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Fighting against a bank levy or wage garnishment by the IRS

Most Massachusetts residents know that the IRS has quite a bit of power when it comes to collecting the taxes it believes an individual owes. If you have been subjected to the agency's collection efforts, you may have a bank levy or wage garnishment filed against you. More than likely, these collection efforts put you in a precarious financial position. You may be able to stop these actions with the proper support.

If you receive a notice of a bank levy from the IRS, it means that the agency has told the bank to freeze your account. You will not have access to the funds in it during this time. At the expiration of 21 days, if you have not paid the taxes the IRS says you owe, it could seize the funds from your account to apply toward your debt. Due to the time sensitive nature of this collection action, you may want to seek the guidance and assistance of a tax law attorney as quickly as possible.

The first steps in the IRS collection process

Many Massachusetts residents find themselves unable to pay their taxes. They file their tax income tax returns with the IRS knowing that at some point, the agency will come looking for payment. They may receive a bill in the mail, not understanding that this constitutes the opening gambit of the collection process.

The IRS expects taxpayers to satisfy the balance due in full. When that does not happen, it may take other actions in order to obtain payment. Meanwhile, the principal balance begins accruing interest and penalties. If a Massachusetts taxpayer can find a way to pay in full, that may be preferable. However, like most people, if a taxpayer could pay the balance, he or she would have done so.

Is offshore banking a high-maintenance investment?

Offshore banking is an appealing way to invest for many individuals. Despite common misconceptions fueled by the cinema, having an offshore bank account isn’t as scandalous as portrayed. On the contrary, offshore banking is completely legal – and oftentimes beneficial – if done the proper way.

Meeting FBAR requirements may require filing Form 8938

Especially since 9/11, the federal government keeps a close eye on monies, assets and accounts held by American citizens that come from foreign countries. In order to determine whether a Massachusetts resident or entity must file a Report of Foreign Bank and Financial Accounts and/or IRS Form 8938, a party must review the FBAR requirements and the reporting requirements of the IRS. Having to file one may not mean having to file the other, depending on the circumstances.

Making that determination may come down to the amount of funds in question. For instance, a FBAR comes with a minimum threshold of $10,000 during the calendar year. This is not $10,000 per account, but instead the total amount across all accounts.

Extended filers: Watch out for mistakes

Not everyone filed their federal income taxes back in April. For example, you may be among the many individuals who requested an extension. For individuals who filed for an extension, an important deadline is coming up in a little under three months. This is the extended tax filing deadline. This year, this deadline is Oct. 15.

Extended filers who fail to file their taxes by this deadline can face penalties. So, for many extended filers, we are entering the time of year when they are heavily focused on getting their taxes ready so they can meet this deadline.

Obligations to the IRS don't end with retirement

Unless a Massachusetts resident worked as an independent contractor, he or she probably received a paycheck that negated the need to worry about taxes but once a year. Now that the opportunity to retire has arisen, it is important to know that obligations to the IRS continue, but in a different way. How tax payments are made and how much is owed depends on whether funds come from a pension, Social Security benefits, a retirement account or a combination of the three.

If an individual receives over a certain amount in Social Security benefits each year, up to 85 percent of that amount could be subject to income taxes. Instead of making large quarterly or yearly tax payments, it is possible to have between 7 and 22 percent deducted from each payment for taxes. This may reduce the monthly amount received, but it will also help avoid large, periodic tax bills that could be a challenge to pay.

Hurry up and divorce? Tax law changes might sway couples.

Changes coming as a result of the 2018 Tax Cuts and Jobs Act could leave some alimony recipients – and payers – out in the proverbial cold in 2019. Next year will bring the end of a very popular tax credit that allows alimony payers to deduct payments from their overall taxable income. This means that, for the wealthiest Americans, their entire yearly income will be taxed at the 37 percent tax rate, not just the amount left over after paying alimony.

The upcoming changes have led some divorce attorneys to actually advise clients strongly considering divorce to get the process moving so that it can be finalized by the end of the year; any divorces settled or modified in 2018 are not subject to the new alimony rules.

When do back taxes become the basis for passport denials?

If you owe more than $51,000 in back taxes, penalties and interest, your U.S. passport/renewal application might be denied. The IRS estimates approximately 362,000 taxpayers fall into this category.

We have been following the progress of this new enforcement tool for several years. Since this provision of the Fixing America’s Surface Transportation Act (FAST Act) became law in December 2015, the IRS and State Department have been working to develop regulations and a coordinated process.

Is that person demanding payment really an IRS agent?

Perhaps the only thing worse than owing taxes is not being able to pay them. Many Boston residents find themselves in this predicament, and they wonder what the IRS will do to collect. Some people receive phone calls, emails or personal visits from people claiming to be agents, but taxpayers need to be cautious. Scammers take advantage of people every day.

IRS agents may make visits and phone calls, but usually only after communicating with taxpayers through regular mail. If numerous notices are ignored, an agent may take other actions in order to get into contact. If an individual has received no notices from the IRS and someone shows up demanding payment, it may not be a real agent.

How to avoid penalties for underpayment of estimated taxes

The second-quarter deadline for all estimated tax payments just recently passed. This means we are officially in the second half of fiscal year 2018, so it’s the perfect time for an internal tax analysis and self-audit. This will allow time before the end of the year to adjust to avoid bigger headaches down the road.

Because of the Tax Cuts and Jobs Act of 2017, there is more ambiguity about what income could qualify for the pass-through deduction of 20 percent. Self-employed business owners who pass through income on their personal tax returns – such as those who own sole proprietorships, S-Corps, partnerships and LLCs – should definitely take the time now to perform a mid-year check of their tax strategy.

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