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Boston Tax Law Blog

How to avoid Massachusetts restaurant sales tax issues

The Suffolk County District Attorney’s Office recently accused the owner of an East Boston diner of failing to report sales. In a lengthy complaint, the state argues the diner failed to properly report $850,000 in sales between 2012 and 2015. Failure to report the income, allegedly resulted in unpaid taxes of roughly $60,000. The owner framed the issue as a misunderstanding.

In Massachusetts, restaurants are required to collect a sales tax of 6.25 percent on meals. Accusations of pocketing money collected for the meals tax, but not paying it to the state are serious. Failure to collect the tax at all is equally serious.

Moving expense deduction to be suspended next year

If you are poised to move because of a new job, or transfer within the same company, you may be curious about what expenses may be tax deductible in the next tax year. After all, moving expenses have been a long-standing deduction that employees and small business owners have traditionally taken advantage of.

However, the moving expenses deduction will be suspended until 2025 as a result of the latest tax reform act. Specifically, the Tax Cuts and Jobs Act (TCJA) that was signed into law last December will not allow this deduction beginning with the 2018 tax year. The new law also suspends the inclusion of employer reimbursed moving expenses into a person’s income.

Student loan discharges may come with strings attached

For those considering bankruptcy because of the weight of student loan debts, they likely have unfortunately learned that discharging such debt is notoriously difficult. Essentially, bankruptcy debtors seeking to eliminate student loan debts must follow a rigid standard and show that their financial situation is going to persist and that they have made a good faith effort in paying them. However, courts have held this bar so high that few debtors actually qualify.

Nevertheless, the story of a disabled man who had $150,000 in student loans discharged brings some considerable concern to those who are looking to bankruptcy to eliminate these debts. After being allowed to wipe away the debt, the man was presented with a 1099-C, which is an IRS form indicating that forgiven debt is considered income under the U.S. Tax Code. After all of his deductions were considered, the man still was liable for $59,000 in tax debt.

Common tax fraud defenses to be asserted

In prior posts, we highlighted the difference between an honest mistake that results in the incorrect amount of taxes paid, and outright fraud where a taxpayer affirmatively tries to avoid paying taxes. Indeed, it is easy to point out the difference between fraud and mistakes in the abstract, but what defenses are actually available when the IRS thinks that you cheated on your taxes?

This post will briefly describe two important defenses.  

What should happen if you are selected for an audit

As we have noted in prior posts, small business owners must be vigilant in keeping good records not just for tax season, but throughout the year. Not only is this a practice that is vital to business success, but mistakes and inaccuracies can lead to audits.

Indeed, next year’s tax season may see fewer audits because of budget cuts, but scores of small businesses will still be subject to tax inquiries. In the event your company is selected for an audit, this post will give you some helpful information as you prepare.

How to protect yourself if you can't pay your tax bill right away

The theme of TurboTax commercials reminds us that the fear of the unknown can really control our lives and force us to procrastinate on completing our tax returns. We may fear that we may make mistakes that will lead to unfathomable penalties. We may also fear the power of the federal government to collect on back taxes.

So if you are barely making ends meet (especially if you are a self-employed business person) and you concerned about how deal with tax debt you can’t readily afford to pay off, it is undoubtedly very stressful.

Everyone files last minute: What happens when IRS computers fail?

Tax Day 2018 has almost become a live blogging event. The IRS reported that its computer systems are “experiencing technical difficulties.” The extent and the cause of the outage were not specified. The agency recommended filing as usual.

The issues may affect the ability to make direct payments as well. The Wall Street Journal reported a congressional aide familiar with what was going on believed it to be a hardware failure and the agency was rebooting systems.

Can a tax debt relief company actually help you?

You may hear the radio advertisements for tax relief companies that can alleviate your burdens after you make a phone call to engage their services. Indeed, different tax relief companies have different strategies depending on the client and situation. But the better questions are: can such a company really help me and which one should I choose?

Before deciding on who to trust with your tax issue, keep in mind that the most effective relief agencies have experienced tax attorneys who represent individuals and businesses, much like our firm. So an essential choice must be a law firm (like ours) or a company that has a skilled tax lawyer.

A bigger paycheck or a larger refund?

The beginning of April is a very popular time to talk about tax refunds; unless, of course, you are poised to owe Uncle Sam money. Nevertheless, it is still important to think about your tax return in terms of the interest free loans that you may be giving to the federal government because of the withholdings in your paycheck.

It is a common norm that taxpayers who have too much withheld in taxes through their monthly (or weekly) paychecks stand to receive a refund after they file their annual return. This brings about a highly debated question: is it better to receive an income tax refund or a larger paycheck?  

Are you guilty of a crime or did you just make an honest mistake?

For most people, dealing with the IRS may not be at the forefront of their plans in January, especially when they have not received their w-2's or corporate bonuses from the past year. Nevertheless, what you do between now and the federal income tax filing deadline (April 17) could subject you to civil or criminal penalties depending on how it is viewed by tax authorities.

Indeed, there may be a difference between what the average taxpayer considers willful and intentional conduct and an honest case of ignorance or neglect. However, what a taxpayer may see as innocent or benign errors may appear to be calculated efforts to avoid paying taxes by the IRS.

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