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Minneapolis Tax Law Blog

Rely on IRS.gov FAQs at your peril

If you have questions about immigration to the United States, you go to USCIS.gov, the official website for the Citizenship and Immigration Services. They have a Frequently Asked Questions area you can turn to and hopefully get straight answers to specific questions. The same goes for most of the major departments.

As important as the Internal Revenue Service is, something similar would seem logical to expect from that agency. Think about it. The IRS is the financial engine of the U.S. government. It might be fair to say that tax issues affect more individuals directly than any other aspect of government activity. Sadly, though, if you depend on information from an IRS.gov FAQ site to be a shield through an IRS dispute, you could be sadly disappointed. Better to enlist an experienced attorney.

Dealing with IRS liens against property

When you purchase property, is it really yours? The answer, of course, is yes. However, there are qualifiers. If you borrow money to buy a house or car and use the property as collateral, your lender has a stake in the game in the form of a lien. However, even if you hold clear title to the property, it is still possible find yourself confronting a lien from state or federal tax collectors.

Such a situation needs swift attention. Fortunately, it should not come from out of the blue. The IRS and state collectors have a right to file claims against your property when you fail to cover an outstanding tax debt. But rules of engagement lay out specific steps officials must follow before a lien is imposed. Before it gets to that stage, there is time to consult an attorney, assess the legitimacy of the claim and formulate an appropriate response.

The tax challenges of legalized marijuana

Talk about your sticky wickets. Pardon what might seem a flip remark about a sensitive issue, but it's hard to describe the situation regarding legalizing marijuana any other way. Minnesota is only at the stage of allowing the use of marijuana for a short list of specific medical conditions. Regulatory structures even for that aren't in place yet and the notion of recreational marijuana isn't enjoying much support at the State Capitol.

That is not the case elsewhere, however. Twenty-nine states have legalized medical marijuana and eight allow recreational sale and use of the drug. As legalization occurs, businesses are budding. And with that comes new tax obligations and potential disputes with the IRS. One big reason is that marijuana remains an illegal controlled substance under federal law.

Avoiding harsh penalties for honest tax mistakes

The power of the Internal Revenue Service can be immense. It has the capacity to make life misery for anyone in Minnesota suspected of failing to meet tax obligations. The agency doesn't tend to wield that power right off the bat, however. An experienced tax attorney knows that actions don't tend to start with audits. First, notices of suspected liability are sent. If responded to promptly and properly, an audit might not even occur.

If an audit is scheduled, consulting an attorney well ahead of time may reveal where errors in filing occurred. At the very least, such an assessment can provide you with insight as to how the auditor may view the claims made in your return.

Tax planning in the midst of tax reform uncertainty

Confrontations with Minnesota or federal tax collectors are not something any business or individual looks for. Avoiding practices that could lead to needing to resolve tax disputes is something most experts agree deserves prioritizing. Achieving that aim typically requires solid tax planning, or as singer/songwriter, Carly Simon crooned about – "Anticipation."

Anticipation is about looking forward. Where taxes are concerned, however, simply looking ahead isn't enough. Action is required. The current environment around taxes is rather foggy right now, making it hard to know what action to take. Leaders in Washington insist that reform is high on their agenda. At the same time, it's unclear what shape that reform might take or when it will come. Still, some experts say there are things corporate taxpayers can explore to hedge against whatever happens.

Nexus tax web isn't untangling with passage of time

Back in the 1990s, the U.S. Supreme Court issued a ruling that established that if a business has a physical presence in a state, even if that presence is a person, sales taxes apply to any transactions that occur. As we noted in a series of posts more than a year ago, this notion of so-called nexus hasn't stood the test of time all that well.

Due to the expansion of online commerce, this once bright-line rule is faded. And with the development of the gig economy, the blurring continues. The result is that a Minnesota business can unexpectedly find itself in a quandary over tax obligations a state says are owed. What constitutes the creation of a business nexus seems to morph every month, triggering new legal disputes.

Gig economy growth has serious business tax implications

It's hard to know how large the so-called gig economy is and how fast it is growing. The federal Bureau of Labor Statistics says current data sheds some light on the subject, but the agency admits it's unreliable because it's so old. One report by the Brookings Institution's Metropolitan Policy Program, credited by some as the most trustworthy, says the number of workers in the gig economy has grown by about 27 percent in the past 20 years. But who really knows?

One reason it's so hard to nail down the numbers in this obviously important part of the economy is that there's so much confusion about who makes up the population. And that confusion can easily translate into income and payroll tax troubles for individuals and businesses in Minnesota and Wisconsin.

What's my best option for resolving IRS tax claims?

There is no single answer to the question posed above. Perhaps the most useful response is that the best option is the one in which you clear your tax debt in the shortest amount of time with the least amount of financial hardship.

In one previous post, we discussed the potential value of seeking a first time penalty abatement. It's not something that every Minnesota or Wisconsin filer qualifies for. It typically requires paying off the full amount owed, but those who do qualify may be able to avoid the penalties that might normally be levied

Is there a statute of limitations on IRS collection of taxes?

For nearly every legal action, there is a point after which the case cannot be pursued. This is called the statute of limitations. Under Minnesota law, the shortest period of time in which a civil case can be brought is two years. The shortest period for criminal cases is three years. There is no statute of limitations in cases of murder.

When it comes to tax-related issues, there are some limits, too. For example, if you and the IRS agree that you owe a great deal in taxes, but your financial situation is such that you can't pay them and also cover living expenses, the agency might grant a request to list your status as "currently not collectible." This does not mean you are off the hook.

To avoid costly IRS audit, respond to pings from ACA exchange

The failure of the new Congress and administration to fulfill on the pledge to repeal and replace the Affordable Care Act undoubtedly leaves many with "question mark" text bubbles dancing in their heads. Republicans in Washington say the issue is not dead, but for now, the existing law remains in place.

Because of that, experts say now is not the time to turn a blind eye when the government informs you that you are in violation of ACA provisions. Failure to comply could mean an IRS audit, which could be costly to a Minnesota or Wisconsin business, so swiftly responding to notices is recommended.

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