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Tax returns feature new forms

Georgia residents may need to get familiar with a series of new forms when they complete their tax returns this year. This may apply to those who are self-employed and made more than $400 from such activity. If so, they will need to pay self-employment tax and report it on line 57. However, the actual calculation of that tax takes place on Schedule SE.

For employees, their employers are required to withhold and pay FICA taxes on their behalf. However, if this doesn't happen, it will be necessary to report unreported taxes on line 58. The same is true if an individual receives tips that aren't reported as part of an employee's income. Individuals who hire someone to work around the house could owe taxes depending on who was hired and how much that person made.

Dealing with tax audits

Some Georgia taxpayers may be concerned about getting audited by the Internal Revenue Service. Much of the concern could be due to the significant amount of misinformation that circulates about tax audits.

Taxpayers should know that audits are not very common. In fact, less than 1 percent of all tax returns that are submitted every year undergo an audit. For people who earn an average income, the likelihood that they will be audited is even lower.

IRS warns of phone scams during tax season

As Georgia taxpayers are preparing and filing their 2018 tax returns, the Internal Revenue Service is warning people about criminals who pose as IRS representatives in phone scams. In a news release, the IRS said that these phone scams continue to be a major threat and can cost victims a lot of money.

The Security Summit, which is a collaboration between IRS, states, and the tax community, works to protect people against identity theft and scams that are aimed at stealing people's money. The IRS says taxpayers should review the Security Summit safety tips at this time of year.

Passports and delinquent taxes

A warning has been issued by the Internal Revenue Service that applies to taxpayers residing in Georgia and around the country. In January 2018, the IRS implemented the Fixing America's Surface Transportation (FAST) Act which, among other things, provides that people must pay their back taxes if they plan to travel abroad. Otherwise, they may experience issues renewing their passports or obtaining new ones.

According to the regulation, the IRS must let State Department officials know the identities of delinquent taxpayers who owe at least $52,000 in back taxes. In accordance with this law, the State Department must deny passport applications and passport renewals submitted by them. In addition, these issues may cause delinquent taxpayers to have their passports revoked.

Forming a micro-captive insurance company

Promoters who suggest using a micro-captive insurance company come from many professions: financial advisors, attorneys, accountants, actuaries, captive managers and others. One thing they have in common with promoters in many fields is the majority are honest, helping their client set up a lawful system for a legitimate purpose.

A minority of promoters—of particular interest to the IRS—advise an unlawful, fake system that appears legal, but its sole purpose is to avoid a tax burden.

About 3 million more taxpayers to owe IRS in 2018 than 2017

The federal tax overhaul that went into law in 2017 has exposed many taxpayers in Georgia and around the country to unexpected income tax bills. According to the Government Accounting Office, roughly 3 million more people than last year will have failed to withhold sufficient income taxes from their paychecks to avoid owing when they file their 2018 federal tax returns. One tax accountant explained that entitlements to withholding allowances that people had grown to expect were reduced. This translated into people not having enough money taken out of their paychecks. The loss of some itemized deductions have also produced higher tax liabilities.

The elimination of itemized deductions for state and local income, sales and real estate taxes above $10,000 formed a primary source of tax liability resulting from the 2017 Tax Cuts and Jobs Act. Another tax accountant noted that people who live in regions with high taxes have lost their ability to deduct some of those expenses from their federal taxable income.

Behavior during audit could lead to criminal tax case

Criminal tax cases are relatively rare in Georgia. Tax professionals and attorneys will say that one common way to bring on a criminal case related to taxes is to be evasive or obstructive during dealings with the Internal Revenue Service. It's something to keep in mind during an audit, the behavior of the person being audited could turn the case into a criminal one. When an auditor comes across suspicious behavior during an audit, he or she can alert the Criminal Investigation Division of the IRS.

The IRS is under no obligation to inform the person that the criminal referral is happening. In most cases, the audit will be suspended without any explanation while the IRS builds a criminal tax case. People who make false representations to auditors are exposing themselves to criminal liability. This is not to say that people should simply agree with the IRS version of events, but good faith, above- board communication is important.

Beware of fake IRS text messages

Most taxpayers in Georgia dread receiving a contact from the Internal Revenue Service. Fears of an audit, a tax levy or asset seizure come to mind. Unfortunately, there are unscrupulous individuals in the world who choose to prey upon these fears. Fake contacts through telephone calls, emails and text messages have become more common.

Fake IRS scams are becoming more common in recent years, and the SMS is the latest method of initiating the scam. Using a text message that looks like it came from the IRS is increasingly popular among scammers. This is because people respond to a higher percentage of SMS messages than emails. After the message is sent, the scammer may then attempt to extort money under the guise of a fake tax liability.

IRS must recover from government shutdown

Although the most recent government shutdown is over, there may be some long-term impacts for Georgia residents. For example, the IRS says that it is weeks behind in hiring and training staff for the upcoming tax season. It also says that there are millions of unanswered letters from taxpayers that will need to be addressed. The number of letters it received during the shutdown increased because it was the only way for taxpayers to reach the agency.

This was because phone lines and other avenues to seek assistance were closed during the shutdown. According to the National Taxpayer Advocate, it could take as long as a year for the IRS to function normally again. However, this has not been confirmed by the IRS, and taxpayers have questioned the validity of that statement. Of course, logic says that the IRS would need more staff to handle both the backlog of mail and any new correspondence that comes in daily.

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