Criminal Investigation's primary resource commitment is devoted to the development and investigation of legal source tax crimes. These investigations involve legal industries and occupations, and more specifically, legally earned income. Fraud in legal industries is often termed "white collar" crime because it involves financial violations, including tax violation, by individuals who are not involved in other criminal activity. Some of the tax violations include income tax evasion, failure to file, or filing a false tax return. The crimes often include employment tax fraud, false claims for tax refunds, abusive trust schemes, unscrupulous tax return preparers and frivolous filers/nonfilers who challenge the constitutionality of the American tax system.

Monday, August 29, 2016

NYS Tax Department Discovers Gold & Strikes it Rich! Celebrity Owned Restaurants Next on the Hit Parade




For time and memorial, New York City Restaurants have been the Darling of the Tax Department. And now (thanks to reality television and the proliferation of celebrity owned restaurants) over zealous tax collectors are cashing in on the Craze, says David Selig of Selig & Associates. But celebrities aren’t the only one’s who are feeling the pinch, says Selig. For example, a tasty little Curry House on the Upper East Side was recently closed by the Tax Department because it owed less than $400 Thousand in sales and corporate taxes. A few days later, the Tax Department seized another restaurant in the East Village; then padlocked a yummy Pizza franchise in the Bronx. Then it was back to Chelsea to shutter another Pizzeria that allegedly owed $122K in Unpaid Taxes; then back up town to kill a few more dreams. Ironically, says Selig, almost all sales tax controversies are resolvable, provided the owners’ get involved early on. Moreover, now that so many celebrities and professional athletes have bought into New York City restaurants, the opportunities to settle have increased exponentially. Unfortunately when it comes to tax controversies, most athletes and entertainers are poorly represented. I suspect it’s because their attorneys and accountants don’t regularly practice before the IRS and State Tax Department, and don’t really understand how the system works, says Selig.


Understanding the Rules

Generally, food sold at food stores is taxable when sold under any of the following conditions:
It is sold heated;
It is sold for consumption on the premises; or
It has been prepared by the seller and is ready to be eaten, whether for on premises or off premises consumption.

Also, the following categories of food are taxable:
Sandwiches (whether heated or unheated),
Carbonated beverages,
Candy and confectionery, and believe it or not,
            Pet foods.

Heated foods: All food that is sold in a heated state is taxable. This includes food that is cooked to order and food that is kept warm using heat lamps or other warming devices. Examples of these foods are:
Hot pizza, hot soup, hot rotisserie chicken, warm roasted nuts, and warm pretzels;
Fish cooked to order at the seafood counter; and
Food sold at a hot buffet in the store.

Food sold for consumption on the premises

Food sold that may be eaten at an eating area (i.e., an area with tables and seating) in the store or just outside the store is taxable. This includes food sold at a:
Restaurant or similar establishment,
Convenience store,
Coffee shop within the store,
Food court,
Salad bar or snack bar,
Concession stand, or hot or cold buffet.





Thursday, August 25, 2016

IRS Collections Don’t Stop Just Because You’re Incarcerated



When the verdicts’ been read and the fat lady has sung, most convicted tax cheats have fleeting thoughts of escape, suicide and their eventual incarceration, viz. the big house. But when it comes to the rough and tumble world of tax collecting, incarceration is but a measly bump in the road. In fact, the financial consequences associated with tax crimes are so financially onerous, that restitution and judgments frequently go unpaid. Unfortunately, indigence won’t stop the IRS from playing “pig pile” a/k/a bringing a civil  action for unpaid taxes, penalties and interest.  

To this end, one of our former clients, who was incarcerated for a non-tax related offense, was contacted by an IRS Agent who wanted to interview him in prison. Our client refused, and eventually the resourceful Agent made up his own extrapolations, which were based on jaundice publications from the New York Post (and were wildly inaccurate). 


Another one of our client’s was visited by the IRS in a halfway house she called home, and just about coerced into signing a $1,000,000 confession of judgment (that she probably didn’t owe).  The inducement to sign was as simple as it was effective “Admit to this tax liability, or we’ll refer your case to Criminal Investigations, and you’ll be back in prison for another 5 years” (powerful stuff). Keep in mind that, at the time of her confession, she was 67 years old, indigent and in terrible health. Ultimately, we had her placed into temporarily uncollectable status, and she died several months later. A Dickensian story if ever there was one, says David Selig of Selig & Associates.  

Tax Tip of the Day: In a criminal tax case, a court can require a defendant to pay the losses incurred by the government. The amount of the restitution ordered by the court is calculated from evidence submitted at trial or from information contained in the plea agreement and presented to the court at sentencing.

Public Law No. 111-237 amended IRC 6201 to provide that the Service shall assess and collect the amount of restitution ordered in a tax case for failure to pay any tax imposed under the Internal Revenue Code in the same manner as if such amount were such tax. The law applies to restitution orders entered after August 16, 2010.

The law also amended IRC 6213(b) to stipulate that a notice of assessment of restitution is not a notice of deficiency and may not be petitioned to Tax Court and IRC 6501(c) to address the unlimited assessment period for restitution-based assessments (RBAs).






Monday, August 22, 2016

Will There Ever be a Rainbow? Same Sex Couples Should Have Stayed Single says IRS




Successfully married taxpayers with high combined incomes are getting the shaft says David Selig of Selig & Associates. Now that the dust has settled and same-sex marriage is official, the IRS is cashing in like never before. In fact, thanks to procedural changes at the IRS, unmarried same sex couples (who are high earners) can now deduct twice the amount of mortgage and interest than their married friends can. But according to the IRS, there’s always a silver lining. 

Background: The IRS lost a seemingly run-of-the-mill case brought by two registered domestic partners (“RDP”) who owned some posh properties in Beverly Hills and Palm Springs; had approximately $2.6 in mortgages, and paid approximately $180,000 in taxes each year. Since our tax law presently allows taxpayers to deduct up to $1 million in interest, viz. mortgage debt, plus another $100,000 in home equity financing, each domestic partner deducted the fully allowable amount on his individual tax return. 

The IRS called shenanigans, dropped the hammer and commenced to audit the financially savvy duo. Specifically, the IRS said the $1.1 million limit must be applied on a “per-residence basis” and that the cozy couple would have to share the deduction limit, and would lose the right to $198,415 worth of deductions during the next two years. 

The registered couple filed a petition in Tax Court - and eventually lost. Crestfallen, they brought their case to the U.S. Court of Appeals in the Ninth Circuit, which overturned the Tax Court's ruling and held the men could deduct $1.1 million each. 

The IRS “acquiesced” and whilst humming the French Mistake, unilaterally decided the Ninth’s ruling would not be limited to the Ninth Circuit - and that all unmarried taxpayers, coast to coast, may take similar deductions.

But don’t start popping the champagne corks just yet, warns Selig. Now that gay marriage is in vogue, the IRS is salivating over its anticipated windfall. Apparently oodles of high earning same sex couples have tied the knot and, blushing brides of all genders, particularly in New York City and San Fran are getting the shaft.  Specifically, when you’re married your deductions top out at $1.1 million in mortgage and home debt. Whereas unmarried, partners can deduct a whopping $2.2 million.



Selig & Associates Presents “IRS Answers to Frequently Asked Questions for Registered Domestic Partners and Individuals in Civil Unions”

The following questions and answers provide information to individuals of the same sex and opposite sex who are in registered domestic partnerships, civil unions or other similar formal relationships that are not marriages under state law. These individuals are not considered as married or spouses for federal tax purposes. For convenience, these individuals are referred to as “registered domestic partners” in these questions and answers. Questions and answers 9 through 27 concern registered domestic partners who reside in community property states and who are subject to their state’s community property laws. These questions and answers have been updated since the Supreme Court issued its decision in United States v. Windsor. As a result of the Court’s decision, the Service has ruled that same-sex couples who are married under state law are married for federal tax purposes. See Revenue Ruling 2013-17 in 201338 IRB 201.

Q1. Can registered domestic partners file federal tax returns using a married filing jointly or married filing separately status?

A1. No. Registered domestic partners may not file a federal return using a married filing separately or jointly filing status. Registered domestic partners are not married under state law. Therefore, these taxpayers are not married for federal tax purposes.

Q2. Can a taxpayer use the head-of-household filing status if the taxpayer’s only dependent is his or her registered domestic partner?

A2. No. A taxpayer cannot file as head of household if the taxpayer’s only dependent is his or her registered domestic partner. A taxpayer’s registered domestic partner is not one of the specified related individuals in section 152(c) or (d) that qualifies the taxpayer to file as head of household, even if the registered domestic partner is the taxpayer’s dependent.

Q3. If registered domestic partners have a child, which parent may claim the child as a dependent?

A3. If a child is a qualifying child under section 152(c) of both parents who are registered domestic partners, either parent, but not both, may claim a dependency deduction for the qualifying child. If both parents claim a dependency deduction for the child on their income tax returns, the IRS will treat the child as the qualifying child of the parent with whom the child resides for the longer period of time during the taxable year. If the child resides with each parent for the same amount of time during the taxable year, the IRS will treat the child as the qualifying child of the parent with the higher adjusted gross income.

Q4. Can a registered domestic partner itemize deductions if his or her partner claims a standard deduction? 

A4. Yes. A registered domestic partner may itemize or claim the standard deduction regardless of whether his or her partner itemizes or claims the standard deduction. Although the law prohibits a taxpayer from itemizing deductions if the taxpayer’s spouse claims the standard deduction (section 63(c)(6)(A)), this provision does not apply to registered domestic partners, because registered domestic partners are not spouses for federal tax purposes.

Q5. If registered domestic partners adopt a child together, can one or both of the registered domestic partners qualify for the adoption credit?

A5. Yes. Each registered domestic partner may qualify to claim the adoption credit for the amount of the qualified adoption expenses paid for the adoption. The partners may not both claim a credit for the same qualified adoption expenses, and the sum of the credit taken by each registered domestic partner may not exceed the total amount paid. The adoption credit is limited to $12,970 per child in 2013. Thus, if both registered domestic partners paid qualified adoption expenses to adopt the same child, and the total of those expenses exceeds $12,970, the maximum credit available for the adoption is $12,970. The registered domestic partners may allocate this maximum between them in any way they agree, and the amount of credit claimed by one registered domestic partner can exceed the adoption expenses paid by that person, as long as the total credit claimed by both registered domestic partners does not exceed the total amount paid by them. The same rules generally apply in the case of a special needs adoption. 

Q6. If a taxpayer adopts the child of his or her registered domestic partner as a second parent or co-parent, may the taxpayer (“adopting parent”) claim the adoption credit for the qualifying adoption expenses he or she pays to adopt the child?

A6. Yes. The adopting parent may be eligible to claim an adoption credit. A taxpayer may not claim an adoption credit for the expenses of adopting the child of the taxpayer’s spouse (section 23) .  However, this limitation does not apply to adoptions by registered domestic partners because registered domestic partners are not spouses for federal tax purposes.

Q7. Do provisions of the federal tax law such as section 66 (treatment of community income) and section 469(i)(5) ($25,000 offset for passive activity losses for rental real estate activities) that apply to married taxpayers apply to registered domestic partners?

A7. No. Like other provisions of the federal tax law that apply only to married taxpayers, section 66 and section 469(i)(5) do not apply to registered domestic partners because registered domestic partners are not married for federal tax purposes.

Q8. Is a registered domestic partner the stepparent of his or her partner’s child?

A8. If a registered domestic partner is the stepparent of his or her partner’s child under state law, the registered domestic partner is the stepparent of the child for federal income tax purposes.

Publication 555, Community Property, provides general information for taxpayers, including registered domestic partners, who reside in community property states. The following questions and answers provide additional information to registered domestic partners (including same-sex and opposite-sex registered domestic partners) who reside in community property states and are subject to community property laws.

Q9. How do registered domestic partners determine their gross income?

A9. Registered domestic partners must each report half the combined community income earned by the partners.  In addition to half of the community income, a partner who has income that is not community income must report that separate income. 

Q10.  Can a registered domestic partner qualify to file his or her tax return using head-of-household filing status?

A10. Generally, to qualify as a head-of-household, a taxpayer must provide more than half the cost of maintaining his or her household during the taxable year, and that household must be the principal place of abode of the taxpayer’s dependent for more than half of the taxable year (section 2(b)). If registered domestic partners pay all of the costs of maintaining the household from community funds, each partner is considered to have incurred half the cost and neither can qualify as head of household. Even if one of the partners pays more than half by contributing separate funds, that partner cannot file as head of household if the only dependent is his or her registered domestic partner. A taxpayer’s registered domestic partner is not one of the specified related individuals in section 152(c) or (d) that qualifies the taxpayer to file as head of household, even if the partner is the taxpayer’s dependent.    

Q11. Can a registered domestic partner be a dependent of his or her partner for purposes of the dependency deduction under section 151?

A11. A registered domestic partner can be a dependent of his or her partner if the requirements of sections 151 and 152 are met. However, it is unlikely that registered domestic partners will satisfy the gross income requirement of section 152(d)(1)(B) and the support requirement of section 152(d)(1)(C). To satisfy the gross income requirement, the gross income of the individual claimed as a dependent must be less than the exemption amount ($3,900 for 2013). Because registered domestic partners each report half the combined community income earned by both partners, it is unlikely that a registered domestic partner will have gross income that is less than the exemption amount.   To satisfy the support requirement, more than half of an individual’s support for the year must be provided by the person seeking the dependency deduction. If a registered domestic partner’s (Partner A’s) support comes entirely from community funds, that partner is considered to have provided half of his or her own support and cannot be claimed as a dependent by another. However, if the other registered domestic partner (Partner B) pays more than half of the support of Partner A by contributing separate funds, Partner A may be a dependent of Partner B for purposes of section 151, provided the other requirements of sections 151 and 152 are satisfied. 

Q12. Can a registered domestic partner be a dependent of his or her partner for purposes of the exclusion in section 105(b) for reimbursements of expenses for medical care?

A12. A registered domestic partner (Partner A) may be a dependent of his or her partner (Partner B) for purposes of the exclusion in section 105(b) only if the support requirement (discussed in Question 11, above) is satisfied. Unlike the requirements for section 152(d) (dependency deduction for a qualifying relative), section 105(b) does not require that Partner A's gross income be less than the exemption amount in order for Partner A to qualify as a dependent.                   

Q13. How should registered domestic partners report wages, other income items, and deductions on their federal income tax returns?

A13. Registered domestic partners should report wages, other income items, and deductions according to the instructions to Form 1040, U.S. Individual Income Tax Return, and related schedules, and Form 8958, Allocation of Tax Amounts Between Certain Individuals in Community Property States. Form 8958 is used to determine the allocation of tax amounts between registered domestic partners. Each partner must complete and attach Form 8958 to his or her Form 1040.

Q14. Should registered domestic partners report social security benefits as community income for federal tax purposes? 

A14. Generally, state law determines whether an item of income constitutes community income. Accordingly, if Social Security benefits are community income under state law, then they are also community income for federal income tax purposes. If Social Security benefits are not community income under state law, then they are not community income for federal income tax purposes. 

Q15. How should registered domestic partners report community income from a business on Schedule C, Profit or Loss From Business?

A15. Half of the income, deductions, and net earnings of a business operated by a registered domestic partner must be reported by each registered domestic partner on a Schedule C (or Schedule C-EZ). In addition, each registered domestic partner owes self-employment tax on half of the net earnings of the business. The self-employment tax rule under section 1402(a)(5) that overrides community income treatment and attributes the income, deductions, and net earnings to the spouse who carries on the trade or business does not apply to registered domestic partners.

Q16.  Are registered domestic partners each entitled to half of the credits for income tax withholding from the combined wages of the registered domestic partners?

A16. Yes. Because each registered domestic partner is taxed on half the combined community income earned by the partners, each is entitled to a credit for half of the income tax withheld on the combined wages.

Q17.  Are registered domestic partners each entitled to take credit for half of the total estimated tax payments paid by the partners?

A17. No. Unlike withholding credits, which are allowed to the person who is taxed on the income from which the tax is withheld, a registered domestic partner can take credit only for the estimated tax payments that he or she made.       

Q18. Are community property laws taken into account in determining earned income for purposes of the dependent care credit, the refundable portion of the child tax credit, the earned income credit, and the making work pay credit?   

A18. No. The federal tax laws governing these credits specifically provide that earned income is computed without regard to community property laws in determining the earned income amounts described in section 21(d) (dependent care credit), section 24(d) (the refundable portion of the child tax credit), section 32(a) (earned income credit), and section 36A(d) (making work pay credit).

Q19. Are community property laws taken into account in determining adjusted gross income (or modified adjusted gross income) for purposes of the dependent care credit, the child tax credit, the earned income credit, and the making work pay credit?

A19. Yes. Community property laws must be taken into account in determining the adjusted gross income (or modified adjusted gross income) amounts in section 21(a) (dependent care credit), section 24(b) (child tax credit), section 32(a) (earned income credit), and section 36A(b) (making work pay credit).

Q20. Are amounts a registered domestic partner receives for education expenses that cannot be excluded from the partner’s gross income (includible education benefits) considered to be community income? 

A20. Generally, state law determines whether an item of income constitutes community income. Accordingly, whether includible education benefits are community income for federal income tax purposes depends on whether they are community income under state law. If the includible education benefits are community income under state law, then they are community income for federal income tax purposes. If not community income under state law, they are not community income for federal income tax purposes. 

Q21. If only one registered domestic partner is a teacher and pays qualified out-of-pocket educator expenses from community funds, do the registered domestic partners split the educator expense deduction?

A21. No. Section 62(a)(2)(D) allows only eligible educators to take a deduction for qualified out-of-pocket educator expenses. If only one registered domestic partner is an eligible educator (the eligible partner), then only the eligible partner may claim a section 62(a)(2)(D) deduction. If the eligible partner uses community funds to pay educator expenses, the eligible partner may determine the deduction as if he or she made the entire expenditure. In that case, the eligible partner has received a gift from his or her partner equal to one-half of the expenditure.  

Q22. If a registered domestic partner incurs indebtedness for his or her qualified education expenses or the expenses of a dependent and pays interest on the indebtedness out of community funds, do the registered domestic partners split the interest deduction?

A22. No. To be a qualified education loan, the indebtedness must be incurred by a taxpayer to pay the qualified education expenses of the taxpayer, the taxpayer’s spouse, or a dependent of the taxpayer (section 221(d)(1)). Thus, only the partner who incurs debt to pay his or her own education expenses or the expenses of a dependent may deduct interest on a qualified education loan (the student partner). If the student partner uses community funds to pay the interest on the qualified education loan, the student partner may determine the deduction as if he or she made the entire expenditure. In that case, the student partner has received a gift from his or her partner equal to one-half of the expenditure. 

Q23.  If registered domestic partners pay the qualified educational expenses of one of the partners or a dependent of one of the partners with community funds, do the registered domestic partners split the section 25A credits (education credits)?

A23. No. Only the partner who pays his or her own education expenses or the expenses of his or her dependent is eligible for an education credit (the student partner). If the student partner uses community funds to pay the education expenses, the student partner may determine the credit as if he or she made the entire expenditure. In that case, the student partner has received a gift from his or her partner equal to one-half of the expenditure. Similarly, if the student partner is allowed a deduction under section 222 (deduction for qualified tuition and related expenses), and uses community funds to pay the education expenses, the student partner may determine the qualified tuition expense deduction as if he or she made the entire expenditure. In that case, the student partner has received a gift from his or her partner equal to one-half of the expenditure.     

Q24. Are community property laws taken into account in determining compensation for purposes of the IRA deduction?

A24. No. The federal tax laws governing the IRA deduction (section 219(f)(2)) specifically provide that the maximum IRA deduction (under section 219(b)) is computed separately for each individual, and that these IRA deduction rules are applied without regard to any community property laws. Thus, each individual determines whether he or she is eligible for an IRA deduction by computing his or her individual compensation (determined without application of community property laws). 

Q25. If a registered domestic partner is self-employed and pays health insurance premiums for both partners out of community property funds, are both partners allowed a deduction under section 162(l) (deduction for self-employed health insurance)?

A25. If one of the registered domestic partners is a self-employed individual treated as an employee within the meaning of section 401(c)(1)(the employee partner) and the other partner is not (the non-employee partner), the employee partner may be allowed a deduction under section 162(l) for the cost of the employee partner’s health insurance paid out of community funds. If the non-employee partner is also covered by the health insurance, the portion of the cost attributable to the non-employee partner’s coverage is not deductible by either the employee partner or the non-employee partner under section 162(l).  

Q26. If a registered domestic partner has a dependent and incurs employment-related expenses that are paid out of community funds, how does the registered domestic partner calculate the dependent care credit?  How about the child tax credit?

A26. If a registered domestic partner has a qualifying individual as defined in section 21(b)(1) and incurs employment-related expenses as defined in section 21(b)(2) for the care of the qualifying individual that are paid with community funds, the partner (employee partner) may determine the dependent care credit as if he or she made the entire expenditure. In that case, the employee partner has received a gift from his or her partner equal to one-half of the expenditure. In computing the dependent care credit, the following rules apply:
The employee partner must reduce the employment-related expenses by any amounts he or she excludes from income under section 129 (exclusion for employees for dependent care assistance furnished pursuant to a program described in section 129(d));
The earned income limitation described in section 21(d) is determined without regard to community property laws; and
The adjusted gross income of the employee partner is determined by taking into account community property laws.
A child tax credit is allowed for each qualifying child of a taxpayer for whom the taxpayer is allowed a personal exemption deduction. Thus, if a registered domestic partner has one or more dependents who is a qualifying child, the registered domestic partner may be allowed a child tax credit for each qualifying child. In determining the amount of the allowable credit, the modified adjusted gross income of the registered domestic partner with the qualifying child is determined by taking into account community property laws. Community property laws are ignored, however, in determining the refundable portion of the child tax credit.

Q27. Does Rev. Proc. 2002-69, 2002-2 C.B. 831, apply to registered domestic partners?


A27. No. Rev. Proc. 2002-69 allows spouses to classify certain entities solely owned by the spouses as community property, as either a disregarded entity or a partnership for federal tax purposes. Rev. Proc. 2002-69 applies only to spouses. Because registered domestic partners are not spouses for federal tax purposes, Rev. Proc. 2002-69 does not apply to registered domestic partners.

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