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Boston Tax Law Blog

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.

What businesses should know about foreign deposits

The Foreign Accounts Tax Compliance Act (FATCA) is now operational and the Internal Revenue Service is reportedly poised to start issuing penalties for non-compliance. FATCA requires foreign banks to disclose to the federal government Americans who have foreign accounts with more than $50,000. The 30 percent withholding penalty on foreign transactions was supposed to be a deterrent; but with few withholdings taking place and more to come, the deterrent may not have had its intended effect.

However, it appears that the IRS is getting ready to make good on its promise to get tough on foreign depositors. FATCA requires banks to inquire as to whether you are compliant with federal law. And the list of banks that show up in the IRS’ Offshore Voluntary Disclosure Program (OVDP) is growing.

IRS offshore account voluntary disclosure program to end

Here at Levins Tax Law, LLC, we advise people in Massachusetts, across the country and internationally who have offshore accounts and other assets outside of the U.S. about their federal tax reporting requirements and about how to respond to IRS inquiries into these accounts. 

Briefly, people with signing authority in or ownership of certain foreign financial accounts may be required to file with the Treasury Department an annual form called Report of Foreign Bank and Financial Accounts, also called an FBAR or a FinCEN 114. FBARs are due every April 15 (a separate requirement from normal tax returns due then), with an automatic six-month extension.

Small businesses may take advantage of R&D tax credits

While the potential for a startup company to be worth millions of dollars after inception drives many entrepreneurs, the reality is that new businesses do not always realize a profit in their first year of operation. Some many not may not make money for a couple years before becoming profitable (e.g. Amazon). During this period, new businesses may not be required to pay federal income taxes (because of the lack of profit), they still must be responsible for payroll taxes; an expense that is not tax deductible, of course.

However, federal law now enables small startups to take advantage of tax breaks that large enterprises have been benefitted from for years. Essentially, startups may claim the coveted research and development credit (R&D credit) that could help in securing the additional cash that small businesses covet.

Beware of new scams against taxpayers

For some people, this week’s snow storm will be a unique opportunity to hunker down and complete their federal income tax returns. For some people, it may take only an hour or two. For others, it may be a project that takes the entire week and then some.

Regardless of how long it takes to enter numbers and check all available exemptions and credits, one thing is certain. Scammers will be out plotting against unsuspecting taxpayers to steal their identities and eventually their federal income tax returns.

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