Maryland Tax Law Blog

Ways the new tax laws might affect your 2018 taxes

At the end of 2017, the government signed into law the Tax Cuts and Jobs Act of 2017. This ushered in changes that will probably significantly affect your 2018 tax return. With the next filing season right around the corner, you might be wondering what your tax liability will look like come April 15.

To properly plan for the last few months of 2018 and maybe even make that last quarterly payment in January, it is important to know how these changes to the tax law will impact your return. Here is a brief overview of some of the major changes that may affect your tax bill.

Is ignorance of the law a defense for tax crimes?

Some people say, “ignorance is bliss.” Similarly, it might also be a defense against tax crimes.

In 1991, the United States Supreme Court ruled in Cheek v. U.S. that “a good faith misunderstanding of the law or a good-faith belief that one is not violating the law negates willfulness.” Willfulness involves intentional disregard for the law. Therefore, if a person does not have knowledge of his or her legal duty or intention to break the law, courts will not likely be able to prove that a person broke the law.

Will the IRS be able to use social media to conduct audits?

You might have a new friend request on social media: The Internal Revenue Service (IRS). According to a recent article, the IRS is currently looking for a way to catch tax cheaters through social media platforms.

In December, the IRS submitted a Social Media Research Request for a "vendor-supplied tool" that will help IRS auditors better identify people who are submitting improper tax returns. While people can publicly display their businesses, services and products on social media, the IRS does not have a way to recover this information for the purposes of an audit.

2019 tax questions for business owners

Small business owners wear many hats, including management, human resources and finances. It is not uncommon for small business owners to exclusively pay attention to tax brackets without considering other important issues. Without a dedicated tax professional, they may overlook important tax law changes. Neglecting changes in tax law can result in a costly 2019 filing season. Business owners should consider these questions in the new year.

Can you claim a new small business deduction?

Countries taking a strict stance on crypto tax evasion

In the past year, bitcoin and other cryptocurrencies gained popularity among investors around the world. Cryptocurrencies exist as virtual tokens that allow investors to electronically transfer assets in a secure way using digital technology. However, they can present a multitude of issues when it comes time to report taxes.

Many crypto investors are unaware that the IRS requires taxpayers to report bitcoin earnings and losses when filing their taxes. According to the IRS, almost 40 percent of Bitcoin investors will commit tax fraud in 2018. Countries across the world are beginning to take a strict stance on crypto tax evasion.

Steps to take after an IRS audit

Those in Maryland or anywhere else who receive an IRS audit notice may feel anxious or scared. The first step that a taxpayer should take is to read the notice to determine what the IRS is asking for. It is also important to note that a person should not automatically assume that he or she owes money to the government. Instead, it may be best to research the situation fully to confirm claims made in the notice.

When communicating with the government, it is a good idea to be honest to improve the chances of wrapping up an audit in a timely manner. If an agent believes that a taxpayer is lying or not being fully honest, it is possible that he or she could seek more information. That may prolong the audit or widen its scope, which could result in an unfavorable outcome for an individual.

IRS investigation of Maryland man leads to tax evasion charges

Reports from multiple casinos about the spending of a public official in Montgomery County alerted the Internal Revenue Service to the possibility of unpaid income taxes. The subsequent IRS investigation eventually uncovered the fraudulent activities of the chief operating officer for the county's economic development department. The 58-year-old man has entered guilty pleas as part of a plea agreement on charges of tax evasion, wire fraud and theft of county funds.

The man used his authority within the economic development department to approve invoices submitted by the fake company that he had set up. He created an entity called Chungbuk Incubator Fund LLC and used it to funnel county funds through the false business accounts and then into his personal accounts.

Income tax fraud

The year is almost over, and it will soon be tax time again. However, according to the IRS, a significant portion of taxpayers in Maryland and across the U.S. fail to adhere to the tax code when they file their returns.

The IRS reports that around 17 percent of tax returns contain errors of some sort. Of those returns, 75 percent are filed by individual taxpayers as opposed to corporations. Most of the mistakes are due to negligence, but some of them are serious enough to constitute tax fraud.

Why the IRS could audit a tax return

If the IRS suspects that a Maryland taxpayer or anyone else isn't being honest on a tax return, the agency may initiate an audit. In 2016, 0.7 percent of all returns were selected for audit. In some cases, audits may be initiated on a random basis. There are seven common reasons why the IRS may want to further examine an individual's tax return. One of those reasons is a failure to report income earned on a freelance basis.

The government will receive a copy of Form 1099 that an individual receives from an individual or company during a given tax year. Those who are self-employed may also receive an audit for claiming a loss on a Schedule C. As a general rule, items should only be deducted if they are related to a business as opposed to being purely personal expenses.

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