Maryland Tax Law Blog

Maryland woman sentenced in false tax returns case

A federal judge in Maryland has sentenced a 45-year-old Baltimore County woman to seven years in prison for identity theft and filing fraudulent income tax returns with the Internal Revenue Service. A jury returned guilty verdicts on 14 counts of wire fraud, aggravated identity theft and filing false tax returns on May 22.

Prosecutors were able to convince the jury that the woman, who ran a home-based tax preparation business, filed hundreds of tax returns with the IRS between January 2009 and March 2013. They submitted evidence showing that the woman not only manipulated the figures to increase the size of refunds, but she also arranged for refunds to be deposited into her banking account instead of having them sent to the taxpayers involved.

Bankruptcy will not solve your issues with IRS tax liens

When people get into trouble, bankruptcy is often the last resort solution they turn to. Depending on an individual's assets and income, either Chapter 7 or Chapter 13 bankruptcy could offer some form of relief. After all, bankruptcy provides an automatic stay against collection activity, even from the government.

For individuals who have substantial tax, it is common for the IRS to seek a lien against their real property if they failed to pay on that debt. People dealing with a federal tax lien on their home may wonder if bankruptcy proceedings can help them address the lien on their property if it is the result of federal tax debt. Unfortunately, in most cases, bankruptcy will not get rid of the tax lien on your property.

The impact a tax lien has on creditworthiness

Maryland residents who owe money to the Internal Revenue Service could have a tax lien placed on their property. This is true whether a person owes personal or business taxes. When a lien is placed on an item, the government is saying that it has a legal interest in the property. While this can make it difficult to get funding for a business, it doesn't necessarily make the process impossible.

As a general rule, those who are looking for business funding prior to paying off a tax lien will want to look at alternative lenders. These lenders may be fine with a borrower having a tax lien under a certain amount or less than a predetermined percentage of a company's annual revenue. It is important to note that a tax lien will not impact a person's credit score. This is important because lenders will generally look at both the creditworthiness of a company and the person taking out the loan.

Practitioners See No Rush to Add Cryptocurrency to Badges of Fraud

Published in Tax Notes, Aug. 27, 2018, pp. 1327-1329

By Nathan J. Richman

Between possible non-tax-evasion motives foreven the most secretive uses of virtual currencies and the long list of open tax questions, practitioners say the IRS shouldn't hurry to amend its badges of fraud list.

The roller-coaster valuations and secrecy promises of cryptocurrencies have drawn the attention of the media, investors, consumers, and IRS investigators. The attention of the last has most recently taken the form of a Large Business and International Division compliance campaignand part of an international criminal taxenforcement collaboration.

At a July conference, a practitioner asked an IRS Criminal Investigation division special agent in charge whether the IRS is viewing the use of cryptocurrency as its own badge of fraud, similar to how unexplained uses of large amounts of cash are a badge of fraud. The special agent said he hadn't heard of that happening.

Nathan J. Hochman of Morgan, Lewis & Bockius LLP, a former head of the Justice Department Tax Division and the practitioner who had asked the question, told Tax Notes that one major issue with treating cryptocurrency as an independent badge of fraud is the general taxpayer's lack of understanding of the IRS's position that the currencies are property rather than "currency." 

How Maryland regulates its lottery

The state of Maryland offers a variety of lottery games that individuals can play to earn cash prizes. In some cases, those prizes will be given to a custodial parent or to the government itself. This is true for those who owe more than $150 in back support or who have an outstanding tax debt.

In fiscal 2013, there were a total of $1.756 billion in lottery tickets sold. Of that amount, $1.036 billion was given back to participants in the form of prize money. The other $545.2 million went to the state's general fund where it was used to support education and small business. It was also used to provide funding for companies owned by women and minorities. Overall, the state lottery has generated $13.9 billion in revenue since it began in 1973. Sales to minors are prohibited, and a person has 182 days to collect his or her prize if the game is not played on a daily or weekly basis.

Common income tax mistakes cost money

Small mistakes can be costly when it comes to filing state or federal income taxes. Though most people endeavor to pay as little in taxes as possible, many filers are still overpaying every year. Maryland residents can avoid such mishaps by remembering a few tips.

First, there are several different kinds of investment accounts that qualify for beneficial tax treatment. Traditional individual retirement accounts and 401(k)s both allow the taxpayer to reduce current taxable income. Roth IRAs, by contrast, defer taxes on asset growth in the account.

Those with tax debt may have trouble traveling abroad

Creating the Foreign Account Tax Compliance Act (FATCA) is among a series of steps that the government has taken to close the international tax gap. This gap is the difference between what the IRS takes in each year from overseas filers compared to what it is owed. However, Maryland residents and others who live or travel internationally may face passport restrictions for not paying taxes or filing tax returns in a timely manner.

Generally speaking, these restrictions would only impact those who don't have an arrangement with the IRS to pay their back taxes. It is also likely to impact only those who have a seriously delinquent tax debt. The IRS considers a debt to be seriously delinquent if a person owes more than $50,000 in assessed taxes. Furthermore, a lien must have been filed and a levy issued against the taxpayer.

5 questions and answers about taxes while living overseas

You grew tired of living in the United States. You decided it was finally time for a change. After all, in your line of work, you can live anywhere you want. You moved overseas and set up a new life for yourself, something you always wanted to do. You cut ties with the United States.

Or did you? You are still a U.S. citizen. What does this mean for you financially? Here are a few questions and answers that can help you understand your tax obligations.

Tax return records need to be kept on file for over 3 years

People in Maryland might have heard that they should keep copies of their federal tax returns for three years. This guideline represents a minimum recommendation that does not necessarily protect people from all inquiries from the Internal Revenue Service. Although the agency generally has three years to decide if it is going to audit a person or require additional tax payments, some situations extend the statute of limitations.

In the case of returns deemed to be fraudulent, the IRS has no restrictions upon the years that it can examine. Tax filings that underreport income by more than 25 percent could come under scrutiny for up to six years. For people who completely fail to file a return, no statute of limitations applies because the act of filing initiates the three-year period of review.

Do you have to track your employees' tips?

Let's say you own a string of restaurants in Maryland and adjacent states, and you have hundreds of employees at all of those locations. Many of those employees earn tips as a part of their standard compensation. Obviously, the exact amount earned varies dramatically from one shift to the next.

This complicates things from a tax perspective. It is not the same as taking employees' taxes out of monthly paychecks that never change or only vary slightly if hours change. What responsibilities do you have for the taxes on those tips?

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