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.
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.
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.
Filling out a withholding form (the W-4) is the first step in paying taxes on income. The IRS recently released a new form it wants to use for withholding that complies with the changes of the Tax Cuts and Jobs Act. The public may comment on the new form through July 1.