Goldburd McCone LLPGoldburd McCone LLP2024-03-18T14:37:19Zhttps://www.goldburdmccone.com/feed/atom/WordPress/wp-content/uploads/sites/1203465/2020/03/cropped-GM_SITEICON_512x512_MAR20-32x32.jpgOn Behalf of Goldburd McCone LLPhttps://www.goldburdmccone.com/?p=2578192024-03-07T23:51:26Z2024-03-07T12:51:03ZHow do states pursue tax debt?
State tax authorities employ various strategies to collect tax debts, such as:
Audits and investigations to determine tax liability, and
Levies on bank accounts and assets to recover unpaid taxes.
These actions can significantly impact a small business's operations, highlighting the importance of compliance and the potential consequences of falling behind.
How do I avoid these issues?
For small businesses, understanding and maintaining tax compliance is crucial. This will help to prevent penalties and interest that can accrue on unpaid taxes while also avoiding disruptive actions like levies and liens. The attorneys at Goldburd McCone are experienced in these matters. They can review your situation and discuss various courses of action to mitigate the legal repercussions.
The case of Yeezy Apparel serves as a cautionary tale for small businesses. State taxing authorities, with their extensive powers, will not hesitate to act to ensure that all businesses meet their tax responsibilities. Education and proactive measures are key to preventing the legal and financial repercussions of significant tax debt.]]>On Behalf of Goldburd McCone LLPhttps://www.goldburdmccone.com/?p=2577042024-02-29T20:48:13Z2024-02-29T17:45:36ZWhat is the emotional toll of an IRS audit on taxpayers?
A recent national survey released by the Taxpayer Advocate highlights the psychological effects of IRS audits on taxpayers. The survey studied non-farm self-employed taxpayers and analyzed how audits, especially correspondence audits, impact taxpayer attitudes and perceptions. Some of the findings include:
Type and recollection of audit: Correspondence audits are less memorable than face-to-face audits.
Impact on attitudes: Audits can induce negative perceptions of the IRS, reducing trust and increasing feelings of coercion.
Effect of audit outcomes: The audit's result affects future audit risk perception and emotional responses towards the IRS.
In essence, the survey reveals that the type of audit and its outcome play a significant role in shaping taxpayer attitudes towards the IRS, with correspondence audits leading to more negative views and frustration with the process.
How can I protect my emotional well-being during an official tax audit?
To cope with the stress of an IRS audit, consider the following:
Seek professional guidance: Engage a tax professional to navigate the audit process. The attorneys at Goldburd McCone have experience in these types of audits and can advocate for your interests on your behalf. This can mean you focus more on your mental health and your legal counsel focuses on protecting your rights, better ensuring a more favorable outcome.
Maintain perspective: Remember that an audit is a procedural matter, not a personal indictment.
An IRS audit can stir up a range of emotions, from anxiety to distrust. By staying informed and seeking professional support, taxpayers can better manage the emotional impact of financial scrutiny while also protecting their interests.]]>On Behalf of Goldburd McCone LLPhttps://www.goldburdmccone.com/?p=2576692024-02-26T16:48:18Z2024-02-26T13:38:36ZHow do small businesses attract the attention of the IRS?
In addition to the errors and omissions noted above, factors that can result in an increased risk of an audit can include:
Complex Deductions and Credits: Small business owners have access to a variety of deductions and credits. However, improperly claimed deductions or overly aggressive tax strategies can raise red flags.
Cash Intensive Businesses: The IRS may focus its attention on businesses that operate primarily in cash, such as restaurants and retail, due to the difficulty in tracking and reporting cash transactions.
Inconsistent Reporting: Discrepancies between reported income and lifestyle or between your filings and associated forms (like 1099s or W-2s from vendors and employees) can prompt an audit.
High Income or Losses: Reporting high income can increase audit risk simply because there is more tax revenue at stake. Conversely, reporting continuous losses may suggest to the IRS that the business is not a true commercial endeavor.
Whether one of these factors or another triggered the audit, business owners can benefit from a basic understanding of how the process unfolds.
How does the process work?
The first step is selection. The IRS uses various methods to select which taxpayer and business to audit. These can include a random selection, computer screening, or connection to a separate audit. The first two methods make use of new technologies that allow the feds to use software to check for any abnormalities, such as those noted above. Simply put, if your tax return does not fall into the “norm” compared to similar businesses, it may get flagged for an audit.
The IRS is also more likely to take a closer look at tax returns if a business partner or investor is the subject of an audit. As such, if you become aware of this type of issue it is generally wise to use the information as an opportunity to make sure your paperwork is in order.
After the taxing authorities choose to move forward with an audit, they will generally send notification through the mail. This notification will include important information. It is wise to read through carefully, watching specifically for any deadlines. There is the possibility of an extension, but you generally have to follow specific steps to get it.
Can I avoid an audit?
Business owners can implement practices to reduce the risk of an audit. These can include maintaining accuracy, transparency, and organization in your tax affairs. Keeping detailed records of all business transactions, including receipts, invoices, and bank statements, is also wise as this means you have the documentation needed to back up your tax filings. It is also helpful to stay informed about changes in tax laws and how they affect your business. A tax professional experienced in this niche area of tax law can review your plan to better ensure you are taking advantage of applicable deductions and credits without stretching the bounds of the law.
While the prospect of a federal tax audit can be daunting for small business owners, understanding the common triggers, and implementing best practices can greatly reduce the likelihood of an audit. Remember, the key is to be thorough, honest, and proactive in your tax affairs. Should you face an audit, approach it with a calm and organized demeanor, armed with your meticulous records and a knowledgeable tax advisor. The attorneys at Goldburd McCone are experienced in these matters and can provide guidance to better ensure your business interests are protected.]]>On Behalf of Goldburd McCone LLPhttps://www.goldburdmccone.com/?p=2576832024-02-23T17:07:21Z2024-02-23T13:06:34ZWhy would New York send me a tax bill if I moved to a different state?
New York is known to have one of the highest tax rates in the country. As such, taxing authorities are critical of those who claim they left the state. Those who choose to call a low tax state like Florida home are likely to be recipients of an audit notice from New York taxing authorities.
Taxing authorities are motivated to win these cases. New York City Comptroller Brad Lander recently outlined the need for alternative options for funding due to uncertainty resulting from increased remote work and decreased property tax revenues. And the stakes are high. According to recent estimates tax authorities won more than half their cases and collected an average of more than $100,000 per residency audit.
What type of evidence do authorities use to build their case?
Gone are the days when taxpayers could simply count how much time they spent in each state to figure out which is their “home” state for tax purposes. Tax authorities are now looking at these cases more closely to determine what the taxpayer truly calls home. This can include a careful review of the following:
Credit card bills
Travel schedule
Social media posts
Dental visits
Veterinarian care
There are even instances of auditors checking the content of the taxpayer's refrigerator.
The key here is domicile, essentially the legal term for what you consider home. If home is where the heart is, auditors argue the taxpayer's prized possessions should be in the state they claim as their domicile. This is especially tricky if you keep a second property in New York. Care for a family pet or the makings for regular meals, the auditors will argue, would not be present in a second property kept in New York unless the taxpayer viewed New York as home.
How can I better ensure I win a residency audit?
Taxpayers are wise to take a two-pronged approach. First, plan for the move. Avoiding the red flags noted above can reduce the likelihood that state taxing authorities will be able to gather evidence to build their case. Second, take notification of an audit seriously. The attorneys at Goldburd McCone LLP can advocate for your interests and work towards a more favorable resolution.]]>On Behalf of Goldburd McCone LLPhttps://www.goldburdmccone.com/?p=2576712024-02-23T17:04:15Z2024-02-22T17:04:03Z#1: What are the legal boundaries?
Tax avoidance is the legal use of the tax regime to one's own advantage, to reduce the amount of tax payable by means that are within the law. Tax evasion, on the other hand, is the illegal evasion of taxes by individuals, corporations, and trusts.
Savvy individuals and business leaders are wise to familiarize themselves with the tax code and stay updated on legislative changes. If a tax strategy directly contravenes the law, it is not just aggressive — it is likely criminal.
Another key red flag: a lack of transparency. Engaging in transactions with complete transparency with tax authorities is a hallmark of legitimate tax planning. Concealment or deceit is generally a sign of fraud. The federal courts have implemented various strategies that are geared towards focusing in on the substance of the tax strategy. Those that are focused only on avoiding taxes and not on a legitimate purpose are unlikely to survive such scrutiny.
#2: What is the tax strategy?
Be wary of tax strategies that are overly complex or too difficult to understand. If the primary purpose of a transaction is to obscure the trail of the income, it is likely not legitimate.
There is no such thing as a risk-free tax strategy, especially one that promises significant returns. If it sounds too good to be true, it probably is.
A sound tax-saving strategy should be able to withstand independent scrutiny. If advisors discourage you from getting a second opinion, question their motives.
#3: What do other professionals say?
It is generally wise to consult with reputable tax professionals who have a track record of ethical practice. They should be willing to explain the strategy and how it complies with the law. Check their credentials.
Discerning between tax savings and tax crime comes down to understanding the law, evaluating the strategies presented, and consulting with ethical professionals. Those who find themselves facing allegations of crossing over the line and into criminal activity are wise to take the accusations seriously as a conviction can come with hefty financial penalties and the threat of imprisonment. The attorneys at Goldburd McCone LLP are experienced with these matters and can review your situation and better ensure your rights are protected.]]>On Behalf of Goldburd McCone LLPhttps://www.goldburdmccone.com/?p=2576912024-02-21T15:46:20Z2024-02-21T12:46:06ZThe basics of the FBAR and the importance of willfulness
Willfulness is a legal term that involves a voluntary, intentional violation of a known legal duty. If the Internal Revenue Service (IRS) can establish first, that you needed to file a Report of Foreign Bank and Financial Accounts (FBAR) and second, that the failure to file was willful, they can move forward with increased penalties. The taxpayer could also face additional allegations of criminal wrongdoing.
In the context of FBAR, allegations of willfulness can include reckless disregard or willful blindness to the filing requirements.
Impact of Bittner v. United States
It is important to note that the rules guiding reporting requirements and possible penalties are constantly evolving. Recently, the Supreme Court provided some clarity on how the IRS can issue penalties in its holding for the case Bittner v. United States. In this case, the Supreme Court essentially stated that the IRS could not assess penalties on a per-account basis. Anyone facing these types of allegations is wise to have legal counsel review how this could impact your case.
Three long-term consequences of FBAR violations
Although the initial threat of a hefty financial penalty is enough to make anyone’s heart race, severe financial penalties, potentially eclipsing the balance of the foreign account itself, are only part of the potential penalties. Additional consequences can include:
Criminal penalties. Criminal charges are possible for willful violations and can include imprisonment and further fines.
Reputational damage. Lasting damage to credit scores and reputational harm, affecting future financial opportunities.
Increased scrutiny. The IRS and other financial institutions may keep a closer eye on your filings and applications.
Taxpayers can take steps to mitigate the impact. The first, and arguably most important, is to consult with a tax attorney to understand the nuances of the case. The attorneys at Goldburd McCone are experienced in these types of cases and can provide guidance. In some cases, this may include a discussion of the IRS's Voluntary Disclosure Program. This is particularly true if it seems likely the IRS is looking to make allegations of willful violations. Taxpayers can also consider filing delinquent FBARs promptly and accurately to help limit penalties for non-willful violations.
FBAR violations are not to be taken lightly, as they can trigger a cascade of legal and financial challenges that jeopardize your future well-being. Understanding the severity of these violations, the evolving legal landscape, and the legal options available to you are crucial steps toward safeguarding your financial future. If you are grappling with FBAR concerns, it is imperative to seek knowledgeable legal guidance to navigate the complexities of tax law and mitigate the risks associated with these violations.]]>On Behalf of Goldburd McCone LLPhttps://www.goldburdmccone.com/?p=2576702024-02-21T15:43:40Z2024-02-20T15:43:24Zalso require the entrepreneur to repay the $700,000 in restitution and serve three years of supervised release.
In another example, New York Attorney General announced an investigation that resulted in allegations that a diner owner failed to pay almost $2 million in tax obligations to the state. The authorities claim that during an investigation, which was triggered by a whistleblower complaint, they found evidence the owner failed to report cash payments at his restaurants. The parties have agreed that the business owner will pay taxes on the unreported funds as well as additional penalties, fees and interest totaling $1,878,493.
In the aftermath of these and similar rigorous tax law enforcement efforts in New York, high net-worth individuals and small business owners are wise to review their taxes for compliance. Recent crackdowns such as these serve as a stark reminder of the legal implications of non-compliance. In addition to the monetary penalties and potential imprisonment discussed above, potential repercussions of such accusations can also include reputation damage. Legal action from tax non-compliance can tarnish personal and business reputations.
How can I avoid tax trouble?
A proactive approach can help mitigate the risk of similar allegations of wrongdoing. This can include:
Know the laws: Keep up to date with state tax regulations, which can change frequently.
Seek professional advice: Consult with tax experts who specialize in New York tax law to ensure full compliance. The attorneys at Goldburd McCone are experienced with these types of legal matters and can review your situation and provide guidance tailored to your case.
Be proactive with changes: Respond promptly to any changes in tax law that may affect your financial situation.
It is also important to maintain proper records. Keep copies of information related to income, deductions, and credits to substantiate your tax returns. Set aside time to periodically review your financial records to catch and rectify any discrepancies early.
The recent tax law crackdowns in New York serve as a powerful incentive for high net-worth individuals and small business owners to adhere strictly to tax regulations. By staying informed, maintaining accurate records, and reporting income correctly, you can better ensure you steer clear of tax trouble and safeguard your financial integrity. Remember, when it comes to taxes, an ounce of prevention is worth a pound of cure.]]>On Behalf of Goldburd McCone LLPhttps://www.goldburdmccone.com/?p=2576232024-01-25T22:30:13Z2024-01-24T22:30:02Zstringent enforcement and frequent audits, especially when it comes to small businesses. And the consequences of slipping up? They can be severe, ranging from hefty fines to something far more daunting: jail time.
A real-world warning
Take, for instance, the recent story of two collision repair shop owners in New York. These entrepreneurs found themselves in hot water after an investigation revealed they had not paid state taxes on sales amounting to over half a million dollars between 2010 and 2016. It is a situation no business owner ever wants to find themselves in.
Confronted with compelling evidence, the owners chose to accept a plea deal. Their admission to tax fraud and filing false returns led to one owner receiving a six-month jail sentence and five years of probation, not to mention the staggering sum of $700,000 in restitution. A stark reminder that the consequences of non-compliance can extend far beyond the financial realm.
Navigating the tax labyrinth
So, what can you, as a diligent business owner, do to prevent a similar fate? The key lies in understanding and respecting the tax laws that apply to your business. It is about being proactive, organized, and seeking the right guidance when needed.
The legal team at Goldburd McCone is experienced in these matters, offering guidance that could help you navigate the complexities of tax compliance. They can provide defense strategies to help protect you and your business from allegations of wrongdoing.
Staying informed and compliant is the best strategy for any business owner. The tale of the two repair shop owners isn't just a news story: it is a lesson in the importance of tax diligence. As you continue to build your business, remember that understanding and adhering to tax regulations is not just about avoiding legal trouble — it is a cornerstone of sustainable success.]]>On Behalf of Goldburd McCone LLPhttps://www.goldburdmccone.com/?p=2576112023-12-19T17:13:35Z2023-12-19T12:13:14Znever went back to the office after the government lifted the restrictions that came with the pandemic.
Why are tax considerations different for remote workers?
Our tax obligations are often tied to where we are when we earn income. In addition to federal taxes, this also impacts state and even local tax obligations. Some workers are finding state taxing authorities expect a tax filing even if they are not residents within the state. Workers may need to file a non-resident tax return for any state they earn income, even if its just a few days sitting at a laptop in a rental unit.
What if I do not file in all states I worked?
Some states play hardball. New York is notorious for coming after taxpayers for state tax obligations, but it is not the only one. North Carolina, for example, also expects those who work remotely within their state to file non-resident tax returns. A failure to do so can result in penalties and interest for a failure to file.
How can I make the process easier?
With all things tax, taking the time to have organized and thorough records helps. Two key areas to record include:
Dates. If you travel and work in various locations, keep track of which days you were in which city and state. This will help you determine where you may owe taxes, and where you do not.
Photos. If you have a dedicated home office and are either self-employed or do contract work, you likely qualify for a home office deduction. If you choose to take this deduction, get a photo of the home office to show that it is a space used solely for work — not simply a corner of the dinning table.
Having this paperwork in order makes it easier to respond to a tax audit.
If you receive notification of an impending audit, know you do not have to go it alone. The attorneys at Goldburd McCone can use their experience to advocate on your behalf to better ensure your interests are protected throughout the process.]]>On Behalf of Goldburd McCone LLPhttps://www.goldburdmccone.com/?p=2576092023-12-19T17:09:51Z2023-12-18T17:08:05Zearn some cash selling extra tickets. The move may have helped offset the cost of their ticket or was simply a business strategy to earn a little extra cash.
In either scenario, the Internal Revenue Service (IRS) only sees one thing: income.
Are taxes due if I sold an Eras ticket?
Nothing kills a good time quite like the threat of taxes. There are certain situations when the sale of a product, like a ticket to the Eras concert, may trigger Uncle Sam's attention. As written, the law stated that any proceeds of $600 or more would trigger reporting and the taxing authority would send the taxpayer a Form 1099-K with further information.
What if I made a lot of money by selling these tickets?
The good news is that the IRS has yet again pushed back its requirement to report $600 or more earnings in these transactions and may increase the reporting threshold. However, it is important to note that the agency will generally require taxpayers to report the use of third parties like Stub Hub for transactions that result in proceeds of over $20,000 and more than 200 transactions during the 2023 tax year.
What if I ignore a letter from the IRS?
It will take more than good karma to fix bad blood with the taxing authorities. Those who receive notification from the IRS are wise to review the correspondence and take appropriate action. It is wise to gather a team of professionals to help defend your rights if you receive notification of an impending audit from the IRS. The attorneys at Goldburd McCone are experienced with these types of cases and can help to better ensure a more favorable outcome.]]>