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Austin Tax Defense Law Blog

How is my employment status relevant to my tax bill?

Paying taxes is complicated enough, but ensuring one is paying their taxes at the right status of worker can be even more complex. It is a common error made by businesses-intentionally or mistakenly misclassifying the status of a worker only to end up paying heavy penalties. The relationship between an employer and employee is important to understand because it determines which party will withhold taxes and which taxes are going to be withheld.

Texas residents may be aware that the IRS tax law defines an employee or an independent contractor using common law principles. While previously 20 factors were used to determine the status of one's employment, they have been condensed down to three basic elements-behavioral control, financial control and relationship of the parties. This means the IRS looks at issues such as who provides actual directions to the employee, their training, hours of work, order of performance, method of payment, tools and materials used and the right to discharge among other factors.

Failing to report your cryptocurrency could lead to an audit

In many ways, cryptocurrency seems like it shouldn't be something you need to tell people about. After all, the word crypto itself means secret or hidden. Bitcoin and other similar popular digital currencies serve as a way for people to complete international transactions without the risk of fluctuating exchange rates.

Digital currencies also serve important roles in the digital underground and dark web, where people buy and sell items that they don't want the government to know about. However, despite these somewhat questionable roots and uses for cryptocurrency, it has become a popular investing tool since its value began to increase sharply in 2018.

What is 'Currently Not Collectible' status?

Many Texas residents may hesitate from filing their taxes because they are unable to pay their taxes and meet their living expenses at the same time. What most people may not be aware of is that the Internal Revenue Service has various programs that can help taxpayers find a way to defer making payments on their taxes. When facing an overwhelming tax bill, rather than run away from it, it might be beneficial to get more information about IRS Tax Law.

The IRS can place a taxpayer's account in "Currently Not Collectible" status. This means the person can defer making payments on past due income taxes. If the taxpayer can demonstrate that they have little to no money left over after making utility payments and paying for rent and groceries, they may be eligible for the deferment. For people who have been struggling to make ends meet, this option can be beneficial because the IRS will not levy bank accounts, garnish wages or request a payment installment agreement.

You can't avail rights you don't know you have. We can help.

A letter from the Internal Revenue Service can overwhelm most Texas residents, especially when it brings news of an audit or unpaid taxes. Filing one's taxes once is complicated enough. Then to have to justify one's claims or deductions can be frustrating, especially since most people do not know how long to hold on to receipts or which deduction to claim at what time.

Having someone knowledge about the ins and outs of IRS Tax law by one's side when both filing taxes and also when dealing with related tax issues can be very helpful. Ronald A. Stearns is a dedicated taxpayer's advocate who works tirelessly to represent his clients with tax-related issues. Not only does he represent his clients personally, he also helps with a variety of situations, from audits to unfiled tax returns.

Did 2018 tax law changes affect refunds substantially?

Just when Texas residents thought they had a handle on IRS tax laws, the 2018 overhaul of the code took place and threw everyone off their stride. In addition to the Tax Cuts and Jobs Act, the IRS and the Department of Treasury also changed withholding tables to reflect the new law. As the IRS reveals its stats from 2018, it seems as if the average tax refund is not so different from last year. It is only down 2% from a year ago.

Standard deductions have nearly doubled to $12,000 for a single filer and many important itemized deductions have been reduced. Personal exemptions have been eliminated as well. Individual income tax credits have decreased. At the same time, the child tax credit has been doubled to $2,000 per child under the age of 17.

IRS liens explained

The importance of paying tax obligations on time has been discussed on previous posts here, as have the various partial payment plans offered by the Internal Revenue Service. Even if an Austin resident is not able to pay their taxes, by informing the IRS and working with them to figure out a way to make payments a person can potentially avoid penalties. While many think that the IRS only imposes financial penalties, that is not the case. The IRS can also file a lien against a defaulter's property.

In a document filed with the county clerk's office, a federal tax lien is the government's way of attaching a legal claim against the person's property, both real and personal. A lien is attached only after the taxpayer has been assessed to owe a certain amount and the IRS has demanded it be paid, but the taxpayer has not done so in a timely manner. If property is sold with a lien attached to it, the IRS is paid out of the sale proceeds.

The most audited counties in Texas

The potential for an audit was likely in the back of your mind as you filed your taxes. You carefully keep track of every tax document that arrives in the mail and look over your return for errors. If someone else does your taxes for you, you trust that they’ve taken the same caution to prevent an audit.

New research shows that you’re more likely to receive a tax audit depending on the county you live in. For reference, the national average is 7.7 audits per 1,000 tax return filings. These are the five counties where your taxes are most likely to receive an audit:

Can I take any steps to reduce risks of getting audited?

While many Internal Revenue Service tax audits are conducted randomly, there are certain factors that might trigger audits. When the information on one document does not match the information on the other, such as the income reported does not correspond with the income on a W-2, the chances of getting audited are high. Similarly, if someone's automatic deductions are more than for others in that profession, they are assigned a high Discriminant Inventory Function System Score, and the higher the score, the more likely the audit. Lastly, the more someone earns, the more likely they are to get audited.

There are also some steps Austin residents can take in an attempt to reduce the chances of getting audited. One of the most important tips is to double-check one's math. Correct numbers on the wrong line or incorrect addition can trigger an audit that could have been avoided if reviewed.

Working to resolve IRS tax law issues

It may not come as a surprise to many Texas residents that people across the state have financial problems that prevent from doing certain activities. One matter that should not be avoided though, regardless of what a person's monetary situation is, is filing and paying taxes. As mentioned on previous posts here, there are many options available to people who are unable to pay their taxes on time, and none of those include avoiding filing taxes.

However, some people are not aware that they have certain options, such as partial payments or installments plans. As a result, they willfully either fail to file their taxes or continue to neglect making payments without informing the Internal Revenue Service. As a result, people often end up breaking tax laws and face a penalty that might even amount to more than the actual tax bill.

What do I need to know before my business’ first audit?

Before you owned your own business, tax season came with its complications. Now, with a new company, your taxes likely became even more difficult. There are many pieces to the puzzle, and it can be hard to know if everything is correct when you send it into the IRS.

While some audits are triggered because of an error, there is also the chance that your business will face a random audit. In either case, the idea of facing that first audit can be terrifying. You may be especially nervous if you have never faced any type of audit.

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