Washington DC Tax Law Blog

When does the IRS expect quarterly tax payments?

In most cases, the government expects taxpayers to pay their taxes in April. Any resulting payment or refund the result of withholdings from paychecks throughout the year. In some cases, the Internal Revenue Service (IRS) may expect taxpayers to make quarterly payments.

Who needs to pay on a quarterly basis? The IRS may require quarterly payments on any taxpayer that does not have taxes withheld on the money they make. For example, the agency generally expects quarterly tax payments from the self-employed to cover income and self-employment taxes.

Gig market audits are likely to go up – but where is my 1099?

The Internal Revenue Service (IRS) will likely increase its focus on taxpayers who work in the gig economy.

Why the change? The agency is expected to increase its scrutiny of this market based on the results of a new report released by the Treasury Inspector General of Tax Administration (TIGTA). The report claims the IRS has failed to collect taxes from the gig economy, also known as the “sharing economy,” because it was not properly tracking tax forms.

Tips to pay an unexpected tax bill

Researchers are starting to analyze data for 2018 tax returns. This tax year is the first that used the new tax law, the Tax Cuts and Jobs Act (TCJA) — a tax law that was supposed to result in a reduced tax obligation for the majority of Americans.

Are taxpayers seeing more savings under the TCJA? Thus far, it appears the new tax law has not delivered. The Internal Revenue Service (IRS) reports as of February 15, the average tax return is 16.7 percent less than the same time last year.

Snowbirds and residency for state tax purposes: 3 things to know

Many people with financial means, including many retirees, escape northern climes this time of year for sunnier vistas in Florida, Arizona or elsewhere.

It’s a great way to avoid the hassle of snow and ice while working on your golf game or enjoying other amenities allowed by warmer weather.

Art dealer sentenced to 20 months for tax evasion

A successful art dealer recently faced sentencing for allegations of tax evasion. The allegations are the result of a six-year investigation which led to evidence to support the following crimes:

  • Failure to file. During the investigation, it became apparent the accused had failed to file taxes in 2009 and 2010.
  • Wrongful use of business expense deduction. The prosecution stated the accused used a business tax deduction for personal expenses.
  • Failure to pay state taxes. The prosecution also accused the art dealer of collecting state sales taxes but the failing to deliver the payments to the government.

The government claims the evasion was egregious. In 2011 alone, the prosecution states the accused paid $300 in taxes. In reality, they state she owed over $1.2 million.

How does the new tax law affect small business owners?

2018 is the first tax filing year to apply the changes implemented with the Tax Cuts and Jobs Act (TCJA). The following could impact small and medium sized business owners:

  • Pass-through deductions. Business owners of pass-through entities can now deduct up to 20 percent of qualified business income. This tax break was not available in the past and could translate to big savings for small business owners.

The hidden cost of an audit

Taxpayers may be aware of some of the common triggers that lead to an audit by the Internal Revenue Service (IRS). These can include a large amount of wealth, having foreign assets and small business ownership.

In addition to these common triggers, the agency has also put technology to use with its new CP200 program. This program reviews tax returns with IRS information on taxpayer income to look for a discrepancy. The program will then flag any discrepancies for further review — potentially resulting in an audit.

FAQs about the Tax Court closure

On December 28, 2018, the Tax Court website announced that it would remained closed until further notice. For those who had hearings scheduled or filing deadlines in January there has been uncertainty.

The IRS recently provided an update. For instance, any returned mail can be re-sent with a copy or the envelope with proof of mailing date (keep the original for your records). In this post, we address several other common issues and concerns.

What is an offer in compromise? Can it help with my tax bill?

An offer in compromise is, essentially, an offer to pay off a tax bill for a lower amount than is due. In exchange for receiving some payment, the Internal Revenue Service (IRS) forgives the remaining debt.

Why would the IRS accept an offer in compromise? Before accepting an offer, the agency would conduct an investigation. This investigation looks into whether or not the taxpayer could potentially pay more than he or she has offered, known as the taxpayer’s “reasonable collection potential.”

IRS Offers Penalty Relief to Ease Reform Transition

In order to make this first filing season under the recent tax reform somewhat less painful, the IRS offered a modicum of relief to taxpayers on January 16, 2019. The IRS announced that, for taxpayers who had withholdings and/or made estimated tax payments equal in amount to at least 85% of the tax reported on their 2018 tax return, it will waive underpayment penalties (IRC §6654 penalties).

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