Danbury Tax Law Blog

A levy may be used to collect tax debt

Numerous Connecticut residents struggle to pay their taxes every year. If they let their tax debt grow year after year without making any payments, the Internal Revenue Service may issue a levy to collect. What does a levy do, and can one stop it?

A levy is a legal right to seize property in order to collect a debt. The IRS cannot issue a levy whenever it pleases. The following three requirements must exist in one's case before the IRS can take one's property:

  • Demand for Payment was sent to the taxpayer
  • The taxpayer neglected to pay
  • Levy notice sent to the taxpayer 30 days before property seizure

Tax audits, things you can do to avoid them

No one wants to get audited. Few people actually do. Those Connecticut residents who are chosen for tax audits may find the experience unnerving, but with help, they can get through it. While audits might be rare, there is no harm in taking a few steps to avoid being subjected to one.

Step number one: Check, check and check again. Make sure all numbers are correct, dependents are listed and exemptions are in order. Clerical errors are a good way to end up on the audit list.

Are you risking an IRS audit as you fill out your tax return?

The deadline for filing your 2019 federal income tax return will be here before you know it. Even though you may know the IRS is not auditing as many people as it used to, you still fear getting a notice in the mail that the agency wants to take a closer look at your documentation and thinks you owe more money than you do.

The truth is that you could become the subject of an IRS audit, but ordinarily, it happens because of mistakes made on your income tax return. If the agency doesn't think it's getting all of the money you owe, that notice could come in the mail, especially if you make certain errors that serve as red flags.

Tax deadline pushed back this year

This time of year, taxes are on just about everyone's mind, as the deadline to file is fast approaching. On March 12, however, it was announced that the April 15 deadline for this year's tax season will be pushed back. The new deadline has yet to be announced, but this may help those in Connecticut and elsewhere who may struggle to meet their tax obligations this year due to the current state of the economy.

The change to the tax deadline is said to be temporary. It is just a way to offer taxpayers some relief while the country recovers from the new coronavirus. Some believe the new deadline will be between June and October. The exact details will be released in the coming days.

Be careful whom you trust to help you with your tax filing

Numerous Connecticut residents have already filed their taxes for the year, and others are still working on it. Many people do not like to do their tax filings alone, so they turn to so-called professionals to do it for them. Unfortunately, some may find that doing so is a mistake. There are legitimate tax services out there, but there are also many that are not.

It was recently reported that the Better Business Bureau is warning people to be careful with whom they trust to help them with their tax filings. A legitimate tax service will stand behind its work and sign the return. This means if there is a problem with the return, the tax service, not the taxpayer, will be held accountable.

Tax audits do not have to be faced alone

You do everything you can to make sure your tax filing is on the up and up. You take your time, make sure everything you submit is correct -- at least to the best of your knowledge. You may even hire someone to help you. Despite your best efforts, you received a letter from the Internal Revenue Service or the state, saying you are being audited. Before you start to panic, remember that tax audits are not something Connecticut residents have to face alone.

Receiving notice of tax audit may seem like the end of the world. It can leave you worried that you may end up owing a fortune in overdue taxes, penalties and fees. Not all audits end that way, however. You may walk away not owing anything. Every case is different.

When tax liens are filed on businesses

When Connecticut residents fail to pay their taxes, the government can do a number of things in order to collect the money owed. One of those things is placing a tax lien on one's home or other property. What if someone fails to pay business-related taxes? Yes, tax liens can also be filed on one's business.

A tax lien is a legal claim against one's property. It is the IRS' way of letting creditors know that they have first dibs on seizing property if taxes, fees and penalties are not paid in a specific time frame. So, if business taxes are not paid, the IRS can seek to sell off one's company or company assets in order to collect what it is owed. In some cases, personal assets may also be seized and sold.

Be sure to declare all taxable income in your tax filing

Wanting to reduce one's tax liability is normal. Most Connecticut residents take steps to do it. No one wants to see the government get more in taxes than it should. However, the steps one takes to limit his or her tax liability can cause problems if one is not careful. For instance, failing to declare all taxable income could have significant criminal and/or financial consequences if the Internal Revenue Service figures it out.

What counts as taxable income? This is a question many people have. Taxable income is one's gross income minus any allowed exemptions and/or deductions. Gross income can come from:

  • Tips
  • Investment earnings
  • Salary
  • Hourly wages
  • Bonuses
  • Certain gifts
  • Lottery winnings

Don't overlook the tax issues in your divorce

If you are preparing to divorce, you may be dealing with many confusing changes. It is possible that your entire routine will be different because of custody schedules. Your living arrangement will potentially change dramatically, and you may be figuring out how to managing the new reality of a single-income household.

Another change you may not have thought about is the way you will do your taxes after your breakup. A divorce can affect numerous aspects of your tax returns, and it can become confusing and overwhelming. It may help you to have a general understanding of the kinds of issues you may face when you prepare your taxes. This way you can work to structure your divorce to minimize its tax ramifications.

Does it look like you'll owe the IRS more than you can pay?

While the year 2020 may still be in its early stages, tax season will be here in the blink of an eye. Many Connecticut residents are already fast at work getting their taxes completed, and some are finding that they owe the Internal Revenue Service more than they can possibly afford to pay all at once. Thankfully, if you are in this boat, you do have a variety of payment options that you can utilize to ensure you stay on the IRS' good side.

Believe it or not, the IRS just wants to get paid. Whether you pay in full by mid-April, seek out an Offer in Compromise, request an extension or negotiate a payment plan, it is all good as long as you make sure to meet your obligation in full at some point. By paying after the traditional tax deadline, just be prepared for interest and fees to be added to your tax bill.

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Baker Law Firm, P. C.
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Danbury, CT 06810

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