Tax Law Archives - Page 35 of 41

Three Tax Mistakes You Make Every Day

Forbes.com: “Harvey Silverglate’s new book Three Felonies a Day argues that a combination of vague laws and changing technologies has led the average American to unwittingly break the law daily. That got me to thinking of an analog in the tax world: Most of us, I fear, mess up tax issues every day. No, these mistakes aren’t felonies. But you don’t want to end up next April 15 having logged 365 days of tax mistakes. Here are three tax rules many of us break almost daily. Respect them, and you’ll reduce the chance of coming to grief with the Internal Revenue Service.”

Settlement of Disputed Debt Does Not Result in Cancellation of Debt Income

The Tax Law Report: The U.S. Tax Court ruled that a taxpayer who proved a bona fide dispute with a creditor and who settled the dispute for less than the amount demanded by the creditor did not have discharge of indebtedness income with respect to the amount disputed and not paid.

“According to bank records, the taxpayers owed $8,042.10 to CitiFinancial and $2,875 to Chase. However, they disputed amounts owed. CitiFinancial agreed to settle the debt for $7,500 and Chase agreed to settle the debt for $1,000. Both banks issued 1099-C’s to the taxpayer for the difference between the settlement amount and the original amount of the debt. The IRS asserts that the taxpayers should recognize cancellation of debt (COD) income for this difference. . . . Here, the taxpayers provided ‘evidence [that] supports a conclusion that a bona fide dispute existed regarding . . . the debt . . . .’ The amount of the taxpayer’s debt ‘that was definite and liquidated’ was $7,549.66 and $1,000 for CitiFinancial and Chase respectively. Therefore, the taxpayer does not have cancellation of indebtedness income from Chase. But they do have $49.66 of cancellation of indebtedness income from CitiFinancial.”

Top 7 Tax Resolution Lessons Learned from the Worst Cases of Celebrity Tax Evasion

Tax Resolution University: “Celebrities, just like average taxpayers, can run into serious IRS problems. You have an edge over the high-profile celebrity tax cheats in that you can learn how to avoid IRS tax problems from the worst celebrity tax evasion cases. Recently Access Hollywood compiled a list of celebrity tax cheaters who found themselves in deep IRS trouble with Uncle Sam. With thousands of fans and loyal followers, ending up on the California’s list of people who owed the most in back taxes does not sound very good for publicity.”

NY Governor Wants to Tax Soft Drinks

New York Post: “Less than week after calling on lawmakers to address New York’s budget crisis without raising taxes, Gov. Paterson fizzled out and suggested he would take another pop at passing a state soda tax. ‘I promise I will put (the soda tax) back in my budget address and give the Legislature another chance to do it,’ Paterson said . . . .”

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49% of IRS Volunteers Preparing 2009 Tax Returns Made Mistakes

The Treasury Inspector General for Tax Administration today released its annual review of the IRS’s Volunteer Income Tax Assistance and Tax Counseling for the Elderly programs entitled “Ensuring the Quality Assurance Processes Are Consistently Followed Remains a Significant Challenge for the Volunteer Program.” Forty-one percent of the test tax returns prepared by volunteers were incorrect.

The accuracy rates for tax returns prepared at Volunteer Program sites decreased for the first time in five filing seasons. Of the 49 tax returns prepared for our auditors by Volunteer Income Tax Assistance and Tax Counseling for the Elderly sites in the 2009 Filing Season, 29 (59 percent) were prepared correctly and 20 (41 percent) were prepared incorrectly. If 17 of the incorrectly prepared tax returns had been filed, taxpayers would not have received $4,138 in tax refunds to which they were entitled. Alternatively, if the remaining 3 incorrectly prepared tax returns had been filed, the IRS would have incorrectly refunded $4,575.

IRS