Internal Revenue Code

An Introduction To The Most Confusing Parts Of The Income Tax Code

The Internal Revenue Code and its accompanying regulations are voluminous. Of course, many of these rules affect the ordinary individual American taxpayer. There may be no more daunting component of federal law than the Tax Code and the volumes of regulations that detail it. Many provisions are confusing, to say the least, and may require certain additional paperwork such as a long worksheet or form.

It’s no surprise that a substantial number of provisions of the Tax Code have a history of high taxpayer error and fraud. When you add to the equation the fact that law, especially tax law, is constantly evolving, a taxpayer’s confusion related to the interpretation of tax regulations may be significant and require the assistance of an experienced tax professional.

IRS Agents – Who Are These People?

For individuals with delinquent tax debt, thoughts of IRS contact may haunt their daily thoughts. IRS operatives may be lurking, waiting, ready to move in and assert their authority. At least this has often been the public perception, albeit somewhat exaggerated. However, this may be more likely of an occurrence in 2016 as IRS representatives seem to be regularly “visiting” taxpayers at their homes and places of employment! The tax professionals at the Thorgood Law Firm can assist any taxpayer that receives an unexpected visit from IRS personnel. Just who are these representatives and agents of the IRS?

The Mitigation Provisions Of I.R.C. §§1311-1314

While the IRS uses the mitigation provisions of I.R.C. §§ 1311-1314 to reopen a taxpayer’s closed tax year and assesses tax deficiencies, it hardly facilitates taxpayers in using these provisions in similar fashion when seeking a refund from a closed year. Nonetheless, Congress intended that the mitigation provisions ensure that if certain prerequisites are met, either the government or the taxpayer may secure appropriate relief.

The mitigation provisions of I.R.C. §§ 1311-1314 provide a form of statutory relief and apply in certain limited circumstances to claims that are otherwise barred by operation of law or any rule of law like the statute of limitations. The goal of the mitigation provisions is to place the parties in the position they would have been in if the tax item(s) had been properly treated.

Who Is Liable For Failure To Pay Over Employment Taxes?

Employers are required to withhold federal income and payroll taxes from their employees’ wages for payment of payroll taxes such as federal income taxes and FICA (Federal Insurance Contributions Act) taxes, which are held in trust until the employer makes a federal deposit of these amounts. The IRS applies a term, “Trust Fund Recovery Penalty” or TFRP, well-known by employers, to describe the fine for employer’s willful failure to pay over these taxes. Persons responsible for making such payments may be subject to criminal charges for any willful failure to do so. Most TFRP cases involve corporate officers.

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.

Gifts and Inheritances Under the Tax Code (26 U.S.C. §102)

Section 61 of the Tax Code states that “except as otherwise provided in this subtitle gross income means all income from whatever source derived”. Thus, the federal tax law requires taxpayers to pay income taxes on earnings, commissions, rents, royalties, retirement benefits, investment profits, tips, fringe benefits, bonuses and almost anything else of value, unless the Internal Revenue Code specifically provides an exception to the general rule contained in §61. An exception to the general rule is §102 of the Internal Revenue Code.

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