The Peck Group, LCAtlanta Tax Law Attorney | Tax Return Law Firm | The Peck Group, LC2024-02-07T16:06:16Zhttps://www.pecklc.com/feed/atom/WordPress/wp-content/uploads/sites/1501607/2020/03/apple-touch-icon-75x75.pngOn Behalf of The Peck Group, LChttps://www.pecklc.com/?p=480212024-02-07T16:06:16Z2024-02-07T16:06:16ZThe IRS wants to look at records carefully
An audit is essentially an in-depth review of someone's most recent tax return and possibly several prior years of financial records as well. Depending on the situation, the person facing the audit might need to send certain records to the IRS.
Sometimes, such as when the IRS audits a small business owner, an IRS agent may come to an outside location as part of the audit process. Other times, the taxpayer goes to an IRS facility for an in-person audit. In any of these scenarios, the IRS typically reviews financial records to determine if someone violated the law or underpaid their taxes.
Audits don't always lead to penalties
Sometimes, audits put people at risk of prosecution if the IRS determines they evaded their taxes or committed fraud on a return. The IRS can recommend the prosecution of those embroiled in a tax controversy. Other times, the IRS may simply determine what someone failed to pay, calculate interest, add fees and then demand payment. Audits often mean that people must negotiate a payment plan or make an offer in compromise to submit a lump-sum payment that is less than their current tax debt.
Those who have just received notice of an upcoming audit may worry about the possibility of prosecution and financial losses. Thankfully, seeking legal guidance during an IRS audit can often make a major difference for a taxpayer in this situation.]]>On Behalf of The Peck Group, LChttps://www.pecklc.com/?p=480202023-12-13T15:00:00Z2023-12-13T15:00:00ZForeign financial institutions now provide asset information
International banking used to occur on a nation-by-nation basis. After years of people and businesses abusing tax loopholes, numerous international treaties have forced drastic changes in the financial sector. The federal government expects taxpayers to report all international bank accounts and foreign assets worth $10,000 or more to the U.S. Treasury Department’s Financial Crimes and Enforcement Network (FinCEN).
Failure to do so could lead to criminal charges. The IRS won't have a hard time finding evidence of most offshore assets. There's now an expectation that financial institutions in most countries annually share information with tax authorities in other nations. There are only a handful of countries that do not currently participate in international financial transparency programs. Most of those countries have unstable circumstances that could put potentially any sizable investments at risk.
Those with offshore bank accounts must comply with reporting requirements by providing information about those assets on their income tax return. Someone who fails to report their foreign assets could potentially face prosecution. Even accidental violations of the law can lead to fines of up to $10,000 per offense. Intentional violations could lead to $100,000 in fines or forfeiting half of the account's balance.
Learning more about changes to tax regulations, and seeking legal guidance accordingly, may help people avoid unintentional violations that could lead to fines or possibly even criminal prosecution.]]>On Behalf of The Peck Group, LChttps://www.pecklc.com/?p=480182023-10-11T13:41:32Z2023-10-11T13:41:32ZThey may fail to file estimated taxes
Tax filing requirements are actually different for those who work as independent contractors or run a small business when compared with normal employees. The average worker only needs to file a single tax return each year with the IRS. That return helps clarify the deductions and credits that may apply to someone's income and ensure they have paid everything they should. Self-employed professionals have additional obligations. In most cases, they will need to submit quarterly estimated tax payments to the IRS in addition to an annual tax return. Failing to do so could lead to more scrutiny from the IRS and possibly additional costs.
They may not have the funds to pay what they owe
Someone who has just started a small business or begun working as an independent contractor may not understand how their income tax responsibilities are different. Employers actually contribute toward employment taxes. Without those contributions, individuals have to pay more. People may have failed to retain enough money to make the large tax payments necessary when they file their annual income tax return as a self-employed professional.
They may not use deductions appropriately
There are rules restricting what credits and deductions self-employed professionals can utilize, and people may violate those rules without intending financial misconduct. Little mistakes regarding write-offs and deductions might eventually lead to major tax debts and possibly legal challenges.
Understanding why self-employed professionals are at risk of tax controversies, and seeking legal guidance when necessary, may help them more effectively avoid mistakes that could lead to tax debt or prosecution.]]>On Behalf of The Peck Group, LChttps://www.pecklc.com/?p=480162023-08-12T03:07:39Z2023-08-12T03:07:39ZThose who claim the Earned Income Tax Credit
Given that income tax is largely a reflection of how much someone earns, those with more income typically have higher obligations. Although those with lower incomes have fewer tax obligations, they can qualify for certain tax credits, like the Earned Income Tax Credit (EITC) that draw more scrutiny from the IRS. Many audits each year specifically focus on those claiming the EITC.
Self-employed people and business owners
The text requirements for those who run their own companies and who don't have employers making contributions on their behalf are different than the tax responsibilities of those who have a standard employment arrangement with a business. The taxes contributed by the self-employed professional will be higher than the taxes required from someone employed by a company, and they also have to make estimated quarterly payments. Errors and underpayments and very easily trigger audits and other challenges for self-employed individuals.
Those who have received a recent windfall
Perhaps someone's parent recently died, and they may be subject to capital gains taxes as a result. Maybe they visited a casino on vacation and one far more than they expected. Those who have unusual and large streams of revenue unexpectedly added one year can very easily make mistakes regarding reporting and paying taxes on those acquired resources.
Not only can the IRS cause a lot of stress for someone by auditing them, but the organization can also impose financial obligations on individuals and possibly even seek their prosecution. Recognizing when tax controversies and legal challenges are more likely can help people properly prioritize fulfilling their tax obligations and to seek legal guidance when they need it.]]>On Behalf of The Peck Group, LChttps://www.pecklc.com/?p=480122023-06-05T17:57:12Z2023-06-05T17:57:12ZWhat’s tax avoidance?
Tax avoidance refers to the practice of arranging one’s personal or business financial affairs in a manner that reduces tax liability within the boundaries of existing tax laws. It involves the strategic use of legal loopholes, exemptions, deductions and other provisions within the tax code to minimize tax obligations. It typically involves a lot of advance planning with taxation always in mind.
The key thing to know about tax avoidance strategies is that such methods are:
Legal: Tax avoidance operates within the confines of tax laws, using valid deductions, exemptions and credits to optimize tax outcomes.
Transparent: Tax avoidance practices are generally disclosed in tax filings, not hidden.
Focused on minimizing tax liability: The primary objective of tax avoidance is to reduce tax obligations by taking advantage of tax provisions and incentives.
For example, tax avoidance might include things like using tax credits for renewable energy investments to lower a company’s overall tax liability, or structuring your business formation to take advantage of favorable tax jurisdictions and incentives.
What is tax evasion?
Tax evasion, in contrast, is any illegal practice that involves intentionally trying to evade the payment of taxes by some illegal means. It can involve things like concealing income and assets or misrepresenting financial transactions in order to lower apparent tax liabilities.
The main characteristics of tax evasion tactics are that they are:
Illegal: Tax evasion involves deliberate acts that are illegal, like not reporting cash income and making sure that no record of such transactions are on the books.
Intentional: A mistake that leads to the underpayment of taxes isn’t the same as intentional evasion, such as purposefully inflating business expenses or hiding assets through shell companies and offshore accounts.
Concealed: Tax evasion generally involves acts that someone doesn’t want to be honest about with the Internal Revenue Service.
Tax evasion is considered a criminal offense and can lead to fines, penalties and even imprisonment.
When you have tax questions or you’re concerned about legal issues involving taxation, it’s always best to get experienced legal guidance that’s specific to your situation.]]>On Behalf of The Peck Group, LChttps://www.pecklc.com/?p=480092023-04-23T18:42:19Z2023-04-23T18:42:19ZThe IRS will accept installment payment plans
Ideally, everyone who owes money to the IRS for federal income taxes will retain sufficient funds to cover those amounts due by the annual tax filing deadline in April. However, for the thousands of taxpayers who discover a balance due when filing their taxes or after receiving notice from the IRS, there simply won't be enough funds on hand to cover the tax debt all at once.
Those who need to cover a tax balance can propose an installment payment plan by submitting paperwork to the IRS explaining how they intend to pay the balance. Typically, there needs to be a commitment to a specific amount and a specific timeline for the payments. The IRS may approve the payment plan or may reject it. They may also suggest alterations to it. The faster someone pays, the less they will have to worry about paying interest and penalties, which can add up very quickly.
Prompt communication and accurate paperwork are key in a tax debt scenario
When someone has an outstanding balance with the IRS, numerous small mistakes can put them at risk of enforcement efforts. The IRS can come after personal property or future wages.
In some cases, tax debts can lead to criminal prosecution. Those who recognize the issue and move quickly to address it, potentially with the help of a legal professional, will be in a better position than those who try to delay addressing their tax issue or simply hope the IRS won't notice.
Proactively suggesting a payment plan is one of the more common ways for people to take control of their current income tax debt. Individuals who are concerned about an outstanding balance can also seek legal guidance at any time.
]]>On Behalf of The Peck Group, LChttps://www.pecklc.com/?p=480082023-02-21T13:46:22Z2023-02-21T13:46:22Z$80 billion in funds will likely mean more IRS agents on the job
Federal lawmakers recently set aside a staggering $80 billion to help better fund the IRS. That will undoubtedly translate into a number of new workers, as many as 87,000, many of whom will help review tax returns and audit financial records when necessary.
In theory, the risk of an audit will be higher with more IRS workers on hand to review people's tax records. However, if you generally file your tax return on time and do not take any kind of liberties with the exemptions you claim or the deductions you apply, simply needing to undergo an audit does not automatically mean that you will end up facing penalties.
Sometimes, the IRS determines through a thorough review that no significant fraud or underpayment occurred. An audit could actually exonerate you, especially if you have help presenting your side of the situation and reviewing your financial records.
Handling an audit alone is a stressful experience
Those facing some kind of tax controversy should be aware that they have the right to seek outside help. Discussing your situation with an attorney can help you prepare for the audit itself or better respond to the claims made by the IRS related to your history of tax payments.
When you have a lawyer handling your case, you are in a better position to exonerate yourself. You also won't have to stress as much about the audit because you won't have to present the evidence on your own behalf. You will have someone to speak up and make the case for you. You won't have to learn tax law, and you won't be at risk of getting tricked or manipulated the way you might be without professional support.
Responding appropriately to an upcoming tax audit can be the difference between amicably resolving the situation and possibly facing charges.]]>On Behalf of The Peck Group, LChttps://www.pecklc.com/?p=480072022-12-19T20:47:26Z2022-12-19T20:47:26ZThe IRS knows one spouse might be innocent
The good news for you as someone worried about criminal penalties related to your spouse's tax decisions is that the IRS is quite realistic about how people handle household tax matters. The organization recognizes that in many households, one spouse doesn't really review the taxes and may just sign the form, trusting that their spouse will do what is right.
Provided that you were unaware of your spouse's misconduct, you may be in a position to apply for what the IRS refers to as innocent spouse relief. Someone who did not play a role in preparing tax documents could potentially ask the IRS to exclude them from any penalties the organization imposes.
To qualify, you must be able to credibly claim that you did not know about the fraud or evasion and that you did not directly benefit from it. Innocent spouse relief isn't an option if the allegations related to your personal income, business taxes, household employment taxes and a few other unusual situations.
Complex tax situations necessitate professional help
Realizing that there could soon be a tax controversy related to your household income tax return could make you worry about your financial future or the risk of ending up with a criminal record. The more you know about your rights, the easier it will be to protect yourself.]]>On Behalf of The Peck Group, LChttps://www.pecklc.com/?p=478112022-10-14T20:16:04Z2022-10-14T20:16:04ZThe interest can add up quickly
As soon as you have failed to meet your tax obligations by a specific deadline, interest will start accruing on the unpaid amount. If you file a tax return and the IRS reviews it six months later and determines there was an underpayment, you will have to pay interest for the entire length of time that has passed since the tax was initially due.
The amount you pay could be significant. Typically, the IRS assesses an interest rate that is 3% above the federal short-term lending rate. The IRS usually adjusts the interest rate quarterly. However, the interest compounds daily, meaning that it will add up more quickly than you realize, especially with a high principal balance.
What penalties or fines will you need to pay?
The financial penalties for underpaying your taxes can also be significant. Typically, the IRS assesses two kinds of penalties. You could face a negligence penalty if you made some kind of mistake or oversight.
The IRS could also assess a penalty if you made a substantial error, which typically means a mistake that would alter your tax responsibilities by 10% or more. The penalty could be 20% of the taxes owed. The good news is that typically the IRS can only assess one of the two penalties against you. Overall, the interest and penalties assessed when someone fails to pay their income taxes in full and on time could add thousands of dollars to the total balance owed.
Learning about the consequences of a tax mistake can help those hoping to resolve a tax issue amicably with the IRS.
]]>On Behalf of The Peck Group, LChttps://www.pecklc.com/?p=478092022-08-17T22:10:20Z2022-08-17T22:10:20Z25% in fines.
But what if you simply didn’t file your taxes at all? Is this also illegal?
There can be serious ramifications
For most people, filing taxes is a requirement and failing to do so is illegal. This is just another type of tax evasion, similar to artificially reducing your income so you don’t have to pay as much. If you have a filing requirement, you must file. Not everyone has an income or has to pay taxes, but those who do need to make sure that they send the paperwork to the IRS on time.
This isn’t just a financial issue. It can be, as noted above, since you’ll have to pay fines for taxes that are paid late. But any type of intentional fraud, such as deliberately refusing to file your taxes, could even bring on criminal penalties. The IRS takes this very seriously.
Can you pay back taxes?
The good news is that, if you failed to file or forgot to file, you may be able to pay off the back taxes that are owed. The IRS is willing to work with taxpayers who are making an honest attempt to pay the money they owe and who are not committing fraud.
Of course, that process can be very complicated, especially if you have a lot of money or have a very complex tax situation. It’s imperative that you know exactly what legal steps to take with so much money on the line.]]>