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Danbury Tax Law Blog

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.

People who do this more likely to face tax audits

Most people in Connecticut will never be audited. In 2019, only .45% of all taxpayers, nationally, faced tax audits. The Internal Revenue Service simply lacks the resources to go over every single taxpayer's tax returns in detail. However, people who do this one thing are more likely to be audited, and that one thing is: make a lot of money.

The average middle-class American only has about a .45% chance of being audited in any given year. Those individuals who bring in between $1 million and $5 million in income have a 2.21% chance of being audited. Those individuals who make over $10 million have a 6.66% chance of facing a full-blown audit.

Why tax evasion is such a big deal?

No one in Connecticut or elsewhere wants to have to pay more in taxes than he or she has to. People do not want to feel that they are the only ones paying their fair share, so they look for ways to minimize their tax obligations. Unfortunately, in doing so, some end up being accused of tax evasion. The consequences if one is convicted can be quite severe.

Why is tax evasion such a big deal? The government runs on taxes collected from the people. Every year, the Internal Revenue Service claims that due to tax evasion and errors, it receives around $458 billion less per year than it should. That is a lot of money that is needed to fund various government programs.

Beware tax scams this time of year

January is quickly coming to a close, and many Connecticut residents are gathering all the necessary paperwork they need to get their taxes filed. While they are doing their part as tax season gets underway, so are scammers. More tax scams than usual pop up between now and mid-April than any other time of year.

What are some of the most common tax scams? Typically, people are sent emails, mail or are called and told they will be arrested if they don't pay up now. Out of fear, people respond and end up finding themselves out thousands of dollars that they will likely never see again.

Don't expect an IRS agent at your door if you're being audited

Like most Connecticut residents, you probably never expect the IRS to audit you. You file your taxes on time, try to follow the rules and arrange to pay what you owe, if anything. More than likely, you will go your whole life without facing a tax audit, but then again, your luck could turn.

If you do end up facing an audit, you probably expect an IRS agent to show up at your door, demanding to see your records. You would expect the investigation to happen in person. Unfortunately, this isn't the case in most audits these days, and if you aren't diligent, you could miss a very important notice from the agency.

IRS unable to keep up with taxpayers

Thanks to a lack of funding, the Internal Revenue Service has been falling short on its duties. The IRS has been expected to operate with the fewest number of employees possible, and its agents have been unable to keep up with taxpayers. How has this been hurting Connecticut residents?

According to a report from the Office of Taxpayer Advocate, in 2019, the IRS only answered about 29% of incoming phone calls, it failed to send refunds in a timely manner, and it neglected to collect billions in taxes. This means that people have been forced to wait on returns that they may desperately need. It also means that numerous individuals have not been getting the help they need with filing their taxes; and many of those facing severe tax issues have been unable to resolve those issues -- meaning their tax burdens have only continued to get worse.

New year, new sales tax laws

It's a new year, and that means the state of Connecticut has new laws that have gone into effect. For instance, changes were made to sales tax laws. These adjustments could hurt some people if they fail to pay or collect sales tax properly. What are these changes?

According to a recently published article, fewer modifications to sales tax laws were made than intended initially; however, those that were made may be a big deal to some. As it now stands, certain items that were exempt from sales tax in 2019 no longer are. Some of those items include:

  • Dry cleaning
  • Parking
  • Design services

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