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Atlanta Tax Law Blog

IRS actions to collect back taxes cannot be ignored

During the past two years, there was apparently more than $30 billion in back taxes, interest and penalties that the IRS pursued. Though it probably does not need to said, the circumstances for anyone owing money will only get worse if the problem is ignored.

When the IRS says that you owe money, it can mean that federal agents will be going after wages and assets in addition to penalties and interest. And the amount owed will only grow disproportionately larger over time if the matter is not dealt with in a timely fashion.

IRS considering new ways to tax corporate perks

Employees may soon be seeing changes in the manner that corporate perks are taxed. The Internal Revenue Service is always looking for ways to increase their revenues and is now considering taxing perks such as meals, yoga classes and free shuttle services. The IRS is especially taking a close look at perks that are being provided in the technology sector.

Companies may wish to push back on such proposals, however. Many perks such as the providing of meals are deemed necessary by businesses. Certain perks are put in place to allow employees to save more time and be more productive at the workplace.

IRS employees paid bonuses despite tax delinquency

A recent internal audit of the Internal Revenue Service revealed that over the course of two years, the agency tasks with maintaining tax compliance paid bonuses to about 2,800 employees who had recently been disciplined for failing to pay their own taxes. In addition to cash bonuses, employees were also given raises and extra paid time off.

In total the IRS gave out $2.8 million in bonuses over the course of two years. Out of that total sum, $1.1 million was awarded to employees who were not up to date on their taxes. An IRS spokesperson says that it is not illegal to pay bonuses to employees who have outstanding taxes owed to the government, but that awarding these bonuses is clearly counter-intuitive for the tax compliance agency.

Budget cuts lead to lower audit risks for taxpayers

It’s hard to think of a bright side to federal budget cuts that have left agencies strapped for cash, particularly this tax season as millions of phone calls to the IRS seeking help on tax returns went unanswered. However, for some taxpayers the understaffed Internal Revenue Service means that they have a lower risk of being audited this year.

In fact, experts predict that audits will be at their lowest levels since the 1980s. A spokesperson from the IRS said that they will continue to zealously pursue the most blatant offenders and people attempting serious tax evasion. Still, he admitted that some people who should be held accountable for unpaid taxes may not hear from the IRS this year.

Man stages pre-emptive strike against tax audit

A man with residences in two different states gained internet fame recently when his daughter began sharing photos he had taken to prove his residence to the Internal Revenue Service in case of an audit. For people who live and work in two different states this can be a big issue, since double taxation can become very expensive. The scenario might sound unlikely at first, but think of people who travel often for work or who live on near the border of one state and commute across each day. For some, the distance might be greater and a second residence is required to help ease the burden of the long daily commute.

When this happens the IRS or state tax authorities may seek proof of residency to determine how many days were spent residing in each state so that the appropriate tax rate may be assessed. Without requiring such proof, people who travel often for work might try to file income taxes only in the state with a lower marginal rate even if they might not strictly qualify.

Tax filing extension comes with a catch

As tax day approaches, many Atlanta readers are probably finding themselves awake at night, worrying about gathering the right information and figuring out how to meeting the April 15th filing deadline for their federal income taxes. Filing taxes is probably everyone’s least favorite time of year, since there can be so many questions that arise and concerns about tax compliance. This is for a good reason – the United States Tax code is incredibly complex. Even with the help of an accountant, people who own business, hold assets abroad, or have other complex tax situations may need to look deeper into tax compliance and tax law issues in order to create the best plan. 

Update: IRS issues guidance on virtual currency

In our previous post we discussed the murky legal standing of the virtual currency bitcoin, which is still in the early stages of adoption by tech-savvy investors. Tax law experts had been awaiting guidance from the Internal Revenue Service about how to categorize bitcoin holdings for tax purposes. As we discussed previously, one option was to consider bitcoins to be a foreign currency and another was to categorize it as a capital asset.

The new guidance from the IRS clears this issue up, saying definitively that taxpayers should categorize bitcoins as property. The virtual currency should not be taxed as foreign currency, the IRS says, because although it can be exchanged for goods, no sovereign nation accepts it as legal tender.

Tax situation remains murky for virtual currency

Georgia readers may already know a little bit about bitcoin, a virtual currency created by an anonymous group online. Bitcoin has been in the news a lot lately as mystery and scandal surrounds the buying, selling, and potential theft of the online commodity. However, for most users of bitcoin the concerns at the moment are more practical and are centered around how to assess the proper tax situation of bitcoins for the upcoming April 15th federal income tax filing deadline.

A tax law attorney cannot help Georgia residents to actually file their income tax return. However, they can help answer some of the big tax compliance questions that come along each year when taxpayers are assessing their income, assets, and potential deductions for their federal and state income tax returns.

Georgia Senate approves state income tax cap

Lawmakers in the Georgia State Senate approved a cap on the state income tax late last month. If their measure is approved by the House and approved by voters there will be no further increases in the state income tax beyond the current rate of six percent. The measure is a proposed constitutional amendment, which means that once in place it would be very hard to reverse.

Experts say that it is unlikely that the constitutional amendment will be successful for a variety of reasons, including a procedural issue that requires revenue-related bills to start in the House of Representatives. The senator who sponsored the measure said that he intended to start a conversation about keeping Georgia as a low income tax state.

Proposal expands tax breaks for low income workers

As many people who follow the news and politics are aware, Congress and President Obama are in the first rounds of negotiations and proposals for a tax code overhaul. As we discussed in a previous post, there are many unresolved issues in the tax code that need to be addressed, particularly in the area of tax breaks for low income families and small business owners (among others). One area of contention is the Earned Income Tax Credit, which provides a tax credit for people who earn less than $14,790 per year. This tax credit along with the Child Tax Credit currently applies to 32 million families nationwide.

At the present time, the tax credit is available mainly for the working poor who have children and offers a maximum refund of $503 per year. In addition to adding eligible taxpayers who do not have children, the proposal also includes more workers by widening the age range by several years on either side and by increasing the income cap for claiming the credit.

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