As we head into the new year, we trust everyone has taken a few minutes to work out a tax strategy for 2016. Planning for deductions and tax credits, looking at pre-tax contributions to employer-sponsored retirement plans and other benefits -- everything should be in place by now, and we should all be able to sit back and enjoy the long weekend.
We are just finishing up our discussion of sales and use taxes, who must pay them and when they are due. Small and mid-sized businesses, that is, businesses that may not have a full-time tax expert on hand, may be more vulnerable to the confusion that seems to be the hallmark of sales and use taxes. One reason is that the business must be fluent in the tax laws of every state it does business in, regardless of the nature of the transaction. That is a lot of ground to cover when you are trying to run a business.
A recent study conducted by McGladrey LLP (now RSM LLP) suggests that mid-sized businesses may be confused about the filing and payment requirements for sales and use taxes. While paying too much is a burden on any company's bottom line, there is also the risk of not paying what they owe and, as a result, incurring fines and penalties. The report listed 10 industries that tend to overpay, among them manufacturing, technology, financial services and pharmaceuticals.
You have just learned that you do, in fact, owe the Internal Revenue Service thousands of dollars. You received a letter pointing out a discrepancy, and you went back through the return and all of your tax records for that year. When you realized that the IRS was right, you got that tight feeling in your chest, or a headache took hold or you; you may even have blacked out.
Many taxpayers may have heard of a tax lien before, but they don't understand what the lien actually entails, such as the consequences of it being associated with your record. So what is a tax lien, and what does it mean for a taxpayer that is unfortunate enough to have it stuck to his or her record? Let's investigate further.
A friend of ours was floored recently when she received a letter from the IRS. Her first thought was our own first rule of IRS correspondence: Do not panic. In fact, "Do not panic" is also our second and third rule. Our friend's second thought was, "Good luck with that." It took her an hour to start breathing normally, she said -- and that was before she opened the letter.
Many people believe that television and movie stars live on virtually unlimited incomes. Unfortunately, for some of those entertainers, they act as if that were a true statement, and sometimes run into problems from the taxman.
A tax-related blog can hopefully be forgiven this time of year for recurrent reference to a theme that is playing out in a broad-based way and with strong relevance for a large number of American taxpayers.
There once was a time when wealthy Americans with money stockpiled abroad in Swiss banks could sleep easily at night, knowing that their account details would be kept shielded from the prying eyes of United States Internal Revenue Service agents.
Here's the bottom-line take from the Internal Revenue Service regarding money held abroad in foreign banks by Americans: You can have your cake, but we want our slice.