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Boston Tax Law Blog

Health savings accounts: What you need to know to avoid an audit

Do you have a health savings account (HSA) through your health insurance? many types of policies now come with HSAs to cover out-of-pocket medical costs.

If you have a generous employer, you may receive $500 or $1,000 at the beginning of the year. In 2016, you can also contribute pre-tax earnings of up to $3,350 for a single person or $6,750 for a family to your HSA. You can invest any amount that you do not use on medical costs. In effect, these accounts can be used as retirement funds growing tax-free over the years.

Expecting a tax refund? Fill early

The Internal Revenue Service started accepting e-filed returns last Tuesday. Yet employers and businesses have until February 1, 2016 to send the tax forms required to complete a return.

This means you may not have started thinking about filling your tax return. But you should, especially if you expect to receive a refund. By filing early, you may be able to thwart any attempt to use your information to obtain a fraudulent tax refund. In this post, we will discuss what the IRS is doing to combat the problem and what you can do.

Hobby loss, part 2: How does the 9-factor test work?

In the first part of this post, on December 27, we provided an introduction to the concept of hobby loss by looking at a recent case example. The case involved a photographer who created and sold stylized digitized images of the American West.

From 2008 to 2010, the endeavor lost money. The photographer tried to take tax deductions for business expenses for those years. The IRS took the position that those decductions were not allowed. The U.S. Tax Court sided with the IRS, applying a 9-factor balancing test.

Private collectors for tax debt: When can they be used?

Turning the calendar into a new year invariably means tax changes. In today's post, we will update you on one of the new features in US tax law this year: the use of debt collectors from private industry to go after certain types of tax debt.

This is not the first time Congress has required the IRS to enlist private collectors to collect unpaid taxes. Critics such as the National Taxpayer Advocate contend that two previous attempts to raise revenue this way not only failed to do that, but also opened up taxpayers to abusive collection tactics.

Distinguishing a business from a hobby, part 1: a photographer’s case

One of the classic issues in tax law is commonly known as “hobby loss.” It involves trying to distinguish between a hobby and a business activity.

It’s an important distinction because tax deductions and possible tax controversies are at stake. After all, many people engage in activities they enjoy that may bring in income, but arguably don’t qualify for the types of tax deductions available for business expenses. And other people engage in activities that are intended to make money, but may end up losing it.

Tax filing season and the protection of personal data

This week the IRS announced the dates for the upcoming tax filing season. Federal tax returns for 2015 will be accepted beginning on January 19, 2016.

The deadline for filing or requesting an extension will be slightly later than the usual April 15 date. Because of the Emancipation Day holiday in Washington, D.C., the deadline this year will not be until April 18.

Bank levies: How should you respond to a freeze on your account?

When the IRS freezes your bank account due to tax debt, it quickly makes your tax trouble especially urgent.

After all, you probably don't have cash stuffed in your mattress or gold hoarded somewhere in your house. An IRS levy against your bank account can therefore undercut your access to the money you need to meet your most basic needs.

Criminal investigations: Numbers down as IRS loses agents

Last week, the Criminal Investigation division of the IRS released its annual report for Fiscal Year 2015. The numbers tell a story of an agency that has had to cut back significantly on the number of investigations it initiates.

The cutbacks are not the result of a change in enforcement policy. As we will discuss in this post, they are the result of reduced resources.

What happens if you don't pay your taxes?

When you think about it, the tax system here in the United States is really based on the honor system. The federal government trusts that you will honor your responsibility to file your tax forms to the Internal Revenue Service for processing. Of course, you truly are legally required to file them -- but even if you didn't file, some time would pass before any penalties would be inflicted upon you.

This isn't to say that you should decide to just skip your duties as a U.S. citizen and not file your taxes. Far from it, actually. But it is an interesting realization about our current tax system. While we're on the topic, though, it begs the question: what happens to someone if they simply don't file their taxes?

Tax debt resolution, part 2: installment agreements and OIC

In the first part of this post, we discussed two possibilities for getting your tax bill paid. One possibility is to take out a personal loan so you can pay Uncle Sam. Another is to set up a short-term payment plan.

In your particular situation, however, neither one of those options may be feasible. You may have tax debt that you are unable to pay in full, even within the 120 days allowed for a payment plan.

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