How Audit Preparation Helps Protect Your Business Receiving an IRS payroll audit notice can quickly disrupt business operations and create significant financial concerns for employers. Preparing payroll records, reviewing worker classifications, and identifying compliance issues early can help businesses respond more effectively if an audit occurs....
Why Businesses Face IRS Payroll Tax Audits IRS payroll tax audits often begin long before businesses realize a compliance issue exists. Payroll reporting errors, worker classification disputes, inconsistent filings, and other employment tax issues can all increase the risk of IRS scrutiny. Understanding what triggers an IRS employment tax audit can...
Understanding the Difference Between Tax Evasion and Tax Avoidance Reducing taxes legally is a common goal for Texas businesses and individuals, but many taxpayers are unclear where lawful tax planning ends and illegal tax evasion begins. Tax avoidance uses legal strategies to reduce tax liability, while tax evasion involves fraud, concealment, or ...
Understanding the Texas Franchise Tax Many business owners are surprised to learn that the State of Texas franchise tax applies to a wide range of business entities operating in Texas. Although Texas does not impose a personal income tax on individuals, many companies doing business in the state must still file annual franchise tax reports with the...
Why Multi-State Tax Nexus Matters for Texas Businesses Texas businesses increasingly expand operations beyond state lines through e-commerce, remote employees, and online sales, often without realizing that those activities may create tax obligations in other states. However, expanding operations across state lines, hiring remote employees, storing...
Understanding Civil Asset Forfeiture in Texas Many Texans are surprised to learn that law enforcement agencies may seize cash, vehicles, and other property even without a criminal conviction. Under Texas and federal law, civil asset forfeiture allows the government to pursue seized property through a separate legal process independent of any crimin...
Why FATCA Compliance Matters for Texas Taxpayers International tax reporting obligations have expanded significantly for taxpayers with foreign financial assets, offshore accounts, or interests in foreign financial institutions. Under federal tax laws applicable in Texas, individuals and businesses with specified foreign financial assets should und...
Why FBAR Compliance Matters for Texas Taxpayers Texans with foreign financial accounts, offshore accounts, foreign bank accounts, or other specified foreign assets may face significant FBAR filing requirements under federal tax laws. Failure to file an FBAR or properly report foreign financial assets may expose taxpayers to significant civil penalt...
What Are the IRS Hobby Loss Rules? Generally, taxpayers may deduct “ordinary and necessary” business expenses under Sections 162 and 212 of the Internal Revenue Code. Many taxpayers believe that they can deduct their expenses related to their passions, similar to how one may deduct expenses related to a business. However, Section 183 limits this de...
Why Tax Planning Matters in Litigation Cases Litigators often focus heavily on liability, damages, and settlement value while giving limited attention to the tax consequences associated with litigation recoveries and expenses. However, the tax treatment of a judgment or settlement can significantly affect the client’s actual net recovery. In many s...
IRS Offshore Compliance Options for Foreign Asset Reporting Many tax practitioners and taxpayers have noticed increased enforcement in the international tax space. It’s always better to correct failures in filing foreign information returns or FBARs before receiving a letter from the IRS. In certain situations, taxpayers who are living in the Unite...
What is the Trust Fund Recovery Penalty? Under Internal Revenue Code (“IRC” or the “Code”) § 6672, any person required to collect and pay over any tax imposed by the Code who fails to collect such tax or pay over such tax will be liable for a penalty equal to the total amount of the tax not collected or paid over. Several persons may be held jointl...
Why Tax Issues Matter in Divorce Tax issues are frequently overlooked in divorce litigation. Parties often focus on custody disputes and dividing assets, but the tax consequences of those decisions can dramatically alter the true economic outcome of the divorce. This article discusses three very important tax issues that arise in a divorce case and...
Understanding What “Tax-Free” Really Means in Business Sales Now, I know what you are thinking nothing is “tax-free.” Yes, that is correct. Generally, tax-free in tax planning is a tax deferral. Also, the tax deferral discussed in this article applies to capital gains. It does not apply to ordinary income items from the sale of the business, includ...
Overview of Disclosure Requirements This is the second part of a two-part article. In Part 1, we briefly covered several international disclosure forms that must be submitted by certain U.S. taxpayers (including nonresident aliens that meet the “substantial presence test”) in connection with international accounts or transactions, including: FBAR/F...
Overview of Disclosure Requirements This two-part article summarizes FinCen and IRS reporting requirements of U.S. citizens,resident aliens, certain non-resident aliens (e.g., who meet the “substantial presencetest”), domestic entities, domestic trusts and domestic estates that have an interest inforeign financial accounts, brokerage accounts, reti...
An assessment is the IRS’s formal recording of a tax liability on a taxpayer’s account. Once a liability has been assessed, the IRS is authorized to begin collection efforts, such as sending bills, filing liens, and issuing levies. Tax and penalty assessments can arise in a number of ways. Perhaps a taxpayer never filed a return, so the IRS filed a...
What is the TFRP? The Trust Fund Recovery Penalty (TFRP) allows the IRS to hold certain individuals personally liable for the unpaid employment taxes of a business. Under Section 6672 of the Internal Revenue Code, any person who is required to collect and pay over any tax and fails to do so may be liable for a penalty equal to the amount of tax tha...
Purpose of Form Form 5471 is used to satisfy the reporting requirements of Internal Revenue Code (“IRC”) §§ 6038 (information reporting with respect to certain foreign corporations and partnerships) and 6046 (returns as to organization or reorganization of foreign corporations and as to acquisitions of their stock). Likewise, Form 5471 is used to r...
Overview Depending on the amount of taxes, penalties, and interest owed to the IRS, you may be considering an Offer in Compromise (“OIC”). However, to pay “pennies on the dollar,” the Internal Revenue Service (“IRS”) will not accept an OIC unless the amount offered is equal to or greater than your Reasonable Collection Potential (“RCP”). What is Re...
