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Austin Tax Defense Law Blog

What is my tax filing status during divorce proceedings?

Austin couples that are newly separated or going through a divorce have enough on their plate without having to worry about how their new marital status will affect their taxes. Navigating these new waters can be tricky, as many have most likely not had to consider these issues previously. It can be complicated from the onset, as couples try to figure out whether they are married.

It seems like a simple enough question-are you married or single? However, the answer is not always straightforward, as IRS rules dictate that one is still married if their divorce is not finalized by December 31 of that year, even if the divorce papers have been filed. Similarly, if the divorce decree was issued on the last day of the year, taxes must be filed as if the person was unmarried the whole year. This does not change even if the couple is living separately-for the IRS, the court decree is the determinant.

Know your rights as a taxpayer

Even though tax season has come and gone, many Texas residents may feel like it never really passes. All year, they are either preparing for filing their next tax return or responding to errors they made in their last one. However, what many do not know is that, as taxpayers, they have certain rights.

Most importantly, taxpayers have the right to be informed. This means they have the right to know what taxes they must comply with and the procedures to do so, and to receive information about tax decisions made and explanations regarding them as well. Secondly, they have the right to quality service, meaning to polite, prompt and professional assistance from the Internal Revenue Service in such a manner that can be understood.

How to prepare for a tax audit

No matter who you are, the IRS has the legal right to select your tax return for an audit. As scary as it may be, just because you're faced with a tax audit doesn't necessarily mean you'll owe additional money.

The first step in the tax audit process is a notification letter. Keep in mind that you'll receive this notification via snail mail, not via email or over the phone.

Worker classifications under IRS tax law

Not every worker is equal in the eyes of the law. Austin residents who perform services that can be controlled by an employer, even if the way to achieve an objective is left up to the individual, are known as employees. On the other hand, independent contractors are those who offer their services to the general public and the payer has the right to control only the result of the work and not the way it is performed. For example, doctors, lawyers, subcontractors, accountants and dentists can be considered independent contractors.

From a tax point of view, this is an important distinction because the IRS tax law regarding both is going to be different. Employees are subject to certain taxes whereas independent contractors may have certain exemptions.

Tax obligations can be lessened with the help of professionals

In an ideal world, a Texas resident would understand IRS tax law, the information required to accurately fill out the returns he or she is obligated to do, and correctly enter one's exemptions and deductions. Unfortunately, this rarely happens-incorrect amounts are often entered or forms are not filed in a timely manner. As a result, individuals may find themselves facing an audit or other penalties.

The notice from the IRS that there is something wrong with one's tax returns can be overwhelming for a filer but it is important to stay calm in such situations. It is even more beneficial to consult someone who is experienced in tax law and can not only explain the reality of what is going on but also discuss the various options available. Many filers are not even aware that the IRS offers a number of relief options for those who are unable to pay their tax obligations.

Can the IRS revoke my passport?

There are many financial penalties to not paying one's taxes in a timely manner, but many Texas residents may not know that the Internal Revenue Service can notify the State Department when someone owes a seriously delinquent tax debt. This means that the State Department can deny someone's application for a passport and can even revoke an existing passport.

The Fixing America's Surface Transportation Act became law at the end of 2015. It gives the State Department the power to take passports away from certain individuals. A seriously delinquent tax debt is defined as one that is unpaid, legally enforceable federal tax liability that is more than $50,000. This amount includes interest and penalties and is also adjusted annually for inflation.

What does a legitimate letter from the IRS look like?

For the Internal Revenue Service, this is the beginning of correspondence season. It is most likely sending out notices, bills and changes in reporting notices to taxpayers. When an Austin resident receives a letter from the IRS, he or she is likely to get overwhelmed by it and not question the validity of the notice. This is what scammers are counting on and taking advantage of.

In one letter of a disingenuous letter, taxpayers are being threatened by a lien or a levy based on delinquent taxes owed to bogus agencies. Additionally, one version claims a warrant has been issued and an individual will be arrested immediately if the payment is not paid.

Eliminate tax debt with an Offer in Compromise

Sometimes, things happen that make it impossible for you to pay a tax bill. Your savings might be stolen by someone who has infiltrated your bank account, you might lose a job or you could simply not earn enough to save what you need for taxes. Perhaps the money your employer put back was not enough, or you can't pay your tax liability for other issues.

Whatever the reasoning is, the Internal Revenue Service does offer tax debt forgiveness in some cases when you can't pay your tax liability. There are circumstances under which taxpayers can have their tax debts partially forgiven.

Why file tax returns timely

Whether an Austin resident can pay his or her tax bill in full or not, tax returns are due in a timely manner. Unfortunately, if someone is unable to meet their tax liability, they might neglect to file a return and end up facing a number of consequences instituted by the Internal Revenue Service (IRS).

The first step the IRS can take is to file a substitute return on behalf of someone who has not filed timely. However, this return will most likely not give the applicable deductions and entitlements one is supposed to receive. The IRS sends a Notice of Deficiency proposing a tax assessment, after which one has 90 days to either file or petition the tax court.

Alternatives to tax collection?

Previous posts on this Texas blog have mentioned time and again that there are ways to meet one's tax obligations to the Internal Revenue Service (IRS) and even end up paying less than what one owed originally. Options, such as offers in compromise and currently not collectible status, have been discussed as collection alternatives in IRS law. Others are also available, depending on the facts and circumstances of one's situation.

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