Archive for Individual

Injured Spouse Relief Is Available

The terms “innocent spouse” and “injured spouse” are frequently misunderstood. These are two different situations under our current tax code.  A previous blog discussed the concept of an innocent spouse under IRS rules (See Innocent Spouse Relief by John Stancil). An innocent spouse is one who stands has filed a joint return and is exposed to liability for additional taxes due to fraudulent activity on the part of the other spouse.  An injured spouse is someone whose refund is captured by the IRS to satisfy a debt owed by the other spouse.  An injured spouse claim, if accepted by the IRS, can prevent this from happening.  A claim is made by filing Form 8379 with the IRS.

First, some background.  When spouses file joint returns, each spouse is liable for anything that is included on the return.  In addition, there is joint liability for any Read More

Written by | Posted in Individual • IRS

If The IRS Sends You A Bill That You Can’t Pay… Please Don’t Have A Heart Attack!

A few years ago, a client came to me almost at the point of a nervous breakdown. He had been recently audited by the IRS and subsequently received a tax bill in the mail for over $180,000! After briefly perusing the documents he brought in, I quickly realized that something was significantly amiss with this tax bill. So I advised him not to panic, but to leave his documents with me. After comparing the audit adjustments with his documents, I decided that we had to go and pay the IRS a visit.

A couple weeks later, we were sitting down with the officer who had conducted the audit and his manager, and after reviewing the audit adjustments together, the amount originally assessed was eventually cut in half. The audit officer, who appeared to be a rookie, had apparently done a very poor job. Read More

Written by | Posted in Individual • IRS • Tax Controversy

Are You Eligible For An Offer In Compromise?

You just heard or saw a commercial that promises, “If you owe the IRS $10,000 or more we can settle your tax debt!” Don’t fall for it. Even when you hear the announcer say “Yes, no problem! We can settle your tax debt no questions asked.” If you called and you’re on the phone with a sales person, listen to your instincts and hang up right away!

An Offer In Compromise (OIC) is what is being hinted at in these commercials. An Offer In Compromise allows you to settle your tax debt for less than the full amount you owe. It may be a legitimate option if you can’t pay your full tax liability, or when doing so creates financial hardship. However, there are many things that must be considered and questions that any respectable professional will ask prior to saying they can settle your IRS Tax debt for less than the full amount of the debt. Read More

Written by | Posted in Individual • IRS • Tax Controversy

How Professional Athletes Attribute “Rest Days” for State Income Tax Purposes: A Major Controversy Brews

Many young professional athletes and their less than experienced managers are learning for the very first time that the money “earned” PLAYING or competing is subject to income tax both at the federal level AS WELL AS AT THE STATE LEVEL WHERE THEY ARE PERFORMING or rendering service on behalf of their employer.

Basically for example if you earn money in Colorado you pay Colorado income tax as well as federal income tax on those same earnings. Professional athletes compete or perform (aka earn money) in many different states, the majority of which have a state income tax obligation, some higher than others and all pretty nasty.

A few months ago a select group of professional athletes shared concerns about Read More

Written by | Posted in Income Tax • Individual • State Tax • Tax Controversy

Tax Changes For 2015: A Checklist

It’s been a few months, but “Welcome 2015!” As the new year rolls around, it’s always a sure bet that there will be changes to current tax law and 2015 is no different. From health savings accounts to retirement contributions and standard deductions, here’s a checklist of tax changes to help you plan the year ahead.

Individuals

For 2015, more than 40 tax provisions are affected by inflation adjustments, including personal exemptions, AMT exemption amounts, and foreign earned income exclusion, as well as most retirement contribution limits.

For 2015, the tax rate structure, which ranges from 10 to 39.6 percent, remains the Read More

Written by | Posted in Individual • Tax Planning

Regulation 105 Withholding Tax For Services In Canada

Regulation 105 Withholding Tax for Services Rendered by Non-Resident

Do you engage foreign individual or company (collectively referred to as “non-resident person”) as independent contractor to provide services in Canada?  Are you the non-resident person providing independent contractor services in Canada?  If you answer yes to either question, do you know that payments made in respect of services rendered in Canada by non-residents are subject to Regulation 105 withholding at a rate of 15%?  There is an additional 9% withholding if the services are rendered in the province of Quebec by non-residents.  These withholding requirements simply act to ensure that non-resident recipients of the service payments pay any Canadian income tax duly owing. Read More

Written by | Posted in Canada • Corporate • Income Tax • Individual • International • Tax Planning • Tax Tips

Who Is Liable To Pay Back Taxes When Filing Jointly?

“I didn’t do it! She did!” you say, as you sit in my office explaining the current, messy state of your financial affairs. Let’s say your wife failed to report her income from running a daycare facility out of your home, and since she handles your taxes, you had no idea. Now you’re separated, on the road to divorce, the IRS is calling you more often than your mother, and you need to know your options.

When married taxpayers file jointly, the letter of the law states that both taxpayers are “jointly and severally liable” for the tax, and “any additions to tax, interest, or penalties that arise as a result of the joint return even if they later divorce.”(IRS) That “severally” means that each spouse is entirely responsible for the whole sum of taxes, interest and penalties. So, even if one spouse earned all the income, the other spouse is just as Read More

Written by | Posted in Individual • IRS • Tax Deductions

So What’s The New Buzz On Foreign Bank Accounts?

When looking for a picture for this post, I came across this one and remembered my college English Professor. She really loved the term, “Freudian Slip” for some reason! All I knew then was that Sigmund Freud was the father of psychoanalysis but I never quite understood how that related to a Business English class, unless that was the Professor’s way of telling us we were driving her nuts! Now I know that the term, “Freudian Slip” is a “mistake in speech that shows what the speaker is truly thinking” or “to do what one is truly thinking about”.

No, this post is not about defining psychoanalytic terms, dare I say more interesting than tax stuff? Not quite, but this post is about the latest buzz from the Internal Revenue Service, about some situations US taxpayers having foreign accounts might be in and their Read More

Written by | Posted in FBAR • Individual • International • OVDP

Thinking of Hiding Money Abroad? Don’t Be A “Dirty Dog!”

In a recent IR published on January 28, 2015, the IRS said that avoiding taxes by hiding money or assets in unreported offshore accounts remains on its “annual list of scams known as the ‘Dirty Dozen’ for the 2015 filing season.” The article is quoted below:

WASHINGTON — The Internal Revenue Service today said avoiding taxes by hiding money or assets in unreported offshore accounts remains on its annual list of tax scams known as the “Dirty Dozen” for the 2015 filing season.

“The recent string of successful enforcement actions against offshore tax cheats and the financial organizations that help them shows that it’s a bad bet to hide money and income offshore,” said IRS Commissioner John Koskinen. “Taxpayers are best served by coming Read More

Written by | Posted in Individual • International • IRS • OVDP • Tax Fraud/Evasion/Crimes

A Message From Uncle Sam To Taxpayers Near And Far: ‘Don’t You Dare Lie To Me!’

Are you looking for a fun way to kill a few minutes when you think the boss isn’t looking, and the company’s firewall restricts access to your favorite website? Google the phrase, “the defendant showed no remorse” and see how many hits you get. I witness this phenomenon firsthand almost every day. When the judge pronounces sentence, either after a trial verdict or as part of a plea bargain agreement, the defendants typically show no emotional response.

A large part of this apathy is “monkey see, monkey do.” That’s the demeanor that fictional and quasi-fictional defendants present on TV, so many of my clients assume they are supposed to behave the same way. Others are in shock after they hear an unfavorable verdict, while others are simply overwhelmed by the process and really have only a vague Read More

Written by | Posted in Individual • IRS • Tax Fraud/Evasion/Crimes

Selecting An Income Tax Preparer

Is your tax return preparer qualified to prepare an income tax return? Despite the number of levels of qualifications for preparers, it remains a relatively unregulated business. Suppose that I have never prepared a tax return in my life, but I decide it might be a good thing to do. I can go to the IRS website, complete an application which certifies that I do not have any felony convictions and am current in my obligations to the IRS, and pay the $64.25 fee. For my $64.25 I get a PTIN – Preparer Tax Identification Number that will allow me to prepare income tax returns for compensation.

Look for a PTIN

As the tax code gets more and more complex, people are turning to professionals to prepare their returns. What should you look for in a tax return preparer? There are Read More

Written by | Posted in Income Tax • Individual
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