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Federal tax liens and tax levies are different

Massachusetts residents who cannot afford to meet their obligations to the IRS could find themselves facing a variety of repercussions. Two of the possible consequences are federal tax liens and tax levies. Some people use the terms "lien" and "levy" interchangeably, but they are different.

When the IRS uses a tax levy to satisfy unpaid taxes, it actually seizes property. This usually involves seizing bank accounts, seizing property and/or garnishing a taxpayer's wages. This action is often taken after a tax lien.

Forget to pay taxes? Pay now to avoid additional penalties.

Taxpayers who fail to pay their taxes can face additional penalties — even if the Internal Revenue Service (IRS) granted an extension. It may seem counterintuitive, but the agency can continue to charge interest and may even apply penalties if you do not pay your tax bill by the April 15th deadline.

Are you part of this group? If so, the IRS recently published a news release with some clarification.

Does the IRS expect teenagers to pay taxes?

Summer is approaching, and many teenagers living here in Boston or elsewhere may begin thinking about getting a job to earn some extra money. Entering the workforce can provide a sense of freedom and independence, but it can also require a wakeup call to the responsibilities that adults tend to assume without much thought. For instance, the IRS expects teenagers to pay taxes and possibly even to file an income tax return.

Age has nothing to do with fulfilling this civic responsibility. A teen may expect to bring home all of his or her wages, and getting that first paycheck could be a shock. When a teenager takes a job, his or her employer is responsible for deducting and paying payroll taxes for every employee, including those who have not even reached the age of majority.

Prepare now for dealing with the IRS next year

Tax time has come to a close for this year, and most people want nothing to do with the subject until much later in the year or nearer tax time next year. While many Massachusetts residents can empathize with that sentiment, it may not be the best course of action for dealing with the IRS. In fact, there may be some steps to take now that could make tax time go more smoothly next year.

For instance, now would be a good time to starting paying into a 401(k) or an independent retirement account, or IRA. Participants avoid taxes on the funds in these accounts until the money is taken out of them. Moreover, contributions to a 401(k) come out prior to earnings being taxed. In addition to avoiding taxes on these amounts, Massachusetts residents are building funds for retirement. It could be seen as a "win-win" situation for many people. 

Some in Massachusetts could file tax refund claims with the IRS

It is not surprising that many Massachusetts residents feel as though the IRS was not fair with them. Some of them are obligated to pay large tax bills with no avenue for relief other than working out a payment plan or some other agreement with the agency. However, others could have valid tax refund claims if the circumstances are right.

Many Massachusetts residents have financial obligations that they may not be able to pay such as past due child support, alimony or state or federal taxes, along with other federal debts like student loans. When a married couple files a joint tax return expecting to receive a refund, they could be in for a surprise. The government may seize that refund in order to satisfy those debts.

What happens when people have unfiled tax returns

April 15 has come and gone. If Massachusetts residents failed to file their income tax returns or file for extensions by this date, they could face consequences if they owe money to the IRS. Unfiled tax returns could lead to substantial penalties and interest, among other things.

Those due refunds will not face any penalties for not filing a return, but there is a deadline to file the return associated with the refund or the money becomes the property of the U.S. government. However, if a Massachusetts resident does owe, that is a different story. Some people avoid filing because they owe, but that would be a costly mistake.

3 face tax crimes for allegedly falsifying tax returns

Owning a business is a dream of many Massachusetts residents, but doing so comes with certain financial responsibilities. Most people fulfill these obligations, which include paying personal and business taxes. Every so often, the IRS alleges that certain business owners commit tax crimes by falsifying returns and failing to pay amounts the agency believes are due.

Three Massachusetts restaurant owners currently find themselves facing these accusations. According to the IRS, the men each owned a 20 percent interest in the restaurant during tax years 2012 and 2013. The agency alleges that for those two years, the men colluded to defraud the federal government.

Two deadline-related tax penalties: Which is more serious?

It’s April and the tax filing deadline is less than two weeks away. If you have not yet filed or had a chance to think about taxes, you still have options.

Take a realistic assessment of the new week and a half. If your calendar is so busy the odds of filing on time are virtually nonexistent, submit Form 4868 (Application for Automatic Extension of Time to File U.S. Individual Tax Return) and the IRS will automatically grant you a six-month extension. This can help you avoid the late-filing penalty (spoiler alert - it is the stiffer penalty).

Can you overcome a trust fund recovery penalty?

As a Massachusetts business owner, executive or bookkeeper with employees, you know that you are responsible for keeping a portion of each worker's check for withholding and Social Security taxes. After putting these amounts in a trust, you are to transmit them to the IRS. When the agency believes you failed to fulfill this duty for some reason, it could find you personally responsible for a trust fund recovery penalty.

If this happens to you, your company or the Massachusetts business you work for, it may not be necessary for you to pay this penalty yourself. You have the right to contest it and defend yourself. There are certain defenses to this accusation and associated penalty.

The IRS offers options for dealing with tax debt

In just a few weeks, the deadline for federal tax returns will arrive. With the new changes in tax laws, it may be difficult for many in Massachusetts to know what to expect when they get to the final calculation. Many who typically receive refunds may end up owing the IRS, and others who typically owe may be shocked if their bill is much higher than usual. This may cause even more anxiety if the taxpayer does not have the means to pay what is owed.

Fortunately, the IRS offers numerous options for repaying a tax debt. Taxpayers who cannot pay the full amount are advised to file their tax returns by the deadline anyway and pay as much as they can at that time. Additionally, submitting a Form 1040-V will notify the IRS that the taxpayer intends to pay the balance within 45 days, and the IRS will subsequently respond with a bill for that amount plus late fees.

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