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Danbury Tax Law Blog

Working with IRS to pay off tax debt

Connecticut residents who are one or more years behind on paying their taxes may find themselves in quite the bind. With Uncle Sam calling and wanting money now, but not enough money in the bank, figuring out how to handle the situation can be challenging. Thankfully, the IRS is not totally unreasonable and may offer an affordable way for one to pay off tax debt.

Before making any sort of deal with the Internal Revenue Service, it is wise to get a confirmation of the amount owed. There may be an issue, and no one wants to be on the hook for taxes they do not really owe. After getting the number, it is then important to determine if the money is to go to the federal government or the state.

Connecticut tax crimes: filing bogus returns doesn't pay

When tax season rolls around, it can be tempting to be a little dishonest in the hopes of avoiding paying an arm and a leg in taxes. However, lying on tax returns or filing bogus returns are tax crimes. Those in Connecticut and elsewhere who are caught doing either of these things could face some serious penalties.

Recently, in another state, a judge ruled in a case involving the tax returns of a couple and their business. They are said to have under-reported their income, filed false sales tax returns and filed bogus joint returns for years. Investigators say, as a result of these actions, the couple embezzled over $170,000 in sales tax alone. They also did not report over $2 million in earnings.

Are you sure you shouldn't be paying payroll taxes?

As a business owner here in Connecticut, you may have people working for you. How you classify them determines whether you owe payroll taxes. If you improperly classify an employee as a contractor and fail to make payroll tax payments, you could end up on the IRS's radar. 

Therefore, it would be in your best interest to understand the difference between an employee and a contractor. Making that determination often rests in the 20-factor analysis created by the IRS to determine whether a worker is an employee.

Federal Tax liens Q and A

No one loves taxes. Sometimes, they are a financial burden that some simply cannot afford to pay. Failing to pay can have serious consequences, however. In a previous post, this column addressed the purpose of tax liens -- a punishment for not paying taxes. This week, this column will answer some common questions that Connecticut residents may have about federal tax liens.

Question number one: How can I rid myself of a tax lien? There are four ways to remove a lien. One may pay all tax debt in full, seek a discharge of property, apply for a certificate of subordination or apply for a lien withdrawal. An experienced tax attorney can provide detailed information about each one of these options.

Estates taxes can add up

As it currently stands, both the state of Connecticut and the federal government can collect taxes on estates. Estate taxes can really add up fast and take a lot away from beneficiaries. With some careful tax planning, it may not be so bad.

It is believed that most adults in the United States do not have estate plans in place. This means they, their assets and their beneficiaries lack a lot of basic protections in the event of their deaths. There are some ways to reduce the estate tax burden with which beneficiaries will have to deal, but it requires action.

The Amazon sales tax problem

Amazon is one of the biggest online retailers in the world. Millions of people use the site to sell their own goods, and Amazon itself offers popular products at relatively low prices. For a long time, the company got away with not charging sales tax. In 2013, the state of Connecticut said no more. While the company itself may charge Connecticut residents sales tax, personal sellers have not been too great about it, leaving them and Amazon on the hook for quite a bit in unpaid taxes.

According to a recent story in The New York Times, more states are pushing Amazon to charge sales tax. Amazon, for the most part, has been doing its part, but they have asked personal sellers to collect and pay sales tax on their own. Unfortunately, this has not been happening, and certain states are trying to hold Amazon accountable.

IRS encourages taxpayers to pay as they go

If you are a business owner or independent contractor, you are probably always looking for ways to reduce your tax burden. The end of the year is a time for your last efforts in seeking tax deductions and making preparations for next year. Included in next year’s plan might be quarterly goals for your business. Is taking care of your tax burden part of these plans?

The Internal Revenue Service recently released a guide to withholding estimated taxes in an effort to help people avoid penalties. The number of Americans facing a penalty for failing to withhold taxes has spiked lately. 40 percent more taxpayers paid the penalty in 2015 than in 2010, according to the agency.

Tax preparer on the hook for the results of tax audits?

Many Connecticut residents turn to tax preparers to help them with their tax filings. As complicated as the tax code is, this can be a smart move. However, what if you, as a professional tax preparer, make mistakes? You could be on the hook for the results of your clients' tax audits.

According to current tax laws, if you make a mistake, you could be subject to significant penalties for your error. It does not matter if the tax return in question is someone's personal taxes, a business return or has to deal with an estate. In order for you to be held accountable, however, it is necessary for the IRS to prove that your error was the result of a willful attempt to lessen your client's tax liability or due to disregarding tax regulations.

Connecticut tax crimes: Fraud or mistake

Income taxes -- no one really wants to deal with having to file and pay them every year. It is, however, a part of life that, until tax laws are changed, is not going away. So, Connecticut residents fill out their forms and get things submitted -- usually on time. The problem is, some commit tax crimes while in the process, with or without knowing it.

Tax fraud. This is when a person willfully attempts to get out of paying his or her owed share of income tax. Examples of tax fraud include:

  • Failing to pay taxes when due
  • Failing to report all income received
  • Making false claims on a tax return

Options for minimizing the pain of back taxes

If you are like many in Connecticut and across the country, you dread tax season. While it is still several weeks before the end of the year, you may already fear you will owe money to the IRS. In fact, you may still be dealing with letters and warnings from the government about overdue taxes from last year.

Your impulse may be to leave the unopened envelopes on the table and deal with the other bills in your life. However, there are options available to you when your tax bill is unmanageable, and the IRS is usually willing to work with people who qualify for their various installment plans.

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