The Blog

Skinny on the Net Investment Income Tax

The Skinny on the Net Investment Income Tax The Skinny on the Net Investment Income Tax – The Net Investment Income Tax is a 3.8% surtax imposed on capital gains, interest, dividends, gains from the sale of property and passive business income such as rents and royalties. It applies to taxpayers with a modified adjusted gross income in excess of $200,000 ($250,000 for a married couple) and is imposed on the total amount of a person’s net investment income or the amount by which that income exceeds the income threshold, whichever is less. Although the Net Investment Income Tax took effect on January 1, 2013, the IRS did not issue the regulations governing the tax until sometime in November. Because of this time lag,  taxpayers … Continue reading

Do Not Ignore Mail from the IRS….

Why You Should Not Ignore Mail from the IRS - Although the issuance of an IRS Notice of Deficiency is usually the first step in the collection of an outstanding tax liability, ignoring it can have serious consequences. The Notice of Deficiency is an official communication from the IRS informing a taxpayer that the tax amount due shown on their tax return is less than the amount owed according to the calculations of the IRS. Because the IRS is allowed to collect a tax debt without proof that the debt exists, a taxpayer who receives an IRS Notice of Deficiency must either pay the tax liability shown on the notice or file a petition with the United States Tax Court contesting the tax amount owed. The … Continue reading

Tax Deadline for Citizens Living Abroad

Tax Deadline for Citizens Living Abroad – The tax filing deadline for United States citizens living abroad is on the horizon. That deadline is June 15th (pushed to June 16th for 2014). This automatic two month tax extension is granted to all overseas residents and does not require an extension request. The only condition for claiming the extension is for the taxpayer to attach a written statement when the return is submitted stating that both the primary residence and main place of business are outside of the country. If a taxpayer residing abroad is unable to file a tax return within the automatic two month extension period, they must then file a written request to gain an additional four month extension. Although neither a late … Continue reading

Government Employees Have Delinquent Tax Balances

Government Employees Have Delinquent Tax Balances – Various government workers have been in the news recently for their delinquent taxes. One article reported that over 1100 IRS employees who owed back taxes and had other tax related problems had, in fact, received bonuses. Another recent report divulged that, as of September 2013, various federal government employees and government retirees owed over three million dollars in unpaid taxes. In a nutshell, it appears that government employees are no different than the general population of taxpayers. Some do not pay their tax bills. A recent audit of the IRS revealed that over 1000 IRS employees who were in violation of one or more of the tax guidelines set by the  very agency they work had received bonus … Continue reading

The Tax Debt Debate

The Tax Debt Debate – One interesting provision of the Tax Extenders Bill that is currently stalled in the United States Senate is the privatization of tax debt collection activities. The Tax Extenders Bill, which is unlikely to be voted on again this month, contains a clause that suggests turning delinquent tax accounts over to private collection agencies. This idea, which has actually been tried before, is the subject of much debate. While proponents believe that private companies specializing in debt collection will be better equipped to collect outstanding tax liabilities, opponents believe that their tactics may be unfair, especially to those taxpayers who are unable to pay their tax debt. The tax gap, which is the difference between the dollar amount of taxes owed to the … Continue reading

Foreign Tax Compliance in the News

Foreign Tax Compliance in the News - In response to the global financial crisis, many countries have stepped up their surveillance of the tax obligations of companies within their tax jurisdiction, especially those that have multinational subsidiaries. In fact, tax compliance and tax avoidance were two of the key issues discussed at the G8 summit held last year in Northern Ireland. Since that time, multinational companies such as Google, Starbucks and McDonalds, among others, have come under increased scrutiny for tax practices that may have resulted in reduced tax bills. Dolce and Gabbana Last week the owners of clothing company Dolce and Gabbana were convicted of tax evasion for failing to pay taxes on over $1.3 billion in royalties concealed in a Luxembourg holding company. The … Continue reading

Tax Fraud Phone Scams on the Rise!

Tax Fraud Phone Scams on the Rise! – Although the 2014 tax season is officially over, it appears that tax scams are actually on the rise. In fact, just days after April 15th tax filing deadline, the IRS issued a warning alerting taxpayers of a phone scam that is the largest one of its kind on record. At the time the announcement was made, taxpayers had already lost over $1 million as the result of scammers impersonating members of the Internal Revenue Service Department over the phone. This recent tax phone scam is not pocketed in in a certain area, but rather has been reported in almost every state in the country! It appears that these recent scammers have been so successful because they are … Continue reading

Taxes Are Due – Better Late Than Never!

Taxes Are Due – Better Late Than Never: The old saying “Better late Than Never!” applies to the filing tax of returns just as it does to most other aspects of life. With the April 15th tax deadline on the horizon, many taxpayers are rushing to file either a completed tax return or a request for an automatic six-month extension. Failure to do so will subject the delinquent taxpayer to late filing penalties that will begin to accumulate along with interest that will be charged on any overdue tax balances. Although late filing penalties can be abated in certain specific instances when there is a valid reason for filing late, the reasons for the delay must be well documented. Even when these conditions are met, … Continue reading

Avoiding an IRS Tax Audit

Avoiding an IRS Tax Audit: It is important to realize that receipt of an IRS Notice announcing that a tax return has been selected for an audit does not necessarily mean that there is an error on the return or that the IRS suspects the taxpayer or business submitting the return has done something dishonest. An IRS Audit is simply the process used by the IRS to verify the accuracy of a tax return by confirming specific items reported on the return. The audit process is always announced by an official IRS Notice which includes a list of the specific items of documentation being requested and a statement of the deadline by which these items must be provided. Although the IRS selects tax returns for audit … Continue reading

Celebrities Who Ignored Tax Deadlines

Celebrities who Ignored Tax Deadlines – Ignoring tax deadlines and failing to pay outstanding tax balances can have severe consequences. Interest and penalties accumulate over time and can amount to a significant financial burden. In addition, the IRS has the authority to use more aggressive collection techniques such as tax levies, tax liens and wage garnishments when outstanding tax balances are not paid in full. The following examples illustrate the consequences suffered by some well known individuals who ignored their tax responsibilities. This celebrity was slapped with a $6.2 million tax lien. Although actor Nicolas Cage earned over $40 million in 2009, the IRS slapped him with a $6.2 million tax lien in that same year. He was apparently spending more money than he earned … Continue reading

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