Posted on August 25, 2021 in Taxation Law

While nearly everyone in the United States is required to pay taxes, many taxpayers struggle to do so. The U.S. Tax Code is complicated, and it can be easy for a person or business to make mistakes. A taxpayer may also encounter financial difficulties that affect their ability to make payments to the IRS. Because of these issues, there are a variety of reasons why a taxpayer may be subject to penalties, which can make their tax burden even more difficult. Fortunately, the IRS provides different forms of penalty abatement in certain situations. By working with an attorney who is experienced in addressing tax penalties, taxpayers can request abatement and find ways to resolve their tax issues as quickly and affordably as possible.

Abatement for IRS Tax Penalties

The IRS most commonly imposes failure-to-file (FTF) penalties for those who do not file a tax return or extension by the due date or failure-to-pay (FTP) penalties for those who do not pay the taxes owed in full when they are due. Taxpayers may qualify for relief from these penalties in certain circumstances, and they will usually need to show that they failed to meet the IRS’s requirements based on factors that were out of their control. The type of penalty abatement that may be available include:

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 Posted on August 17, 2021 in Tax Appeals

Taxpayers have a number of options for responding to attempts by the IRS to collect taxes. If the IRS conducts a tax audit and determines that there is a tax deficiency, it may perform a tax assessment and take action to collect the amount owed. A taxpayer can appeal the IRS’s determinations by filing a petition in U.S. Tax Court, and after a petition has been filed, the IRS is prohibited from taking action to perform a tax assessment or collect taxes while the matter wends its way through the Tax Court process. However the U.S. Tax Court is currently experiencing delays, and this may result in complications and difficulties for some taxpayers.

Responding to Tax Court Delays and Premature Tax Assessments

Typically, the U.S. Tax Court receives 23,000 to 26,000 petitions from taxpayers each year. As of July 23, 2021, the Tax Court court has already received more than 24,000 petitions this year, and this has affected its ability to process cases. Because of the large number of petitions, there may be a delay between when a person files a petition with the Tax Court and when the Tax Court serves notice of a petition to the IRS.

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 Posted on August 10, 2021 in Taxation Law

The requirements that taxpayers must follow when reporting their income to the IRS can be complicated. This is especially true for those who have foreign investments, including individual taxpayers, corporations, and partnerships. Recently, the IRS issued a notice that taxpayers with an interest in controlled foreign partnerships will need to file some new forms starting in 2022. By understanding these requirements, taxpayers can ensure that they are providing the correct information and taking steps to avoid potential tax penalties.

Schedule K-2 and K-3

U.S. taxpayers who have an interest of 10 percent or greater in a partnership that was formed in a foreign country are required to provide information about the partnership to the IRS, including details about a partner’s ownership interest and their allocations of income and tax deductions and credits. Starting in the 2021 tax year, the IRS will be requiring partnerships, S corporations, and individual partners to report information of international tax relevance on two new schedules, K-2 and K-3. These schedules will be included in the following forms:

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 Posted on July 21, 2021 in Taxation Law

When a couple chooses to end their marriage, they will need to address a wide variety of financial matters, and they will need to make decisions about how to handle multiple types of divorce-related tax issues. However, there are many situations where couples separate before getting divorced, either as a trial to determine whether to move forward with ending their marriage or in preparation for their final split once the divorce process is complete. 

When a couple is living separately while they are still legally married, they will need to address certain types of unique tax issues. The decisions they make during this time may be based on how they expect to handle matters during their divorce, or they may need to take temporary measures to ensure that both parties’ financial needs are addressed properly. It is important for spouses to understand their rights and options when addressing these matters, since decisions that may be beneficial for one spouse may lead to financial difficulties for the other.

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 Posted on July 19, 2021 in Taxation Law

Virtual currencies have represented a significant investment opportunity for many people over the last several years. Because of the increased level of financial activity surrounding cryptocurrency, the IRS has begun to pay closer attention to these transactions to ensure that investors are paying the required taxes. 

In the past, some cryptocurrency investors have treated transactions in which one type of virtual currency was traded for another as “like-kind” exchanges, which would allow them to defer capital gains taxes on these transactions. The Tax Cuts and Jobs Act of 2017 disallowed the use of tax-free exchanges for personal property in 2018 or later. However, some investors may have used these types of exchanges for transactions that took place before 2018, and they should be aware that they could potentially face tax audits and be required to pay taxes that apply to these transactions.

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 Posted on June 25, 2021 in Tax Audits

During the COVID-19 pandemic, many individuals, families, and businesses have experienced financial difficulties, and to help avoid additional strain that would affect the national economy, the IRS temporarily suspended some of the activities it usually takes to collect unpaid taxes. However now that the United States is emerging from this national emergency with many businesses reopening and people returning to work, the IRS has stated that it will be resuming its regular collection programs. Taxpayers who are facing tax audits or who have unpaid taxes will need to be aware of the potential types of actions that the IRS may take against them.

IRS Tax Enforcement Operations

As of June 15, 2021, the IRS has begun to return to its normal practices of collecting taxes. Typically, the IRS sends notices to taxpayers who have tax debts, informing them of the balance that is due. The IRS will be following up with those who have not responded to these notices. Those who have tax liabilities from tax returns filed for 2019 or 2020 are required to respond to notices from the IRS within 30 days, either by paying the amount due or requesting an offer in compromise or other forms of relief. This window is extended to 45 days for those who reside outside the United States. Beginning August 15, 2021, anyone who has failed to respond to a notice from the IRS may be subject to tax liens or levies.

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 Posted on June 21, 2021 in Taxation Law

The coronavirus pandemic has affected many people’s finances, but fortunately, different forms of relief have been made available from federal and state governments. While this has provided many people with benefits allowing them to meet their financial needs, it may also complicate certain matters. Couples who are going through a divorce will need to determine how COVID-19 relief may affect them, including whether they will be able to receive stimulus payments and claim tax credits. When addressing issues related to divorce and taxes, it is important to work with an attorney who can explain the laws and ensure that the decisions made are financially beneficial.

COVID-19 Stimulus Payments and Tax Credits 

Most people received multiple stimulus payments in 2020 and 2021 that were meant to address the ways that the COVID-19 has affected the national economy. These payments were treated as “recovery rebates,” and they functioned as a prepayment for tax credits that could be claimed when filing an annual tax return. The initial stimulus payment for individuals with an income of $75,000 or less was $1,200, and married couples who earn less than $150,000 received $2,400. Families were also able to receive a stimulus payment of $500 for each dependent child. Additional stimulus payments of $600 per individual were sent out in December 2020 and January 2021, and a third stimulus payment of $1,400 per individual, plus up to $1,400 per child, was sent in March 2021.

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 Posted on June 18, 2021 in Taxation Law

Divorcing couples often need to address complex financial issues, especially if they will be dividing multiple types of property, assets, and debts. In addition to determining how they can divide all of their marital property fairly and equitably, couples will also need to understand how the decisions they make will affect their tax obligations. When addressing issues related to divorce and taxes, including gift taxes, it is important to work with an attorney who understands how tax laws apply to property settlements.

Divorce Settlements and Non-Taxable Gifts

When a person makes a gift of money or property to someone else, gift taxes may apply, and a gift tax return may need to be filed. However, in most cases, transfers of property between spouses either before or after their divorce are exempt from gift taxes. Typically, these transfers will be considered non-taxable gifts if they fall into one of the following categories:

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 Posted on May 18, 2021 in Taxation Law

Couples who have decided to end their marriage will need to address a wide variety of financial issues. During this process, spouses will not only want to make financially advantageous decisions, but they will need to consider how these decisions will affect their taxes. One divorce-related tax issue that may arise involves determining how taxes will apply to child support or spousal support payments made by one party to the other.

Taxes on Support Payments

In the past, child support and spousal support were taxed differently. The person who paid spousal support was able to deduct these payments from their taxable income, and the person who received spousal support was required to report these payments as part of their income and pay taxes on the amount received. Child support was handled differently, with the payor not being allowed to deduct payments, and the payee not reporting payments as income. 

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 Posted on May 12, 2021 in Taxation Law

Ending your marriage can be a difficult decision, but if you have decided that it is the best choice for you and your family, you will want to make sure you are taking the right steps to begin the next phase of your life on secure financial footing. In addition to addressing matters related to your property, income, and family finances, you will also need to look at your taxes. A variety of divorce-related tax issues may arise, and one of the most important is determining what filing status to use when filing your annual tax returns.

Options for Filing Status for Divorcing Spouses

For the year when your final divorce decree was or will be issued, you will not be able to file taxes jointly with your spouse. That is, if you will be finalizing your divorce in 2021, you and your ex will each be required to file separate 2021 tax returns before the April 15th deadline in 2022. However if you are still legally married on December 31, 2021, you can still file a joint tax return for 2021. 

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