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Atlanta Tax Law Blog

US Tax Court denies Avrahami motion for reconsideration

The Avrahamis' motion for reconsideration was denied by Federal Judge Mark Holmes in November. The court concluded that at least one of the policies was so "ill-drafted" that it was both an occurrence policy and a claims-made policy. The Avrahamis argued, in the motion, that there should be no reasonable dispute that the policies were claims-made and not occurrence policies.

Hints to make filing taxes easier

The end of the calendar year is generally a time of celebration and cheer for Georgia residents. However, the end of the holiday season usually means the beginning of the tax season. While this may be a busy time for accountants and taxpayers, the IRS has tried to make the season easier to manage. For starters, the agency recommends that individual and business taxpayers gather relevant documents as soon as possible.

Those who are expecting refunds may need to wait until the end of February to receive them. This is true for those who are claiming the Earned Income Tax Credit or Additional Child Tax Credit. Taxpayers should be aware that the IRS will withhold the whole refund, and this is done as a fraud protection measure. The IRS does say that filing electronically is still the easiest way to avoid issues with a return, even considering potential safety concerns.

What to know about a tax lien

If a Georgia resident fails to pay a federal tax bill in a timely manner, the IRS may place a lien on that person's property. This helps to ensure that the government will get the money that it is owed. Tax liens are only imposed after a taxpayer has been notified of the existing balance and has been given a chance to pay it.

Creditors are alerted to the lien, and the easiest way to get rid of it is to pay the tax bill in full. Once it has been paid, the lien is released within 30 days. In some cases, the government and the taxpayer can come to an agreement on a lighter type of lien. This may result in a lien only being placed on certain property or it taking a subordinate role to other existing liens.

Do you owe back taxes to the Georgia Department of Revenue?

Tax law in Georgia can be a complicated matter. If you owe back taxes to the state, the government may begin a collections process to recoup the taxes you owe. 

There are different types of procedures the Georgia Department of Revenue may use to try to collect on what you owe. Here are a few things you should know if you owe back taxes in the state of Georgia:

The IRS and requesting identity verification

Some people in Georgia might receive a notice from the IRS about verifying a taxpayer's identity. According to one expert, these letters most often indicate that a taxpayer has been the victim of identity theft.

However, the IRS may not be easy to deal with. One woman who handled financial affairs for her elderly parents received a notice about the need to verify their identities in March. The daughter sent the documentation requested along with the three years of returns the agency asked for. However, the agency sent another letter saying the information she sent was insufficient. The next round of information she submitted was also not enough.

The truth about common tax myths

Georgia residents may have firsthand experience with how complicated the federal tax code can be. Such confusion has led to the creation of generalizations or myths that some may have come to take for granted. While it is true that the IRS generally audits those who make more than $1 million per year, those who make under $25,000 and claim the earned income tax credit may be at risk for being audited.

In 2014, these individuals were twice as likely to be examined compared to other taxpayers. Even if a tax return is accepted, the IRS has three years to audit it. That number goes up to six years if a taxpayer failed to report 25 percent or more of his or her income for that year. Those who have cash earnings also may believe that they don't have to report their income.

How to pay taxes on time

In 2015, 10 million people were hit with failure to pay estimated tax penalties in Georgia and across the nation. This was an increase from 7.2 million in 2010. While penalties differ for each taxpayer, it could add hundreds of dollars to a tax bill. Those who derive income both from an employer and side gigs may benefit by increasing their withholding or making payments throughout the year.

It is important to understand that the tax system requires people to make most of their tax payments as they go. This means that taxpayers are generally required to pay as they make money as opposed to at the end of the year. Those who pay at least 90 percent of their estimated taxes during the year avoid paying interest on any remaining balance owed. The amount that a person pays in estimated taxes in a given year is usually based on what he or she made in the previous year.

Remember that you have rights if you are facing an audit

When you prepare your tax return, you should be aware of key tax issues that might raise red flags with the Internal Revenue Service and lead to an examination of your business practices.

IRS agents do not tell you everything about their mindset, agenda or procedures if they schedule you for an audit. Just the thought of the coming meeting may cause your palms to sweat, but remember that you have rights. 

Is it true that tax debt can be discharged in bankruptcy?

Chapter 7 of the bankruptcy code offers full discharge for your allowable debts. In Chapter 13, you can repay some debts through a court-approved payment plan, and the remaining obligations will be eligible for discharge. Chapters 7 and 13 manage tax debt in the same way.

To be able to discharge your income tax debt in a bankruptcy proceeding, you must meet specific criteria.

Why 401(k) contribution increases benefit workers

In 2018, Georgia employees and others in America will be able to contribute up to $18,500 into their 401(k) accounts. This is an increase of $500 from 2017 limits. Although an extra $500 per year may not seem like much, it could result in an extra $70,000 in a retirement account for a 30-year-old who contributes the maximum amount. A 40-year-old who contributes the maximum amount would have an extra $34,712.

If that same 30-year-old kept that extra $500 in cash, that person would have $18,500 in cash by age 67. The 40-year-old would have $13,500 in cash by age 67. The reason why such a small contribution can have such a large impact is due to compound interest. Those who can't contribute the maximum amount are encouraged to save as much as possible and increase their 401(k) contributions whenever possible.

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