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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.

Who does the IRS consider a dependent?

Many Massachusetts residents may ask this question every year. With the tax changes now in effect this tax season, the answer may prove even more important. Like many questions posed to the IRS, the answer varies depending on the circumstances. There is more than one definition involved.

Even though dependent exemptions disappeared for the 2018 tax year, other credits may be available for those with dependents. Whether an individual in a Massachusetts resident's life fits into the definition could mean saving money on taxes. Thus, whether a child or relative falls under the definition of a dependent is a crucial question.

How to avoid tax-related scams and identity theft

This tax season is the first to fully implement the largest tax code reform of the last 30 years. Questions and concerns exist in tax circles about the details and gray areas.

It is a good year to seek professional tax advice even if you have completed returns yourself in the past. In doing so it is important to ask some questions to avoid scams and identity theft.

Those owing the IRS shouldn't book their vacations just yet

Spring is nearly here, and summer will be nipping at its heels. During this time, many Massachusetts residents begin planning vacations outside the country -- often to warmer climates. For those who owe the IRS back taxes, it may be better to hold off on making those plans since the agency could prevent them from obtaining or using their passports.

If the IRS claims that a Massachusetts taxpayer owes a minimum of $52,000 in taxes, penalties and interest, the agency can submit a request to the U.S. Department of State to revoke or deny him or her a passport. Before it may do so, however, the agency must issue a levy, file a lien and exhaust all administrative remedies available to collect the past due amount. This step may also apply to unpaid child support and the FBAR Penalty.

The IRS wants to set the record straight for taxpayers

During tax season, Massachusetts residents often hear rumors regarding how to save money on taxes, whether they will end up paying more for one reason or another, and more. Now, with the changes in the tax laws and the questions regarding the government shutdown, people have even more questions and need direct answers instead of rumors. Even though the shutdown ended, at least temporarily, people may still wonder whether IRS operations will proceed as normal.

The first rumor the IRS wanted to address was the question regarding whether those due a refund would receive them. Massachusetts residents owed a refund will receive it. Even with the changes in the law and the shutdown, those payments will go out.

Innocent people pay for taxes filed incorrectly due to scams

It is tax time again. Numerous Massachusetts residents may anticipate refunds while others expect to pay. In either case, filings need to be made, and many people turn to others for help in maximizing refunds and minimizing payments. The problem is innocent people could end up paying for taxes filed incorrectly because they unknowingly became the victims of scammers.

Going to tax preparers for assistance may sound like a good idea, but Massachusetts residents may want to verify the qualifications and reputation of such individuals before doing so. If this cannot be done in advance, some clues could reveal a potential problem in the future. For instance, if a tax preparer claims that a higher refund could be obtained through "bending the truth" on a return, the individual taxpayer should get up and walk out.

Avoiding state tax audits when using the earned income tax credit

For some Massachusetts residents, earning enough money to live on can present a challenge. For this reason, the state, like the federal government, provides eligible taxpayers with the opportunity to take advantage of certain tax breaks, including the earned income tax credit. However, if filers are not careful, they could risk tax audits through misuse or mistaken use of this option.

Most of the people who qualify to use the EITC have children, if that helps allude to the requirements to use this credit. To simplify the process, the state of Massachusetts uses the same criteria as the IRS does for federal income tax returns. The state also matches the percentage allowed by the federal government as well.

Man pleads guilty to tax evasion after IRS investigation

The IRS wants the money it believes people here in Massachusetts and elsewhere owe. The agency will conduct investigations when its agents suspect that an individual or business failed to pay any amounts owed. Depending on the results of the investigation, agents will make accusations of tax evasion and other crimes against taxpayers.

For example, an independent contractor worked installing ATM machines in casinos in another state between 2000 and 2012. He received commissions based on ATM transactions at the facilities where he installed the machines. In 2012, the man filed his tax return for the year 2005. In that return, he claimed an income of $394,317.

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