Federal Tax Posts

Employers that withhold taxes from employees but don’t pay them over to the IRS may face harsh penalties. The Trust Fund Recovery Penalty (TFRP) equals 100% of the unpaid tax. The TFRP can be assessed personally against responsible parties and may include prison time. One taxpayer who operated an ammunition manufacturing and sales business withheld federal taxes from his employees’ paychecks. A U.S. Dept. of [...]

Chief financial officers (CFOs) of some major U.S. companies are seeking help from U.S. Treasury Secretary Janet Yellen. In a letter, they said the final foreign tax credit (FTC) regs issued on Dec. 28, 2021, are a “radical departure from well-established law.” The final regs, they added, put U.S companies at a “competitive disadvantage” with foreign companies. For over a century, foreign income tax paid [...]

The IRS often can’t attempt to collect debt from taxpayers whose debt has been discharged in bankruptcy. A U.S. Bankruptcy Court in West Virginia recently ruled against the IRS after the agency sent multiple collection notices to a debtor who had a discharge order. The IRS excused its actions by saying they were inadvertent and that the notices were sent via an automated system. But [...]

Taxpayers beware, warned the IRS, as it issued the 2022 “Dirty Dozen” scams list. The list starts with four potentially abusive arrangements to avoid, including: charitable remainder annuity trusts, Maltese individual retirement arrangements, foreign captive insurance and monetized installment sales. If these schemes appear on a tax return, they will likely draw unwanted IRS focus. “Think twice,” said IRS Commissioner Chuck Rettig. “Taxpayers are legally [...]

The Social Security Administration’s (SSA) Office of the Chief Actuary is projecting that the Social Security wage base will increase from $147,000 to $155,100 in 2023. The SSA provides three forecasts for the wage base (intermediate, low and high cost). All forecasts predict an increase from $147,000 to $155,100 in 2023. Future intermediate forecasts are: $165,300 in 2024; $173,400 in 2025; $180,600 in 2026; $188,100 [...]

The “Military Spouse Hiring Act,” was introduced in the U.S. Senate and is currently under review. The proposed legislation is mirrored by a bill in the U.S. House. The bill seeks to expand the Work Opportunity Tax Credit to include qualified military spouses as a targeted group that qualifies for the credit. A “qualified military spouse” is defined as any individual who is certified by [...]

Americans living and working abroad: You have less than a week to file your federal income tax return. The due date is June 15 if your tax home and residence are outside the U.S. and Puerto Rico, or you’re serving in the military outside the U.S. and Puerto Rico on the regular tax filing date. You’ll need to attach a statement to your return indicating [...]

The Treasury Inspector General for Tax Administration (TIGTA) has issued an audit that evaluates whether the IRS timely and accurately processed individual paper and e-filed tax returns during the 2022 filing season. As of March 4, 2022, the IRS received 54.7 million tax returns and issued $129.2 billion in refunds. The audit found that “significant staffing shortages continue to hamper the IRS’s efforts to address [...]

What happens if taxpayers can’t pay the taxes the IRS says they owe? An “offer in compromise” (OIC) may allow them to settle their tax debts for less than full liability. It can be difficult to get an OIC accepted, but individuals are eligible to apply if they’ve filed all required tax returns, made required estimated tax payments and met other requirements. (Taxpayers in open [...]

You can roll over funds from one IRA to another tax free as long as you complete the rollover within 60 days. What if you miss the deadline? You may owe tax and an early distribution penalty if you’re under age 59½. The IRS may waive the penalty if there are extenuating circumstances. In a recent private letter ruling, the IRS waived the 60-day requirement [...]

Have you ever heard about the “tax gap” and wondered what it is? According to the IRS, “the gross tax gap is the difference between true tax liability for a given period and the amount of tax that is paid on time.” The tax agency explains that estimates consistently show the United States “enjoys a relatively high and stable voluntary tax compliance rate.” However, it [...]

The IRS Collection Financial Standards are revised annually and used in determining how much income delinquent taxpayers can keep to pay their bills (with the rest going toward settling their tax debt). Allowable living expenses include those expenses that meet the “necessary expense test.” This test is defined as expenses that are necessary to provide for a taxpayer’s health and welfare or the production of [...]

The deadline to file 2021 tax returns is now in the rearview mirror for most people. But what if you owe tax and didn’t request a filing extension? You should file soon to limit interest and penalties. Here are some after-tax-day tips from the IRS: Make a full or partial payment online by debit or credit card or digital wallet. Alternatively, request a payment plan [...]

Spouses who file joint federal tax returns are both generally liable for the tax owed. But joint filers may seek “innocent spouse” relief. One taxpayer requested relief for multiple years of underpaid taxes. A U.S. Court of Appeals found that the U.S. Tax Court properly denied her relief claim. She had tacitly consented to filing a 2010 joint tax return by providing her ex-spouse with [...]