Boston Tax Law Blog

Got virtual currency? You could receive a letter from the IRS

On behalf of Levins Tax Law posted in Tax Crimes on Wednesday, July 31, 2019.

Boston taxpayers are required to report all of their income, which includes any virtual currency owned. The problem is that it is easy to forget about it and that could draw the attention of the IRS. In fact, the federal taxing authority recently announced that it has begun contacting certain owners of this type of currency via mail.

The letters accuse virtual currency owners of failing to report this income and pay the required taxes on it. The IRS categorizes the three types of letters as "educational." They say they intend to advise the affected taxpayers of their filing and tax obligations. Taxpayers are also given advice regarding how to correct perceived errors.

The IRS has a new tax form for those over age 65 for 2019

On behalf of Levins Tax Law posted in Internal Revenue Service on Wednesday, July 24, 2019.

After spending a lifetime working and preparing for retirement, people over the age of 65 -- here in Massachusetts and elsewhere -- often end up living on fixed incomes and others continue to work well after this birthday. Even so, many of them must still pay taxes on the income they do receive. The IRS recognizes their need to retain as much of their income as possible, so for the 2019 tax year, people within this age bracket can use a new tax form.

The new 1040-SR comes from the 2018 Bipartisan Budget Act, not the Tax Cuts and Jobs Act. What it does is increase the standard deduction for single and married seniors. Older taxpayers should review their tax situations to determine whether this form will provide them greater benefit than another form.

IRS flexes its muscles, suspends taxpayer’s passports

On behalf of Levins Tax Law on Wednesday, July 17, 2019.

The Internal Revenue Service (IRS) has an array of tools it can use to force taxpayers to pay their taxes. One tool: the IRS can suspend your passport. Taxpayers who face such a suspension will receive a Notice CP508C from the IRS.

Tax audits don't have to mean large financial setbacks

On behalf of Levins Tax Law posted in Tax Controversies on Monday, July 15, 2019.

When the IRS comes knocking and asking questions about your income and the returns you filed, you probably experience a myriad of emotions ranging from shock to anxiety and everything in between just like other Massachusetts residents in your position. One of your primary concerns could be that you will owe so much more in taxes that you will not recover financially. However, that does not have to be the case. Tax audits do not have to result in financial setbacks.

Even though you may feel as though the IRS is treating you like a criminal, the agency does understand that mistakes happen. If you are forthright and honest, you may not suffer serious consequences. The penalties assessment may not be quite as harsh as at first anticipated.

Foreign Account Reporting Compliance After the Close of the OVDP

On behalf of Levins Tax Law on Thursday, July 11, 2019.

About a decade ago, the IRS implemented an amnesty program that allowed taxpayers to pay back taxes, penalties and interests resulting from income earned through foreign accounts without fear of criminal persecution. In the decade that followed, about 56,000 Americans came forward to resolve more than $11 billion in tax revenue owed to the U.S. government.

This amnesty program, known as the Offshore Voluntary Disclosure Program, closed in September 2018. In its wake, there are several programs available to encourage taxpayers to voluntarily disclose offshore assets with minimal civil penalties:

Have you heard of he IRS's Information Returns Processing System?

On behalf of Levins Tax Law posted in Tax Crimes on Wednesday, July 10, 2019.

Most Massachusetts taxpayers fill out their yearly tax forms, and they make sure they include every dollar of income in order to avoid any adverse repercussions for not doing so. Perhaps it's because they know, or at least suspect, that when it comes to collection taxes, the IRS has many tools at its disposal. One of those tools is the Information Returns Processing System.

This database looks at what a taxpayer reports as income against information received from employers and others such as credit card companies and other financial institutions. These companies are required to report any information they have about the income of clients or customers. If the IRS believes the numbers do not add up, first contact will be made by mail.

Tax evasion is not just about income taxes

On behalf of Levins Tax Law posted in Tax Evasion on Wednesday, July 3, 2019.

When it comes to settling the bill with the IRS, the first thing that pops into most people's heads is personal and business income. While that is the case, the agency does collect other taxes as well. A Massachusetts small business owner who has employees needs to remember that the nation's taxing authority expects to receive the payroll taxes owed. If those are not paid, employers could find themselves facing charges of tax evasion.

For example, a man in a nearby state recently received a sentence of five years' probation for tax evasion because he failed to make the required payroll tax payments for two employees. Ironically, he owned a tax preparation business at the time. Between 2011 and 2014, the business owner should have submitted Employer's Quarterly Federal Tax Returns paying the Federal Insurance Contribution Act and income taxes for the two individuals each quarter.

Proving insolvency to the IRS could reduce the tax bill

On behalf of Levins Tax Law posted in Internal Revenue Service on Tuesday, June 25, 2019.

Even though the country is no longer in the midst of a recession, some Massachusetts families still struggle financially. Many of them work out deals with their creditors to reduce their debt, and that may include having some balances forgiven, which means that the company that extended credit for a home, car or other debt absolves the consumer of responsibility for a portion of the debt. The problem is that the IRS usually considers this forgiven debt as income and that could mean a hefty bill at tax time.

Some Massachusetts families avoid having to pay taxes on debt forgiveness through a bankruptcy discharge. What happens to those families who choose not to file for bankruptcy? Are they simply stuck with the tax bill on those forgiven balances? Fortunately, bankruptcy is not the only way to avoid including those balances as income when it comes to paying taxes.

IRS issues: Getting tax withholding right can be a challenge

On behalf of Levins Tax Law posted in Internal Revenue Service on Wednesday, June 19, 2019.

New laws often cause some measure of confusion in their first years. When the Tax Cuts and Jobs Act of 2017 went into effect, it was no exception. It created confusion for a lot of taxpayers, many here in Massachusetts included. Now, the IRS is advising taxpayers to make sure their withholding is correct in order to avoid problems during tax time, but getting it right could present a challenge.

Adjusting the amount of taxes that an employer takes from an employee's paycheck helps control whether a taxpayer receives a refund or pays the IRS at tax time. It could also help adjust those numbers up or down. Moreover, changing withholding could affect how much individuals receive as income each pay period. Those wanting more income each month would increase the number of allowances claimed on their W-4 forms and decrease them to pay more taxes during the year to increase the potential for a large refund.

Filing an audit reconsideration request

On behalf of Levins Tax Law posted in Tax Controversies on Thursday, June 13, 2019.

Getting the IRS to change its decision regarding how much a particular Massachusetts resident owes in taxes is not an easy task. The taxpayer must provide compelling reasons for the agency to approve an audit reconsideration request. In order to even get such a request past the first layer of review, it must meet certain criteria.

For instance, the reason for the reconsideration must fall into one of four categories. If a Massachusetts resident did not attend the audit or did not receive IRS communications regarding the audit due to a move, the IRS may grant the request for reconsideration. The other reasons why a request may be granted is if the taxpayers disagrees with the assessment or has additional information not available to the IRS during the first audit.