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Danbury Tax Law Blog

Is it true that few people committing tax crimes go to jail?

Taxes -- no one likes them, but just about everyone is subject to them. There are millions of Americans, though, some likely residing here in Connecticut, who are failing to pay taxes either in full or at all. In fact, they are accused of finding ways to cheat the system in order to benefit themselves. Tax crimes are serious, but a recently released article suggests that fewer people committing tax crimes actually end up going to jail. Is that true?

According to the article, nearly 14 million taxpayers are said to owe $131 billion to the government. For every 30 taxpayers who dutifully file and pay their taxes in full each year, there is at least one person or business that does not. The number of people failing to pay the appropriate amount in taxes each year has tripled since 2002. Why?

You could get the IRS to put off collecting your back taxes

While no one here in Connecticut, or elsewhere, wants to pay taxes, some people genuinely can't pay them. Their financial situations simply do not allow for it despite the taxpayers' best intentions to honor the debt.

If you find yourself in this situation, you may feel as though you have little to no options. You may brace yourself for the worst from the IRS, but it may not have to come to that.

Don't let tax debt bring you down

Every year, there are those in Connecticut who, come tax season, learn that they owe the Internal Revenue Service a significant chunk of change. If they cannot pay it, some may choose to let it slide -- which can have significant consequences and ultimately end up increasing their tax debt. The best thing to do when unable to pay taxes is to make a plan of attack and stick to it.

There are actually a number of ways to address one's inability to pay his or her tax debt. Some are better than others. A few options include:

  • Use a credit card to pay the debt
  • Take out a personal loan from a bank, family or friend
  • File for an extension
  • Ask the IRS for a payment plan
  • Apply for an Offer in Compromise

How to get through a sales tax audit

Connecticut residents who have to collect taxes on items that they sell may find tax season a bit of a nightmare. Sales tax rules can be complicated and are often changing. This means that, despite one's best efforts, one might be picked for an audit at some point. Here are some things that can help one through a sales tax audit.

There are a few things that can be done well before being audited. First, it is necessary to understand the sales tax rules regarding the goods and services one offers. Second, find out if any goods or services offered are exempt from sales tax. Finally, understand one's use tax exposure -- meaning make sure to pay taxes on items purchased for business use. Staying on top of these things can help businesses avoid sales tax audits altogether.

Have questions about estate taxes?

Tax laws in Connecticut can be difficult to understand. Tax law is complex and is often changing. Laws regarding estate taxes, for example, are prone to change and do not always make sense. If you have questions about estate taxes, a good person to talk to in order to get answers would be an experienced tax law attorney.

Maybe you are in the estate planning process and just want to make sure your assets make it to your beneficiaries rather than go to Uncle Sam. Maybe you recently lost a loved one and want to know how much of his or her estate will be lost in taxes. No matter what side of the fence you find yourself on, the goal of wanting to keep assets in the family rather than going to the government is understandable.

How should you file a tax return during or after a divorce?

Going through a divorce can result in many major changes in your life. While you may look forward to at least some of those changes if your marriage was difficult and unhappy, you may also find yourself trying to get a handle on how to carry out certain tasks as a single person.

For instance, your divorce, or even pending divorce, may cause you confusion when it comes time to file your taxes. You likely got accustomed to jointly filing your taxes with your spouse, and now, depending on your exact circumstances, you may need to complete the process differently.

Tax evasion defense conclusion: Intentional conduct

Over the past several weeks, this column has discussed various defense strategies that may be available to Connecticut residents who are accused of evading taxes. This week, to close out the series on this subject, one more tax evasion defense strategy will be shared. The final defense available has to do with intentional conduct.

In any criminal case, there are certain elements that must exist in order for prosecuting attorneys to achieve a conviction. When it comes to tax evasion, they must prove that the accused intended to defraud the government and that intent was shown in the accused's actions. Without intent, criminal cases are usually dead in the water.

Installment agreements possible when you cannot pay your taxes

In light of the tax changes that took effect in 2018, are you finding that you owe the government a significant sum this year? If you are, you are not alone. Many Connecticut residents have been shocked to see that, instead of receiving tax refunds, they owe a lot. If you cannot afford to pay what you owe in taxes by mid-April, do not fret; the Internal Revenue Service is likely willing to work with you on this.

One thing that the IRS may be willing to work out with you is an installment plan. A lot of people do not have the money on hand to pay a significant tax bill all at once. The IRS understands this. The government just wants to get paid, and if that means you pay in small amounts over a set period of time, so be it.

Tax evasion defense part III: Statute of limitations expired

As stated in two recently published posts for this column, evading taxes is a crime with serious consequences for Connecticut residents. Of course, it is necessary for the Internal Revenue Service to provide evidence that one has actually committed the crime and any audit requests and charges brought against the accused have to be filed in a specific time frame. In a continuation of the tax evasion defense series, the statute of limitations will now be discussed.

The statute of limitations, which is simply a limit for how long legal actions can be taken against a person, is put in place so that no one has to live with the threat of legal action for the rest of his or her life. When it comes to taxes, the statutes of limitations that exist are for three years, six years and no time limit. For personal income taxes, the IRS has three years to request an audit. The time frame doubles to six years if a person failed to report 25 percent or more of his or her income. There is no time limit for the IRS to pursue an audit or press charges if a person has never filed taxes or has filed fraudulent returns.

Passport access denied for those with tax debt

Numerous Connecticut residents depend on passports for their travel needs. Unfortunately, individuals with tax debt may find that they are unable to obtain passports until they start paying the Internal Revenue Service. Depending on one's financial situation, that may not be easy to do, but with help, an affordable payoff plan may be achievable.

According to reports, a law was signed in 2015 that allowed the government to deny citizens access to passports if they have significant tax debt -- $52,000 or more. The IRS is required to report this level of tax debt to the State Department so that passport applications can be denied or held until a plan to tackle the debt has been approved and put into action. That may seem like an extreme measure to some, but the government felt it was necessary to get people to meet their tax obligations.

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