A great deal of responsibilities lay on the shoulders of individual business owners operating in partnerships, including tax liability. Their professional decisions can have major personal financial impacts, and therefore, must be chosen carefully. Business owners operating in partnerships should consider the following three tax tips.
Taxpayers may receive leniency on mistakes this year
Changes to tax laws have left many Americans unsure about their own tax liability. Taxpayers with complex assets typically face a more complicated filing process, but this year’s filing season may be even more confusing with new rules in place. Without help from experienced professionals, it is possible that many people will make mistakes on their tax returns. Fortunately, confused taxpayers are getting a break this year.
The Treasury Department has said that it will not penalize taxpayers who accidentally underpay their 2018 taxes – up to a certain amount. If you miscalculate your tax liability, then you will not be hit with penalties as long as you paid 85 percent of what you owe through withholding or estimated quarterly payments.
How likely are you to be audited?
You often hear of people being audited, but how likely are you to actually receive an audit notice from the Internal Revenue Service (IRS)? According to a recent report, your chances are around one in 160.
After the recent 35-day government shutdown, the IRS is facing budget and audit staff cuts. As a result, IRS audits are at an “all-time low.” However, there are still certain groups of individuals who remain at a higher risk of an audit this year.
Does a government shutdown affect your tax filing?
After 35 days, the longest-ever government shutdown in the United States is over. However, there could still be significant effects on the 2019 tax season, especially as the possibility of another government shutdown looms.
Over the past month, the Internal Revenue Service (IRS) had around 35 thousand fewer employees working than normal. While a government shutdown does not explicitly affect your tax filing, short staffing of IRS employees likely could. According to a recent article, the biggest effects from a government shutdown can come from customer support wait times and the amount of time it takes to receive a refund.
What are the penalties for filing a late tax return?
The deadline to file taxes this year is Monday, April 15, 2019, but Maryland residents receive an extra two days to file. While this might seem like plenty of time to get your tax documents in order, thousands of people across the United States will miss the deadline.
Luckily, there is no penalty for filing your taxes late if you are expecting a refund because penalties are dependent on the money you owe. However, there can be severe financial penalties for Americans who file a late return and fail to make a payment on the taxes they owe.
The end of the OVDP: What it means for taxpayers going forward
The IRS brought the Offshore Voluntary Disclosure Program (OVDP) to a close on September 28th, 2018. This program allowed U.S. taxpayers to bring foreign assets into U.S. tax compliance, pay for civil tax and penalties while avoiding harsh criminal referrals. This caused uncertainty for taxpayers with offshore assets, including savings accounts, businesses, trusts and estates who missed the deadline.
Fortunately, the window has not been closed for voluntary disclosures, but the rules have changed. The IRS released the new procedures for voluntary disclosures received after September 28th, 2018. Some changes to guidelines include increased penalties and a shortened disclosure period from eight years down to six. Most importantly, taxpayers who come forward voluntarily may still be able to avoid criminal prosecution.
What happens if you discover an error on your tax return?
Spring is almost here, which means the deadline to file your tax return is quickly approaching. Now is the time to start gathering the appropriate documents you will need in order to file your taxes.
However, things can sometimes get missed. As hard as you might try to make sure everything is correct, mistakes can still happen. So, what are the consequences for an error on your tax return? Will you be fined? Will there be an audit? Will you serve jail time?
Ways the new tax laws might affect your tax return
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.
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.
