In December 2015, Congress passed the Fixing America’s Surface Transportation Act (FAST). Provisions included in this bill authorize the State Department to deny or revoke passports for individuals with delinquent tax debt of more than $50,000. The bill also resurrects the IRS private debt collection program and requires the IRS to use third-party entities to collect tax debt under limited circumstances. The IRS contracted with private debt collection agencies from 2006 to 2009, but then at the end of this period insisted it could more efficiently collect the debt itself, thus ending the private program.
In March, 2010, FATCA , or The Foreign Account Tax Compliance Act, was enacted by Congress to remedy a perceived growing problem with foreign banks facilitating and encouraging U.S. taxpayers to conceal assets in their financial institutions. Seventy-nine countries have since signed FATCA agreements with the IRS, which require the financial firms within each of the participating countries to report account data for accounts owned by U.S. taxpayers or face severe penalties.
Also, the IRS is now automatically exchanging digital financial account information with tax authorities in other countries.
Taxpayers that are unable to pay their tax bill have several options. All is not lost. Taxpayers who can’t pay their tax liability or who create a financial hardship by paying this liability may take advantage of a federal tax program in which they utilize a mechanism known as an “Offer In Compromise” to resolve and settle these tax problems with finality. The Offer in Compromise (or “OIC” in IRS and legal jargon) program is not for everyone and the IRS advises that taxpayers explore all other payment options before submitting an OIC. An experienced tax professional is absolutely essential in all steps of the process of formulating, making, and awaiting the IRS to accept, an OIC.
You’ve just received an award as the prevailing party in a lawsuit and it’s just a few weeks before the April 15th tax deadline. As you organize your documentation for the preparation of your taxes, you suddenly wonder if you have to pay taxes on the legal proceeds that you received a few weeks earlier. Are they indeed taxable? Whether you must include the amount of the proceeds in your income depends on all the facts and circumstances of each individual case. It also depends upon the type of injury incurred.