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Maryland Tax Law Blog

Do you have to pay taxes on offshore gambling winnings?

You've been playing poker for years. You started when you were a teen, playing with your friends for fun. No money changed hands. You learned the ins and outs of the game, though, and found you were really good.

Then poker blew up. It was all over the television. You started playing more and more at casinos. You began taking trips out to Las Vegas to play in big games and tournaments.

When disaster strikes

People living in Maryland know the importance of being prepared for natural and man-made disasters. Despite one's best efforts, however, there is still often a flurry of activity as individuals and families attempt to reestablish their lives after life-changing devastation. One area that can become particularly challenging is the reconstruction of tax and financial records to prove losses.

If personal financial records have been destroyed or lost in a disaster, it is possible to put them back together. For example, one can order many tax documents directly from the IRS either online or over the phone. From there, taxpayers can contact lenders, financial institutions and insurance companies to obtain copies of other documents such as statements, invoices, and appraisals.

Questions about new IRS rules for partnership audits

New rules for audits contained in the Bipartisan Budget Act of 2015 will become effective on Jan. 1, 2018, but officials at the Internal Revenue Service acknowledge that procedural questions still need to be settled. Business partnerships in Maryland therefore could face uncertainty in the face of an audit because of insufficient guidance about the appeals process or push-out elections to transfer tax liabilities to specific partners.

Tax practitioners have expressed worry about the omission of an appeals process within the new regulations. An attorney advising the Department of Treasury's Office of Tax Policy said that the agency was developing an appeals process.

Could the 'Cohan Rule' apply if you don't have receipts?

If you ask any accountant or tax lawyer, accurate bookkeeping is essential to filing a complete and accurate income tax return. Keeping receipts is also important in defending oneself in the event of an audit or any other court action to collect on back taxes.

Given the power and resources that the federal government has at its disposal, it seems like not keeping receipts may be a death knell to those opposing an IRS action. However, it may not.

Businesses should be aware of online tax software scams

There's an old saying about the two constants that everyone must deal with: death and taxes. With today's technological advancements, a third should be added...phishing scams.

The term "phishing" refers to the act of a scam artist posing online as a legitimate company or entity with the intent of depriving unsuspecting users of their money or personal identity. Like the name suggests, scammers are literally "fishing" for willing victims online. While most phishing scams focus on consumers, the IRS has warned of new schemes that target businesses and professional firms.

Accounting for gambling proceeds on a tax return

Maryland residents who gamble casually should report all of their winnings on their federal income tax return. Individuals should also report the fair market value of any prizes won such as a car or vacation. Examples of gambling include playing the lottery or betting on horses at a track. Money won at a casino is classified as gambling winnings as well.

Parties that pay individuals their winnings may be required to send a Form W-2G. The amount recorded on that form should be listed as other income on a Form 1040. Any additional winnings not listed on such form should also be reported as other income, and it may be necessary to pay estimated tax on winnings. Losses may be deducted up to the amount reported on a tax return, and it can only be deducted by those who itemize deductions.

Understanding sales and use tax

Businesses in Maryland are required to pay various taxes, but which types of taxes depends on the type of business. Sales and use tax are taxes paid on merchandise that is sold or rented. Only one of these taxes is applicable to each transaction. Generally, use tax is charged for the rental of tangible goods or interstate sales, while sales tax is charged for local sales and some services.

In order to collect sales tax, a business must first obtain a license. Sales tax is paid by retail customers and collected by the business proprietor to be sent to the tax authority. Wholesale businesses do not charge sales tax to their customers because it will be paid by the retail customer when the merchandise is resold.

Bitcoin is subject to taxation, regardless of price fluctuations

In recent weeks, bitcoin investors have watched as this cryptocurrency has shed a substantial amount of its value. This isn't uncommon. All currencies tend to fluctuate in value when compared with other currencies. Even the United States dollar can go into periods of increased or decreased international value. Those who own substantial amounts of bitcoin can likely look forward to it regaining some, if not all, of the recently lost value in upcoming weeks.

In the early days of bitcoin trading, some people were looking at this digital currency as a means of hiding assets from the government. These days, however, bitcoin is very mainstream. You can even use it to pay at some restaurants. The Internal Revenue Service (IRS) is very aware of the fact that many people have tied up substantial financial assets in Bitcoin, and they expect that United States taxpayers will report and pay taxes on their bitcoin assets.

New IRS rules aimed at partnership audits

Maryland businesses that operate as partnerships or as limited liability companies will face new IRS rules starting with all tax years commencing on or after Jan. 1, 2018. In some cases, this may require changes to an existing partnership or member agreement. It may also require partners to communicate better in general to avoid potential consequences. One of the goals of the new auditing rules is to simplify the role of the IRS in conducting audits as well as to level the playing field between corporations and large partnerships.

Less than 1 percent of 2012 taxable year returns filed by a large partnership were audited. In that same year, more than 27 percent of traditional corporate returns were audited. Furthermore, two out of three large partnership audits concluded with no changes being made. Of C corporation returns audited, only about 25 percent resulted in no change to a return.

Multiple tax liens may lead to legal issues

Maryland residents who are interested in redeeming tax liens on properties in order to secure deeds to them might be interested in a North Carolina case that examined whether local tax liens or federal tax liens are superior. The case involved a property that had both a municipal tax lien as well as a federal lien and separate purchasers under two foreclosure sales.

In the case, the IRS filed two tax liens against the property. The local city later filed its own municipal tax lien. Without notifying the IRS, the city held a foreclosure sale on the lien, and it was purchased by the city as the highest bidder. Triangle Homes then filed an upset bid, which is allowed in North Carolina. By doing so, it was able to take the title and recorded its tax deed.

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