b'To Arbitrate or Litigate? AlertsClients frequently ask whether they should specify arbitration1. Control.In court proceedings, the parties fates are controlled or litigation as the dispute resolution method in their contracts.by the judge assigned to the case by the court. That judge will1 Tax UpdateWhen Are Taxes Due? Of course, the answer is one of the most hated of lawyerlyprobably be fair, smart, and hard-working, but the judge may notIRS Individual Income Tax Return and Estimated Tax Due Datesanswersit depends. There are advantages and disadvantages tohave a background in the area of dispute. Many judges rotateUnlike last year, the Internal Revenue Service (IRS) has not extended the filing deadline for your 2020 individual income both methods of dispute resolution.between assignments, including criminal and family law matters.tax return. Your return is due April 15, 2021. Monetary Considerations As a result, the judge may not be in the best position to handle a complex commercial dispute.If you cannot file by April 15, 2021, to avoid penalties you must file The conventional wisdom is that arbitration is the better choicean extension by submitting Form 4868 to the IRS by April 15, 2021.FOR THE PERIOD:PAY BY: because it is less expensive. But this is not necessarily true.In contrast, the parties to an arbitration have input on who willThis extension extends your return filing due date to October 15, 2021. Arbitrations administered by agencies like the American Arbitrationdecide their dispute. Arbitrators do not have to be lawyers. TheJan. 1March 31April 15, 2021 parties can choose someone with knowledge of their industry toBe aware that this extension does not extend the time to pay your IRSApril 1 May 31June 15, 2021 Association have filing fees that can be in the thousands of dollars,tax liability, but merely extends your return filing due date. To avoid while court filing fees are usually only hundreds of dollars. Indecide the dispute. late payment penalties, you may need to make a payment to the IRS byJune 1Aug. 31Sept. 15, 2021 arbitration, the parties pay the arbitrators fees. In complex matters,2. Finality.Court proceedings have mechanisms for appeal.April 15, 2021.Sept. 1 Dec. 31Jan. 17, 2022* arbitrations are often decided by a panel of three arbitrators, eachJudges and juries make mistakes, and appeals allow for correction of whom bills by the hour. In contrast, judges in court are paidLikewise, the IRS has not extended the deadlines for making estimated tax* You do not have to make this estimatedby the taxpayers. Courtrooms are also provided by the taxpayers,of those errors. But that takes time and money. Arbitrations do notpayments in 2021. If you are required to make estimated tax payments,payment if you file your income tax return andtypically have appeals. Overturning a bad arbitration award is verypay the entire amount by January 31, 2022.while arbitrations often occur in conference rooms that are renteddifficult, so if you have a bad day at arbitration, you may well beindividuals must submit payments by the following dates:by the parties. Administration of arbitrations is unquestionablystuck with the result. There is a fundamental trade-off betweenMinnesota Tax Return Due Datesmore expensive for the parties than court-based litigation. the ability to potentially overturn a bad result and the time and expense to reach a final resolution. Similarly, Minnesota has not extended the filing deadline for your 2020 individual income tax return. Arbitrations reputation as a cheaper alternative to litigation stems from its less formal nature. Court proceedings are governed by3. Speed.The last non-monetary consideration is speed.Minnesota requires taxpayers to file their 2020 individual income tax returns by April 15, 2021. Minnesota does allow strict rules of procedure and evidence. Arbitrations have rules too,Most of the time, court proceedings are slower than arbitrationsan extension to file returns until October 15, 2021. No special form is needed to file for this extension. It is an automatic but those rules are generally more relaxed. The result is that thereas the pace is dictated by the courts calendar. Because arbitrationsgrace period provided to taxpayers. However, to avoid a late payment penalty, you must pay your Minnesota tax liability are fewer disputes over procedural technicalities in arbitration,are controlled by the parties, they can be tailored by the parties toby April 15, 2021.allowing the parties to concentrate more on substance than form.move as quickly as the parties want. Arbitrations usually move faster than court proceedings, whichMinnesota has not extended any estimated tax payments due in 2021. The due dates for making Minnesota estimated tax also saves the parties money on attorneys fees. Conclusionpayments are the same as for federal estimated tax payments, which are outlined above.Limitations on discovery are the biggest driver for cost savingsThis is a very brief overview of complex issues that can affect youAlthough Minnesota has not extended the various due dates, it is abating penalties due to reasonable cause, which may in arbitration. The courts have rules that permit wide-rangingand your company. Before signing any contract with a disputeinclude being negatively affected by the COVID-19 pandemic. Please reach out to a Moss & Barnett attorney to help discovery of evidence through several means, including writtenresolution clause, you should talk with your Moss & Barnettevaluate whether your circumstances constitute reasonable cause or if you have questions regarding the tax filing deadlines. interrogatories, subpoenas, requests for production of documents,attorney about what dispute resolution method is right for your and depositions. All too often, the cost to respond to discoverysituation and how contract language can be crafted to achieve can equal or even exceed the amount in controversy. The amountyour goals. 2 Company Expenses Paid with Forgiven PPP Loan Proceeds Are Tax Deductible of discovery permitted in arbitration varies widely depending onThe Consolidated Appropriations Act, 2021 (the Act) clarifies the treatment of business expenses paid with the applicable arbitration rules and the arbitrator. The AAAs FastPaycheck Protection Program (PPP) loan proceeds that were subsequently forgiven. Prior to the Act, the Internal Track Rules, for example, do not permit any discovery. That beingJeffrey A. Wieland Revenue Service (IRS) issued guidance that businesses could NOT claim a tax deduction for business expenses that were said, there is a trend in arbitration to generally allow for more612-877-5261|Jeff.Wieland@lawmoss.com paid with forgiven PPP loan proceeds. The IRS position was that businesses would recognize a double benefit since the discovery, which reduces or even eliminates the cost advantageLawMoss.com/people-jeffrey-a-wieland forgiven PPP loan proceeds were excluded from taxable income. The Act reverses the IRS position and provides that such of arbitration.expenses are tax deductible. Please note that some states have taken a position that expenses paid with forgiven PPP loan Jeffrey A. Wieland practices in our construction law and litigation Non-Monetary Factorsgroups. He has a B.S. in Engineering Physics and a Masters degree inproceeds are NOT tax deductible for state income tax purposes.In addition to the above cost considerations, there are threeMechanical Engineering. He spent 15 years working as an engineer non-monetary factors parties should consider when negotiating aand project manager before becoming a lawyer. He is licensed in theIf you would like assistance assuring best practices in these areas, please contact your attorney at Moss & Barnett.state and federal courts in Minnesota and North Dakota where he 2 method of dispute resolution: typically represents contractors, subcontractors, suppliers, and owners. 3'