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.
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.
Massachusetts residents who cannot afford to meet their obligations to the IRS could find themselves facing a variety of repercussions. Two of the possible consequences are federal tax liens and tax levies. Some people use the terms "lien" and "levy" interchangeably, but they are different.
It is not surprising that many Massachusetts residents feel as though the IRS was not fair with them. Some of them are obligated to pay large tax bills with no avenue for relief other than working out a payment plan or some other agreement with the agency. However, others could have valid tax refund claims if the circumstances are right.
April 15 has come and gone. If Massachusetts residents failed to file their income tax returns or file for extensions by this date, they could face consequences if they owe money to the IRS. Unfiled tax returns could lead to substantial penalties and interest, among other things.
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.
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.
With the technology available today, keeping records may not seem as difficult as it did in the past when most things were on paper. However, that does not always resolve the issue of how long Massachusetts taxpayers should retain their tax records. When it comes to taxes and statute of limitations, how long the paperwork should be kept largely depends on the information, but a good rule of thumb would be to keep relevant tax paperwork, including prior returns, as long as possible.
Have you moved to Boston or to another location here in the city recently? Did that move prevent you from knowing that the IRS send you communications regarding an audit, so you failed to appear for it? Perhaps you did attend, but now have new information to provide the agency that could potentially change the outcome. You may be able to file for an audit reconsideration request.
Did you know everything about your family's finances? Did you rely on your spouse to handle it all, including filing income tax returns? If the IRS later comes after your former spouse and you, you may qualify as an "innocent spouse," which means that you may not be held liable for any wrongdoing by your ex-spouse during the marriage.