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Tax Controversies Archives

Congress lets a number of tax breaks expire

Many Massachusetts companies and individuals are once again in the dark as to whether they will receive certain tax credits during 2014. One of the side effects of a Congress that is deeply divided on budgeting issues is that 55 tax credits expired at the end of 2013. While it is expected that most will be renewed, there is no guarantee this will be the case.

Restaurant seized for alleged failure to pay taxes

Massachusetts residents who enjoyed a restaurant located in Andover for the last decade will be sad to hear that the establishment is no longer in business. The demise of Dylan's Bar & Grill is the result of a tax collection case instituted by the state against it.

New tax results in confusion in Massachusetts

Business owners in Massachusetts may have heard about a controversial new tax law. A 6.25 percent sales tax may apply to software or computer services that are not 100 percent proprietary. Many have expressed confusion about the new tax, as well as opposition to it. Those that sell software complain that the tax code is vague about what software or services are or are not to be taxed.

Handling tax problems

Massachusetts residents who owe the IRS money may be tempted to get in touch with services that promise to save them 90 cents on the dollar. However, most of these deals are too good to be true. When individuals are worried about tax audits, they may end up feeling desperate, but it is important to handle a tax problem in the correct manner. Those who are having issues with their taxes should contact the IRS, look into payment options and seek assistance from a professional.

Questions remain regarding federal same-sex benefits

Although same-sex marriage is legal in Massachusetts and in 12 other states, many people are waiting for a final decision from the IRS regarding tax and Social Security benefits after the Supreme Court voted to end the Defense of Marriage Act in June. People in 37 other states are in limbo as they wait to see how the IRS will address tax matters, such as tax refund claims. Although DOMA has been repealed, the exact application of that ruling is still unclear.

G-8 suggests world standards for tax reporting

The Group of Eight or G8 Leadership are leaders of several nations that meet to agree on policies that affect many aspects of finances and business in Boston, the United States and other countries. G-8 leaders have agreed to work toward a new global standard to prevent secrecy in international banking and make tax collection cases easier for prosecutors.

Taxpayers may wind up paying for mistakes later

When individuals complete their personal or business taxes, they are often interested in minimizing their tax obligation. However, some Boston taxpayers may not be completing their tax returns in an honest manner. This can result in Boston taxpayers receiving a refund or smaller tax debt now, but being subject to tax audits and paying a larger tax amount with interest and fees later.

High earners more likely to be audited

A new analysis of Internal Revenue Service data shows that the IRS is more likely to go after high-wage earners than lower income taxpayers. The data revealed that taxpayers who have taxable incomes in excess of $1 million were almost 12 times more likely to have a tax audit conducted on them, compared to other taxpayers. Out of the high-wage earners who were audited, approximately one-eighth of them were examined by the IRS in 2012 fiscal year, resulting in 41,000 examinations. While approximately 25 percent of these tax returns did not result in any change in the taxes that needed to be paid, the vast majority of the returns resulted in a change. Some audits resulted in finding that more taxes were owed. On average, the amount of additional taxes per return was $117,000, totaling about $4.8 billion overall.

Signing joint tax return may cause problems

Signing a joint tax return may result in serious implications for an innocent spouse. However, filing a joint return is a completely voluntary action and should likely be avoided in some situations. When a person signs a joint tax return, he or she creates joint and several liability. This term means that the IRS can go after either spouse to collect the full amount of any tax that is owed. Even if a divorce court finds that the tax liability rests on one spouse, the IRS does not have to honor this finding and can still pursue tax collection procedures against either spouse. In a similar fashion, a probate court's findings can also be ignored and an innocent spouse can be left to pay off the tax liability.

Tax controversy regarding gay couples could be on horizon

A tax controversy may have arisen after a federal appeals court issued a decision in regard to the Defense of Marriage Act, known as DOMA. The Court of Appeals for the Second Circuit in New York declared that the law is unconstitutional. Another federal appeals court made the same conclusion prior to New York's decision. The United States Supreme Court may be called on to weigh in on the constitutionality of the act in the future. The current federal tax code does not recognize gay marriage. However, if the Supreme Court strikes down the constitutionality of DOMA, gay couples who are legally married could then file a claim for a refund of federal tax overpayments. Six states currently recognize same-sex marriage, including Massachusetts. Gay-rights activists and accountants have recommended that same-sex couples should file a protective refund claim. This claim goes to the Internal Revenue Service. This strategy will allow couples to receive a larger refund if the U.S. Supreme Court strikes down DOMA.

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