If you owe money to the IRS, you know you are up against a formidable adversary. IRS tax liens and other collection mechanisms can target your property and bank accounts, leaving you with fewer and fewer options.
That is why, for taxpayers in Texas and across the country who are facing tax debt, it's important to know what the options are. Two of the most significant are an offer in compromise (OIC) and an installment agreement.
Like anything else, filing tax returns does not occur in a perfect world. There are many reasons why people fail to file that have nothing to do with tax fraud. Sometimes, for example, people simply get overwhelmed by life events, such as a death in the family, a serious illness or chemical dependency issues. Other times, financial challenges such as home foreclosure or job loss may be in play.
Regardless of the reason, however, taxpayers who fail to file can benefit from facing their fears and working with the IRS to resolve their tax debt issues. The same is true for state tax issues, whether those are in Texas or any other state.
Concerns about the Foreign Account Tax Compliance Act (FATCA) have been deep-seated and widespread since Congress passed the law in 2010. On its face, FATCA is supposed to target tax evasion on offshore accounts.
In practice, however, the new law has posed major implementation challenges. For taxpayers in Texas and across the country — and for financial institutions around the world — the full story of getting ready for and complying with FATCA is only beginning to unfold.
The IRS looks for revenue wherever it can find it. In recent years, for example, the agency has becoming especially aggressive at going after what it perceives to be unreported income from offshore accounts.
Another example is worker classification audits. The IRS has done many of these in Texas, looking for employers trying to avoid payroll taxes by classifying certain workers as contractors when they are actually employees.
But foreign account and worker classification enforcement are hardly the only avenues the IRS takes in its search for tax revenue. Yet another instance of this is the agency’s recent action against colleges that the IRS suspects of underpayment of taxes on employee compensation and on businesses they own.
Nirvana is a Buddhist term for the state of consciousness that transcends desire and suffering. More figuratively, it is a blissful state of freedom from cares and concerns - a state, however, that may always remain just out of reach.
By the second definition, no American state is a tax nirvana. And that certainly includes Texas.
Is the IRS reading your e-mail?
The IRS says it is not. Yesterday the acting commissioner of the IRS denied allegations that his agency gains access to taxpayers' e-mail messages without obtaining search warrants.
In Texas and throughout the nation, taxpayers are naturally concerned about the IRS gaining too much access to their personal communications. Such concern is only natural for privacy reasons. And of course the stakes are even greater when possible tax evasion charges could result from a criminal investigation.
In basketball, it's difficult for virtually any player when the other team puts two defenders on them. Even stars like the Dallas Mavericks' Dirk Nowitzki find such match-ups challenging and need help from teammates.
Now let's apply this analogy to tax law. If the U.S. government suspects you of tax fraud, in a sense you are being double-teamed. When the investigation is into possible criminal conduct, both the IRS and federal prosecutors may be involved.
This was what happened in a recent Texas case. Last week, the U.S. attorney's office for the San Antonio area and an IRS special agent announced criminal tax charges against three people.
In a nation based on the values of liberty and equality, someone's income level shouldn't really affect their chances of an IRS tax audit. After all, equality before the law is such a key value for us as Americans.
You'd think, then, that it shouldn't matter whether you are rich, poor or middle income. The likelihood of having your tax return audited wouldn't depend on your income. In Texas and across the country, belief in that type of fundamental fairness is practically an article of faith.
And yet, when one looks at the data regarding who actually gets audited, it is clear that high-income taxpayers are more likely to be audited than those of lower income.
Precision is important in any complicated activity. But the transaction costs involved in spending the time to dot every i and cross every t can be significant too. When it comes to adding up expenses for itemized deductions on a federal tax return, is it really necessary to calculate every expense down to the last penny?
The answer to this question is important to taxpayers in Texas and across the country. It is important because, if the IRS deems your return to contain too many zeroes, you may be at increased risk of being audited by the IRS.
In order for the law to be fair, the rules must be clear enough so that people can use them as a guide. Unfortunately, that is not really the case, many people believe, with IRS payroll audits of small businesses regarding suspected misclassification of employees.
In Texas and across the country, the IRS has been increasing such audits, looking for evidence that employers may have classified independent contractors as employees. The agency is concerned that employers might do this in order to avoid payroll taxes, specifically Social Security and Medicare tax payments.
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