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Boston Tax Law Blog

Fourth of July special: taxation and representation

The Fourth of July is a fitting occasion to put tax law in a larger picture.

After all, protests over taxation without representation played a key role in the movement toward American independence from Britain. The image of tax protesters dumping chests of tea into Boston Harbor in 1773 continues to shine out vividly in a country still trying to bring more fairness to its tax system.

Revisiting the right to appeal IRS actions

It's been awhile since we last discussed the rights that taxpayers have to challenge the IRS through appeals.

In our concluding post of last year, we noted that bringing an action in U.S. Tax Court is not the only way to appeal an IRS action. There are also numerous internal appeal procedures within the IRS. In this post, we will remind you of some of these internal options for disagreeing with the IRS.

Civil forfeiture, part 2: What is being done to address the problem?

Let's pick up the thread of our discussion of civil forfeiture from last month. In recent years, the IRS and other government agencies have often been quick to seize assets for suspected violations of the Bank Secrecy Act or other laws - even in cases where no criminal charges are ever filed. We discussed this problem in our May 8 post.

In this part of the post, let's look at what Congress and the IRS are doing to address the problem.

What a difference intent makes!

When it comes to tax noncompliance, intent can make a significant difference in terms of the penalties a taxpayer faces. When the Internal Revenue Service investigates noncompliance, there are certain things auditors will investigate to get a better handle on the intent of the taxpayer. This is where the distinction between negligence and fraud is critical.

Tax fraud, of course, is always intentional, with the specific intent being to evade tax obligations. Tax negligence, on the other hand, involves a range of less reprehensible states of mind, including carelessness, recklessness and intentional disregard. Auditors are trained to look for specific indicators associated with either negligence or fraud.

Foreign account reporting, pt 2: FBAR penalties and 'willfulness'

For taxpayers without foreign bank accounts, filing season comes only once a year, in April. But if you have reporting obligations for a non-U.S. account, there is a second filing deadline that comes at the end of June. The applicable form for this second filing is now called FinCEN 114, though it is still widely known as the FBAR.

If you have foreign assets, you have to check "yes" in the appropriate box on your regular tax filing. You may also have to file Form 8938, the Statement of Specified Foreign Financial Assets, even if the value of the assets is not high enough to trigger an FBAR filing obligation. We explained this in more detail in our February 19 post.

Foreign account reporting, part 1: Who is required to file?

The filing deadline for foreign bank accounts that meet certain monetary thresholds is only a few weeks away. As in past years, the deadline is June 30.

The form used for filing is now called FinCEN Form 114, but it is still often referred to as the FBAR. In this two-part post, we will discuss two basic questions that often arise in connection the FBAR filing requirement.

Home mortgage debt cancellation, pt 2: eligibility considerations

Let's pick up the thread of a two-part post we began earlier this spring on the taxation of cancelled debt from a home mortgage.

The general rule of course is that a cancelled debt is considered taxable income. But as we explained in our March 5 post, the Great Recession and the real estate crisis that accompanied it put that general rule to the test. With so many people experiencing forclosure or a short sale, Congress responded with legislation that excluded income from cancelled mortgage debt.

Foreign assets: Which ones do you have to report on Form 8938?

This is a follow-up to a post we did last winter on filing requirements for foreign assets and income.

As we noted earlier, there are actually two sets of filing requirements that can come into play. The first set involves checking the appropriate box and filing Form 8938 as part of your regular income tax return. The second set involves filing FinCEN Form 114 (otherwise known as the FBAR) if you have offshore accounts that exceed certain valuation thresholds. We discussed this in our February 19 post.

Civil forfeiture, part 1: When is the IRS allowed to do it?

If you are a small business owner, the bank account you use for your business is vital to you. Day by day, the transactions that occur there are like your life blood

It is therefore obviously a huge problem when the IRS seizes that account, contending that there has been suspicious activity under the Bank Secrecy Act or some other federal law. In this two-part post, will describe the problem of civil forfeiture and update you on recent efforts to reform the process.

Residency and state taxes, part 2: proposed federal law has not passed

In the first part of this post, we discussed some of the detailed rules on residency status affecting state income tax returns. We focused, in particular, on part-year residents and what state tax obligations they may have in Massachusetts.

In today's post, let's look at how states tend to treat people who live in one state but earn income in another. More specifically, we will take note of a proposed federal law to encourage more uniform standards for this type of taxation.

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