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Boston Tax Law Blog

How proposed tax reform could impact you

Recently, President Donald Trump released an overview of his proposal for sweeping tax reform. Among the key provisions are:

  • A simplification of tax brackets – The Trump plan will reduce the number of tax brackets from seven to three, taxed at rates of 12 percent, 25 percent and 35 percent.
  • Elimination of the estate tax – Estate taxes are currently applicable only to individual estates of more than $5.45 million, or married couples’ estates valued at $10.9 million or above. Still, cuts are proposed.
  • Changes to personal exemptions and deductions – Only mortgage interest and charitable contribution deductions remain; all personal exemptions disappear, but the standard minimum deduction would double. This included deductions for medical expenses, student loan interest and child care.

Falsifying personal or business tax returns can lead to prison

We’ve previously discussed the potential consequences and ramifications – both civil and criminal – that can flow from submitting falsified tax returns. A majority of cases that involve criminal penalties flow from individual tax returns, but it is important to remember that business-related tax fraud (or evasion) can also result in criminal charges. These include, but are not necessarily limited to:

  • Imprisonment
  • Payment of back taxes/restitution to the IRS
  • Tens – or hundreds – of thousands of dollars in fines
  • Payment of costs associated with prosecution

Income from “side hustles” must be reported to tax authorities

More Americans than ever before – an estimated one in four – are taking so-called “side gigs” to bring in extra money. Whether it is walking dogs on the weekends, renting out your home occasionally through Air BNB or another similar service, delivering, or hauling passengers with a ride-share service like Lyft or Uber, “side hustles” generate hundreds of billions of income annually.

Unfortunately, many of us, in particular those of the “Millennial” generation, aren’t declaring those extra earnings to the IRS or other taxing agencies. Almost a third of Millennials with side jobs, income-generating hobbies and occasional money-generating activities are not reporting their income.

Equifax breach could bring long-term tax woes

Earlier this month, consumer credit giant (and one of the “big three” reporting agencies responsible for evaluating the creditworthiness of millions) announced a massive data breach. Hackers infiltrated the company’s databases, compromising confidential information of an estimated 143 million Americans.

The information accessed in the hack includes names, birthdates, social security numbers, addresses and debt account information. Of course, this vital information is more than sufficient for a criminal to commit identity theft.

Is the issue of Internet taxation “nexus” heading to SCOTUS?

A court case pitting the state of South Dakota against online retailers Wayfair, NewEgg and Overstock is likely to head up to the nation’s highest court on appeal soon. The case, State of South Dakota v. Wayfair Inc., 28160-a-GAS, Supreme Court of South Dakota (Pierre), came down in favor of the Internet sellers who challenged a state law requiring any online retailer who collected more than $100,000 in annual to pay sales taxes on transactions.

The decision by the state’s highest court turned on a precedential 1992 SCOTUS decision, Quill v. North Dakota, which dealt specifically with the issue of creating a “nexus” for sales before taxes are collected. Specifically, that case says that a retailer must have a physical presence in a state before tax liability “kicks in.”

Is your hobby actually a business venture?

Many of us enjoy hobbies in our free time. Whether its crafting or woodworking, building websites or small engine repair, hobbies offer a respite from everyday life in the form of stress relief and building personal skills. 

Sometimes, hobbies can grow into something bigger. Hobby activities can turn out to be a lucrative business venture. Many people have been able to quit their full-time jobs and wholly support themselves doing something that originally began as a hobby.

New House proposals aim to stave off IRS forfeiture abuses

Last week brought a potentially huge development in the long-standing fight against abuses of IRS authority in civil forfeiture cases: The U.S. House of Representatives passed via voice vote the Clyde-Hirsch-Sowers Restraining Excessive Seizure of Property through the Exploitation of Civil asset forfeiture Tools (RESPECT) Act.

Most people outside political circles are unaware of the Act, but it represents the first major steps at curbing wrongful asset forfeiture in a long time. The Senate hasn’t yet voted on a corollary measure introduced by Senators Tim Scott (R-SC) and Sherrod Brown (D-OH).

Distinguishing tax avoidance from tax evasion

The difference between tax avoidance and tax evasion may seem solely like a semantic one, but to the IRS, the differences are important.

There are distinct differences between criminal tax evasion and simply being negligent or overly aggressive when taking deductions, filing tax returns, taking credits or using exemptions.

Do “sin taxes” change behavior?

State legislatures continue to increase the tax on cigarettes. Alcohol comes up in the sin tax discussion occasionally. The latest in Massachusetts is a proposed tax on sugary drinks, which health advocates argue will lower the rate of type 2 diabetes.

One of these taxes that is not frequently discussed is a 10 percent excise tax on indoor tanning services that went into effect with the Affordable Care Act (ACA). Has this one reduced the number of perfectly tanned individuals in New England?

FATCA challenge dismissed by federal appeals court

A group of several Americans living abroad - who call themselves "Republicans Overseas" - have vowed to continue their fight against the Foreign Account Tax Compliance Act (FATCA) in spite of a recent dismissal of their claims by the Sixth Circuit Court of Appeals.

The plaintiffs, originally joined in their suit by Senator Rand Paul (R-KY), initially filed suit to stop enforcement of FATCA as concerning their overseas accounts. Their suit argued, among other things, on allegations that compliance with the "draconian" FATCA infringes upon their privacy rights.

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