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Maryland Tax Law Blog

Private tax debt collectors

Many people living in Maryland experience difficulty paying their federal taxes. While these individuals and couples may make good-faith efforts to work with the IRS, sometimes these efforts fail. The IRS is permitted to contract with private debt collection companies to pursue delinquent taxpayers.

This practice of using private collection agencies has come under criticism from some quarters. Many have noted that collection agencies don't have the same standards that the IRS does when it comes to determining whether a debtor has the ability to make payments. As a result, people who would have been given "hardship" status by the IRS are not receiving it from debt collectors.

How to protect against cyber tax scams

Maryland residents and small business owners may need to be especially wary of identity theft and other security issues during the tax filing season. This is because thieves may try to get a list of employee W-2 forms in an effort to get the information on it. Companies are urged to contact the IRS directly if they are the victim of a scam or believe that someone is trying to conduct a scam.

Employees should be directed to not reveal sensitive employee information unless the request is verified as authentic. In some cases, an individual may send an email posing as a manager within the company who needs a list of employee names and W-2 forms. Scammers may also attempt to walk into an HR office and ask for such information in person. However, it is possible that anyone within an organization could be vulnerable to such requests.

E-filing can carry risks of late tax payment

Taxpayers in Maryland are increasingly using e-filing technology to submit their tax returns to the Internal Revenue Service each year. Tax returns must be filed each year in a timely fashion in order to avoid potential penalties. In the past, this simply meant mailing off a paper return before the due date, and the famous "mailbox rule" applied to tax returns filed close to the deadline. Lines at U.S. post offices were a frequent sign as April 15 approached.

However, many taxpayers use online systems to electronically file tax returns, eliminating the use of mail and much of the utility of the mailbox rule. When a paper return is filed through the mail, it is not considered a late filing even if it contains errors that require correction and re-submission. The situation can be different for e-filed returns. While the mailbox rule does apply and a return is considered timely as long as it is transmitted in an authorized, processable manner, rejections can complicate e-filing.

2017 Tax Act Provides 20% Deduction for Individual Owners of Certain Pass-Through Businesses

One of the most significant changes under the new tax rules is the reduction in the maximum federal income tax rate for Subchapter C corporations to 20%, together with the elimination of the corporate alternative minimum tax ("AMT"). In an apparent effort to mitigate the potential disparity for the owners of flow-through business entities, individual owners can deduct 20% of domestic qualified business income ("QBI") from a partnership, S corporation or sole proprietorship ("qualified business entities"), subject to certain limitations.

2017 Tax Reform: Individual Tax Changes in the "Tax Cuts and Jobs Act"

Kundra & Associates is excited to provide you with relevant text/information as to the new Tax Law Changes with special thanks to RIA for text and language. If you have further questions, please contact your tax professional or the attorneys at Kundra & Associates for assistance.

On December 22, President Trump signed into law the "Tax Cuts and Jobs Act" (P.L. 115-97). Herein we touch on the impact the changes will have on individuals, the impact of the new rates, brackets and the Affordable Care Act.

2017 Tax Reform: S Corps, Partnerships & Related Changes

Kundra & Associates is excited to provide you with relevant text/information as to the new Tax Law Changes with special thanks to RIA for text and language. If you have further questions, please contact your tax professional or the attorneys at Kundra & Associates for assistance. 

New Deduction for Pass-Through Income

Previously, net income from pass-through businesses- sole proprietorships, partnerships, limited liability companies (LLCs), and S corporations-was not subject to an entity-level tax. It was instead reported by the owners or shareholders on their individual returns and thereby effectively subjecting the income to individual income tax rates. 

How to avoid a tax audit

While Maryland residents may sometimes worry about the chances of being audited by the IRS on their taxes, the chances of it happening are actually rather small for most people. However, those who would like to keep their chances even lower may want to engage in some practices that keep them off the radar.

Those who wish to avoid an IRS audit will want to be completely honest while filing their taxes. Filers should ensure they report all of their income accurately, along with deductions and credits. Additionally, filer should ensure that, when documenting their itemized deductions, those deductions are realistic.

Bitcoins and 1031 exchanges

The value of Bitcoin has soared over the last month, meaning that numerous Maryland residents who benefited from the soaring prices will face large tax bills if they cash in on their profits. This begs the question: Is there a way to bypass capital gains on these transactions?

Tax preparers have asked the same question, and some have wondered if it will be possible to lower the tax burdens related to Bitcoin through what's called a 1031 exchange. However, if the new tax bill passes, it could render the 1031 exchange ineffective as a tax planning strategy.

Common reasons for audits

A majority of taxpayers in Maryland and the rest of the country normally do not have to go through an audit. However, there are certain issues on a tax return that may compel the Internal Revenue Service to take a second look.

Because of the increased likelihood of making a mathematical error, people who file paper returns have a greater chance of being audited. According to one popular online tax preparation service, the error rate for paper returns is 21 percent, much higher than the 0.5 percent for returns that are filed online. In addition to math errors, handwriting that is difficult to decipher may also give the IRS cause to perform an audit.

Rapper DMX pleads guilty to tax fraud

Maryland residents may be aware that the rapper Earl Simmons, who is also known by the stage name of DMX, has been accused by the federal government of hiding millions of dollars in income to avoid paying taxes. Simmons faced up to 44 years in prison after being charged with 14 counts of tax fraud in July, but reports indicate that the 'It's Dark and Hell Is Hot" singer has avoided this fate by entering into a plea agreement with prosecutors.

Simmons entered a guilty plea to a single count of tax fraud in a Manhattan federal court on Nov. 30. According to reports, the rapper will spend up to five years behind bars followed by three years of supervised release. The plea arrangement also requires Simmons to pay back $1.7 million in unpaid back taxes. Sentencing in the case is scheduled to take place on March 29.

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