Posted on December 22,2017 in Taxation Law

With the prevalence of smartphones and personal computers in modern American society, people have more opportunities than ever to earn an extra income. In the sharing economy (also known as the gig economy), money can be made by driving individuals in cars, renting out homes or rooms for short periods, making and selling products, or performing tasks for people.

While there are great benefits from supplementing one’s income in this manner, these individuals may not be aware of how this additional income affects the taxes they pay. Consider the following aspects of tax law of which people in the sharing economy should be aware:

1. Taxable income - All income is generally taxable, whether it is paid by an employer, earned in a “side business,” or received as a cash payment. Since sharing economy companies often treat workers as independent contractors rather than employees, the worker is usually responsible for paying taxes on his or her earnings.

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 Posted on December 19,2017 in Taxation Law

In 2016, the release of the “Panama Papers” sent shockwaves through the financial world, exposing the methods that many wealthy individuals and corporations use to avoid paying taxes. This issue has received additional scrutiny recently due to the release of new documents, known as the “Paradise Papers,” which have revealed more details about how trillions of dollars are transferred through offshore tax havens.

The Paradise Papers include more than 13 million documents, most of them related to Appleby, a company with headquarters in Bermuda that helps its clients pay less taxes by moving money into offshore accounts. The financial dealings of a number of prominent people and entities were brought to light by this release, including companies like Apple and Facebook, celebrities like Madonna and Bono, and public figures like Queen Elizabeth II and U.S. Commerce Secretary Wilbur Ross.

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 Posted on December 07,2017 in Taxation Law

For anyone who earns an income, operates a business, or makes a financial transaction in the United States and the state of California, taxes are an unfortunate reality. Nobody likes paying taxes, but they are a necessary part of modern life and allow our government to continue operating.

Collecting taxes is a complicated matter, especially when it involves large companies and organizations with complex financial assets. In recent years, the governmental departments that collect taxes have begun working to operate more efficiently by focusing their efforts on identifying and addressing specific tax issues. These tax compliance campaigns have been conducted by the Internal Revenue Service (IRS), the California Board of Equalization, and the California Employment Development Department.

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 Posted on November 28,2017 in Taxation Law

Purchasing a business can be an exciting venture, allowing a person or company to expand his or her assets and add additional sources of income. However, business owners should be aware of the tax issues that can arise when buying a business, including whether they will be responsible for the business’s tax liability.

Successor Liability

If a business owes taxes, interest, or penalties at the time of its sale, the purchaser of the business may be held liable for these amounts. This is known as successor liability, and the California State Board of Equalization (BOE) may enforce this liability through a state sales tax audit within three years of the purchase of the business. A state sales tax refund claim may also trigger the enforcement of a tax liability.

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 Posted on November 17,2017 in Taxation Law

Benjamin Franklin once said that nothing in this world is certain except death and taxes. This common saying is as true today as it was 200 years ago—paying taxes is a civic duty that is required of everyone in the United States. However, people often attempt to cheat on their taxes and avoid paying what they owe, and this can result in serious consequences. If you are facing a tax audit, you should understand the potential consequences of tax fraud or tax evasion.

IRS Tax Fraud Penalties

Tax fraud can take a number of different forms, including:

• Attempt to evade or defeat tax - This can include underreporting income, claiming improper deductions, or underreporting the value of an estate.

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 Posted on November 09,2017 in Tax Audits

The prospect of being audited by the IRS is rather frightening, and many taxpayers do not know what to expect in a potential tax audit. However, only around 1 percent of people who file taxes are audited, and there is a great deal of confusion about what makes an audit likely. When filing a tax return, it is important to understand what the IRS looks for when deciding who to audit.

The DIF System

The IRS uses automated scoring known as the Discriminant Information Function (DIF) System to analyze tax returns. This system compares people’s incomes in a geographic area and looks at factors such as family size, how income is earned, and real estate property values to find any discrepancies that may require an audit. The IRS also uses an Unreported Income DIF (UIDIF) score to analyze whether a person is likely to have any income that was not reported correctly.

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 Posted on October 27,2017 in Tax Appeals

If, when filing your tax return, you owe taxes to the Internal Revenue Service (IRS) and you do not pay them at that time, the IRS will bill you for the taxes that are due. They will send at least two notices. Additionally, if taxes are not paid after you receive a final notice, the IRS will begin to take collection actions. These actions can include applying the amount of your future tax refunds to the amount due, or seizing your property and financial assets.

If you are unable to pay your taxes, you are likely already having financial difficulties. Moreover, if you receive a notice that the IRS plans to initiate a collection action, you may worry about the possible consequences. In these cases, an experienced tax attorney can help you appeal the IRS’s decision through one of the following procedures.

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 Posted on October 19,2017 in Tax Appeals

If you are unable to file your tax return by the April 15 deadline, or if you cannot pay the taxes that are due at that time, you are likely experiencing financial hardship. Unfortunately, this hardship will only be compounded by the penalties that the IRS charges for failure to file or failure to pay taxes. However, you may be eligible for relief through a first-time penalty abatement (FTA) waiver.

What is FTA?

The IRS created the FTA waiver in 2001 to encourage compliance with tax requirements. Under this program, both individuals and businesses who have been compliant in the past can receive amnesty for penalties levied against them.

According to a 2012 report by the Treasury Inspector General for Tax Administration (TIGTA), more than 90 percent of the people who qualify for FTA do not use it because they are unaware that it is available. 

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 Posted on October 12,2017 in Taxation Law

In the United States, we are all too aware of the taxes that affect our everyday lives, such as sales tax and income tax. However, there are additional taxes that apply in special situations, including when someone leaves assets to his or her heirs after their death and when a person gives someone a large gift of money or property. These taxes are known as transfer taxes, and people should be aware of the tax laws that apply in these situations.

Estate Tax

When a person dies, taxes may apply to the transfer of his or her property to his or her heirs. A complete accounting of one’s assets will be made, including cash, real estate, investments, and business interests, using the fair market value of these items. The total value of this property is known as the Gross Estate. Deductions from this amount may apply for debts, expenses related to estate administration, property left to charities, and property left to a surviving spouse.

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 Posted on September 29,2017 in Taxation Law

The IRS is turning to large-scale data analysis to help detect criminal activity among taxpayers. It is doing this through the creation of two initiatives, each with a different focus. Both initiatives will heavily rely on data gained through the IRS’s civil departments that will be used by the agency’s Criminal Investigation Division.

Initiative 1: International Tax Enforcement Group

Foreign tax compliance, including the reporting of offshore accounts, has long been a priority for the IRS. Recently, the IRS announced that a new team, the International Tax Enforcement Group, will analyze massive amounts of collected data in an attempt to find non-compliant tax filers.

The team will be comprised of IRS investigators who have foreign compliance experience and base them out of a central location, the Washington, D.C. field office.

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