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Manhattan Tax Law Blog

Jailtime and loss of property: Penalties for overdue taxes

The Internal Revenue Service (IRS) can impose harsh penalties for those who fail to pay their tax obligations. Stories of the government agency sending people to jail and taking away property abound. But when can the government use these extreme measures and are these severe penalties common? This piece will answer these questions.

How often does the IRS use these more severe penalties? There agency averages two cases per month throughout the country involving a taxpayer going to jail or losing their property to the IRS.

Will NY’s increased sales tax receipts impact audit rates?

Individuals, businesses and even state governments felt the impact of the recession in recent years. States throughout the country, including New York, reported weak gains in tax revenue growth for the last two years. State government finally appear to be rebounding. Recent data shows this year is off to a much better start. Tax collections for Q2 in New York were reportedly up 18.2 percent.

What are the chances of a repeat NY tax audit?

A business or individual will likely experience frustration after receiving a notification from the New York State Department of Taxation and Finance of an impending state tax audit. One thing that can top this frustration: notification of a second audit.

How often does New York State’s Department of Taxation and Finance conduct repeat audits? The agency notes repeated audits are possible. The situation will evolve from one of two paths:

Could you be selected for sales and use tax audit in New York?

Although businesses of any size can find themselves the subject of a sales and use tax audit, some are at a higher risk than others. Common targets often include large businesses or those with complicated tax filings.

What else can trigger a sales and use tax audit? The New York Department of Taxation and Finance states that a failure to file a return, a failure to properly report sales, discrepancies when compared to federal filings and a history of audits are common reasons that trigger a state audit.

Business owners: 3 tips to help during a sales tax audit

Business owners subjected to a sales tax audit can take proactive steps to ease the process. Some tips that apply to most in this situation include:

  • Cooperate. A recent publication in the CPA Practice Advisor notes a top mistake made during a sales tax audit is giving the auditor a hard time. Although it is important to contact an attorney and have legal counsel to help better ensure your rights are protected during the process, business owners should avoid intentionally making the process difficult. Examples to avoid include providing messy, unorganized records or an intentionally uncomfortable workspace. 

Can taxpayers offer the IRS a settlement?

Not everyone can pay their tax bill. These situations can impact anyone, including some of the Hollywood elite. Famous actor Wesley Snipes provides an example. The actor attempted to make a deal with the Internal Revenue Service (IRS) after getting a $23.5 million tax bill.

He did this by offering a settlement, referred to as an offer in compromise.

Making $20,000 has more IRS scrutiny than higher incomes

It would be easy to assume the IRS spends most of their time carefully looking over the taxes of highly paid individuals. After all, the more money that exists in accounts and investments, the more complex the assets can become. It makes sense it would be easier for mistakes to happen.

However, the IRS does not just focus on those making six figures. They work to audit a variety of income levels, which includes people living with low-income levels. These people often qualify for The Earned Income Tax Credit (EITC or EIC), which reduces the amount of taxes owed and often provides a refund.

Real estate and the Qualified Income Business Deduction

The Tax Cuts and Jobs Act (TCJA) includes a provision that allows qualifying business owners to take an income deduction (QBID). The vague language and complexity of the 20 percent pass-through deduction continues to cause frustration for business owners. Which business owners can take the deduction? Who cannot? This piece will focus on how this provision of the TCJA impacts those in the real estate business.

Businesses have new tax rules for holiday meals and entertainment

The holidays are right around the corner. In the weeks leading up to holiday breaks, many companies will treat their employees, vendors and other associates to perks for another great year of working together.

However, new changes to the Tax Cuts and Jobs Act (TCJA) are eliminating certain tax breaks that a business could claim relating to these meals and entertainment.

Got foreign accounts? IRS has new reporting requirements.

The Internal Revenue Service (IRS) recently announced new reporting requirements for United States taxpayers with foreign accounts. The change is in part due to the sunset of the offshore voluntary disclosures program (OVDP).

Who can benefit from the new program? The agency explains the program is designed to offer those who face potential criminal charges for willfully failing to report foreign assets to voluntarily disclose these assets. In exchange, the government will mitigate the risk of penalties.

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