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Danbury Tax Law Blog

Is this year's tax bill overwhelming?

You may be among the many in Connecticut and across the country who hoped the recent changes in the tax law would benefit you. If you count on a refund for bills, vacation or to stash away as savings, you may have wondered if the new tax laws would give your refund a little bump. On the other hand, after years of getting nothing back from the IRS, you may have expected to get even a small refund.

Unfortunately, you and others were disappointed to learn that your refund will be considerably smaller than in the past. In fact, many are seeing refunds over 8 percent lower than last year. You may have even more trouble if you are among the many who owe money to the IRS. While this may be a shock, you can take some steps to ease the pain.

Are sales tax changes coming to Connecticut?

Lawmakers in Connecticut are trying to decide if they should increase taxes on certain products that are for sale in the state. Sales tax laws are frequently changing, so this is not an out-of-the-blue thing. It is something that business owners and residents need to follow, though, because if changes are made, they need to adjust how much they collect or pay on these items.

So, what products are under review for new or increased sales tax? First up is wheelchair ramps -- the most recent proposal would make these items exempt from sales tax. Second is liquid vaping products -- it is proposed that these products be taxed at the same rate as cigarettes and other tobacco products. Third up is gym memberships -- it is proposed that these be sales tax exempt. The fourth and final item to be discussed here is home-sharing services, such as Airbnb -- lawmakers would like to see a sales tax increase of 6.35 percent.

Connecticut tax evasion defense part I: Mistake or ignorance

The federal and state governments take taxes very seriously. If you do not pay what you owe on time, you may be accused of tax evasion. Such an accusation is not something to take lightly, as a criminal conviction on a tax evasion charge can have significant consequences. This column will discuss various defense options available to Connecticut residents who are facing tax evasion charges.

The first defense option that will be discussed is claiming mistake or ignorance. Tax law is not easy to understand, and it is frequently being updated. People often make mistakes on their taxes or are unaware of how certain tax laws may apply to them. This is not tax evasion; it is simply human error.

Connecticut residents who wish to appeal tax audits may do so

No one wants to get picked for a tax audit, but it happens. The Internal Revenue Service not only looks for red flags on tax forms that would warrant tax audits, but it also randomly selects Connecticut residents to put through the wringer every year, just because they can. When an audit is complete, some people may feel that they have to live with the results, but the truth is, it may be possible to fight the results by filing an appeal.

A tax audit can have one of three outcomes. The first, and what everyone hopes for, is that nothing will be found and no further taxes or penalties will need to be paid. The second is that an issue will be found, and taxes and penalties will need to be paid to bring one's tax obligation current. The third is that a major violation will be found, which can result in the need to pay further taxes and penalties, and criminal charges may be filed.

Is it possible to commit a tax crime and not even know it?

Getting taxes done, turned in and paid on time can be extremely stressful for quite a few Connecticut residents. People do their best to make sure they fill out everything right, only take the deductions they believe they qualify for and hope for the best. Unfortunately, some people make mistakes that may result in them facing tax fraud accusations without even realizing their error. When actually accused of a tax crime, one can seek help to deal with it.

According to a recent article, there are several ways that people mistakenly complete their returns in a way that could be considered tax fraud. Before talking about those things, let's define tax fraud. It is the intentional wrongdoing by a taxpayer in order to avoid or lower their tax obligation. The key word here is intentional.

This tax season could be a challenge on many fronts

It's hard to imagine anyone in Connecticut not knowing about the partial government shutdown. If you are one of the lucky ones that it doesn't affect directly, then you may not pay much attention to it other than what you see in your news feed or in a newspaper.

However, as tax time approaches, you may want to pay a bit more attention since it could impact your filing experience this year. While the IRS vows that anyone receiving a refund will get it, it may not be able to provide other services it normally does during this time of year.

Gig workers, beware these potential income tax problems

Now more than ever before, more Connecticut residents are gig workers. Gig workers are considered small business owners. They work for themselves by taking on business opportunities offered through larger companies -- such as Uber and Airbnb, among a number of others. Being a gig worker can be a good deal and offer good money, but it can also cause some income tax problems.

Small business owners are affected by a number of extra tax rules. This is something of which many people are not aware. Some individuals may be surprised at tax time when they learn they owe the Internal Revenue Service a big chunk of change that they were not expecting to have to pay. For example, self-employment tax is quite a bit higher than regular income tax and is something gig workers have to pay, which can greatly increase their tax obligation.

When a tax situation requires an attorney

When tax season rolls around, most people in Connecticut and elsewhere try to file their taxes themselves or turn to accountants for assistance. There are some tax situations, though, that may require one to seek out a tax attorney for help. What situations would be best handled by an attorney rather than an accountant?

An accountant is good with numbers; an attorney understands the law. The goal of an accountant is to input numbers accurately and try to minimize a person's tax liability. The goal of a tax attorney is to prevent or resolve any tax problems that may arise.

How are inheritance and estate taxes different?

When a loved one passes away, closing out his or her estate can be a real ordeal. Part of the process may involve paying estate taxes. What about inheritance taxes? Does the state of Connecticut collect such taxes, or are these the same as estate taxes?

Many people consider estate and inheritance taxes to be the same thing. They are not. Estate taxes come from calculating an estate's net value and subtracting any liabilities. If the end value of the estate reaches a certain amount, estate taxes will need to be paid.

Not everyone goes to jail for tax crimes

Connecticut residents who have allegedly committed questionable tax moves may worry about what may be coming their way. The state and federal governments are not afraid to throw people in jail for certain tax crimes. Those facing allegations of committing tax crimes can help themselves by seeking legal counsel as soon as possible.

When accused of committing a tax crime, one might worry about any potential consequences of a conviction -- such as jail time, as mentioned above. The truth is, not everyone goes to jail for tax crimes. This was clearly seen in a case involving a mayor in another state.

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