Monthly Archives: April 2016

Qualifying for IRS Innocent Spouse Relief

When married taxpayers file jointly, which is often done because of certain benefits available to couples filing jointly, both taxpayers are jointly and severally liable for the tax and any additions to tax, interest, or penalties that arise from the joint return, even if their marriage is later dissolved. Joint and several liability means that each taxpayer is legally responsible for the entire liability.

Thus, both spouses on a married filing jointly return are generally held responsible for all the tax due even if one spouse earned all the income or erroneously claimed deductions. This is true notwithstanding the provisions of a divorce decree regarding a former spouse’s responsibility for any taxes due on previously filed joint returns. However, in rare cases, a spouse may obtain relief from joint and several liability.

Unsure if you should go with standard or itemize deductions?

Unsure of whether you should use the standard deduction amount, or take the time to itemize deductions? The answer is fairly straightforward; you should itemize deductions if your total deductions are more than the standard deduction amount. Also, you should itemize if you don’t qualify for the standard deduction. Taxpayers should initially calculate itemized deductions and then compare that amount to their standard deduction to determine which provides the greater benefit. A taxpayer may be subject to a limit on some itemized deductions if he or she exceeds the adjusted gross income limits.

Real Estate Loss Deduction for Individuals

In the last ten years, too many taxpayers have sold real estate at a loss. How does this type of loss ultimately affect the amount of taxes owed to the IRS? First, to accurately determine the amount of a loss from disposition, compare the property’s sale price to its tax basis. The tax basis is generally the original purchase price, plus the cost of improvements (but not expenses deducted as repairs and maintenance) less depreciation.

What Is A Federal Tax Lien?

A federal tax lien is the government’s legal claim against your property when you neglect or fail to pay a tax debt. The lien protects the government’s interest in all your property, including real estate, personal property and financial assets. A federal tax lien exists after the IRS:

• Puts your balance due on the books (assesses your liability);
• Sends you a bill that explains how much you owe (Notice and Demand for Payment); and
You:
• Neglect or refuse to fully pay the debt on time.
The IRS files a public document, the Notice of Federal Tax Lien, to alert potential creditors and the public that the government has a legal and enforceable interest in your property.

Losses, Expenses and Interest between Related Taxpayers – Know The (Tax) Code: 26 U.S.C. §267

Congress, aware that related parties could create fictitious tax losses lacking economic substance based upon the related parties continued enjoyment of the property subject to the loss, enacted § 267 of the Internal Revenue Code to disallow certain losses and deductions on transactions between related taxpayers.

Frivolous Tax Arguments And Their Perils

“Like moths to a flame, some people find themselves irresistibly drawn to the tax protester movement’s illusory claim that there is no legal requirement to pay federal income tax. And, like moths, these people sometimes get burned.” United States v. Sloan, 939 F.2d 499, 499-500 (7th Cir. 1991).

As long as the federal income tax has been with us, taxpayers have tried to argue that income taxes don’t legally apply to them. The reasons and bases for these arguments usually include the voluntary nature of the federal income tax system, the meaning of income, and the meaning of certain terms contained in the Interenal Revenue Code. Taxpayers hanging their hats on frivolous positions risk a variety of civil and criminal penalties for tax evasion and tax fraud . And taxpayers that adopt these frivolous positions may face more severe consequences than those who only promote them.

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