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Be cautious of DIY approach to filing taxes, consider working with tax attorney

There is no shortage of resources for folks looking to take a do-it-yourself approach to filing federal income tax. For individuals with a relatively simple tax profile, this may not be such a problem, but for those who have a more complex situation, who have significant wealth, and for businesses, it is important to not be guessing when filing returns.

One thing that needs to be kept in mind about do-it-yourself tax filing, though, is that taxpayers are ultimately responsible for mistakes they make in their filing, whether or not they relied on published information about filing taxes. This is true even information provided by the IRS! So taxpayers cannot rely on the accuracy of the information they gather in doing their own taxes. Ultimately, they are responsible for any mistakes they make. 

Why you should not commit state tax fraud in Georgia

There are probably more jokes about taxes than there are tax laws. It is no secret that everyone wants to pay as little taxes as possible and will do anything to achieve that goal. Unfortunately, you may be tempted to do so through fraudulent means. No matter how common these practices are, they are illegal and can lead to severe consequences that may ruin your business. Avoid the following penalties and take a safer but just as satisfying approach to your taxes instead.

New tax rules aim to end corporate practice of “earnings stripping,” P.2

We previously began looking at the Treasury Departments recently announced rules aimed at ending the tax inversion practice of earnings stripping. By and large, corporations have not welcomed the new rules, for obvious reasons, though many tax experts are hopeful that they will be quickly overturned under a Trump administration.

Some in the field feel that Trump may end up retaining some aspects of the new rules, though, and are more cautious about the future. Corporations, in view of the uncertainty of the situation, should not expect that the new rules go away and are advised to mobilize compliance efforts.  

New tax rules aim to end corporate practice of “earnings stripping,” P.1

Back in October, the U.S. Treasury Department announced new regulations aimed at addressing corporate tax avoidance, particularly through the use of tax inversion. The term refers to common corporate practice of acquiring small foreign competitor companies in nations with low tax rates and then relocating the corporation’s legal domicile to the foreign nation.

The aim of tax inversion is to avoid tax liability. Companies that engage in tax inversion often make use of interest deductions to foreign corporate headquarters in order to reduce their corporate taxes in the United States. This is known as earnings stripping, and is a practice that the new rules seek to discourage.

Looking at the IRS appeals process and expedited resolution of tax controversies, P.2

Previously, we began looking at the IRS appeals process and how the Fast Track Mediation Program fits within that overall process. The IRS appeals process is important because most disputes can be solved through it. Taxpayers do have the right to bypass the appeals process and take their case directly to court, but doing so is often not going to be the most efficient way to handle a tax dispute.

Tax decisions are appealed to local appeals offices, and begin with filing either a small case request or a formal written protest to the contact person identified in the taxpayer’s letter of proposed tax adjustment. Exactly which type of appeal to file depends on the circumstances of the case, including the amount of money in controversy and the number tax periods at issue. Most tax controversies are resolved in small case requests. When more money is at issue, a formal protest is appropriate. 

Is your charitable organization tax exempt?

Starting a charitable organization is unarguably a kind thing to do. Just as important as the charity work you do is how you run your nonprofit, not only for the benefit of the cause you serve but also for your own advantage. You may think that your charitable organization is automatically tax exempt by nature, but it needs to meet specific requirements and follow certain rules to receive and maintain the status of tax exemption. The Internal Revenue Code outlines these standards in section 501(c)(3).

Looking at the IRS appeals process and expedited resolution of tax controversies, P.1

Disputes with the Internal Revenue Service can become quite involved, especially when there is a lot of money in dispute. The IRS, like any bureaucracy, has various procedures it is required to follow when investigating taxpayers, and taxpayers have due process rights they need to be aware of so that their interests are given fair consideration.

In some tax dispute cases, a taxpayer’s interests are best served by opposing the IRS and taking their case to the courts. In many cases, though, tax disputes can be resolved by fully pursuing the agency’s appeals process. The appeals process can be pursued by taxpayers who have received a determination from the IRS in their case, who have a letter explaining their right to appeal the decision, who do not agree with the decision, and who decline to sign any agreement forms sent to them, whether to extend the investigation or to pay the additional tax assessment.  

Navigating statute of limitations extension agreements, P.2

We’ve been looking in recent posts at extension agreements between the IRS and taxpayers, which extend the deadline for IRS to assess additional tax and can allow taxpayers more time to provide documentation when they disagree with IRS audit findings.  

As we noted, taxpayers do not have to agree to an extension, and they have several options with respect to the type of agreement they make with the IRS. One option, known as an unconditional consent, can be either open-ended or a fixed date. In this type of agreement, the IRS and the taxpayer retain all of the examination and appeal rights they had prior to the expiration of the statute of limitations. This could be beneficial for the taxpayer in some circumstances, but there may be certain cases where the taxpayer doesn’t want the IRS to retain all its examination and assessment rights. 

Navigating statute of limitations extension agreements

In recent posts, we’ve been looking briefly at the statute of limitations for the IRS to pursue additional payments in tax audits. As we noted last time, the IRS generally has three years to make tax assessments, does sometimes ask taxpayers to agree to an extension of the deadline for assessing taxes. Though taxpayers do not have to agree to such an extension, doing so can benefit them in some circumstances.

For the IRS, an extension allows extra time to finish an audit and to process the results before making a final decision. Extending the statute of limitations allows a taxpayer additional time to produce documentation to support the taxpayer’s position in the audit or to request an appeal from the results of an audit. It can also give a taxpayer additional time to claim a tax refund or credit. 

When art is your business

There are certain activities out there that some people do as a business while others do as a hobby. Art is among these activities. Professional artists or other individuals who are trying to make a business out of one of these activities can face scrutiny from the Internal Revenue Service over whether they are actually engaged in business or instead are just a hobbyist. This issue can be a major focus area when such an individual ends being audited by the IRS.

Why does it matter tax-wise whether an artist is a professional or a hobbyist? Well, it can have major implications on what sorts of tax deductions they would be allowed. If their art activities are considered a business, they would be able to deduct many of the expenses related to these activities. If, however, the activities are deemed a hobby, such deductions generally would not be available.

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Located in Atlanta, The Peck Group, LC, represents clients nationwide. Regionally, we are committed to serving clients in Fulton County and throughout the state of Georgia.