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How the TCJA impacts retirees

The Tax Cuts and Jobs Act (TCJA) will have an impact on those who are retired as well as those who are still working. Retirees in Georgia who receive pension or annuity checks must generally pay income taxes on those earnings. While many choose to have taxes withheld on their behalf, others decide to receive the full amount of each check. This means making quarterly tax payments directly to the IRS.

With the passage of the TCJA, income tax brackets fell by about 3 percent for most taxpayers. This means that some retirees may owe less than they did before, and paying too much to the government could result in a refund. However, those who pay too little in estimated taxes could owe the government the following spring. Furthermore, those who don't pay enough might be assessed an additional penalty.

How a tax debt could put a passport in jeopardy

Georgia residents and others who owe a significant tax debt could be in danger of losing their passport. If the IRS determines that a person is trying to evade paying taxes or leave the country to avoid paying taxes, it will notify the State Department. At that point, the State Department will then either not issue a passport or decline to renew one that a debtor already has.

Typically, this step is taken when a person owes $50,000 or more, and that amount includes fees and penalties accrued on top of the original balance. It is important to understand that receiving a notice from the IRS simply means that it is proposing an amount that a taxpayer owes. There are many notices sent before the proposed bill turns into an actual bill. Taxpayers can postpone this from happening by filing protests and appeals to the IRS all the way to the U.S. Tax Court.

Company offers hybrid student loan/401(k) benefit

Georgia residents and others who are making student loan payments may struggle to contribute to a 401(k) plan. However, one company recently received permission from the IRS to make contributions on an employee's behalf. It is believed that the company that offers this benefit is a health care company called Abbot. To qualify, an employee must make student loan payments equal to 2 percent or more of his or her yearly salary.

The money that the company puts into the 401(k) plan is considered a tax-free contribution. If the employee received a direct payment to help with student loan payments, that money would generally be considered taxable funds. There currently is a bill in the Senate that would allow pre-tax dollars to be used to help workers pay off student loans. A recent survey found that over 75 percent of employees with student loans wanted their employers to help pay for them. Generally speaking, workers have been open about leaving their current employers for ones that offered better benefits.

New Tax Law Prompts Companies to Consider Corporate Changes

S corporations have in recent years seen increasing popularity as the choice by many Atlanta, Georgia small business owners for the type of corporation they will establish for federal tax purposes. Although both the traditional C corporation and the S corp establish a separate entity and provide limitations on liability, the primary difference between the two is in how they are taxed.

In an S corp, taxable income flows directly to the shareholders at their applicable tax rate based on their ownership share in the company. Taxable income in a C corp is taxable directly to the corporation. Individual shareholders are then taxed on dividends paid by the corporation. This double taxation of C corps has been a primary reason for the surge of S corp filings.

Are you afraid to open that letter from the IRS?

Once tax season is over, most people breathe a sigh of relief and go on to other things. You looked over your federal return carefully before submitting it and thought all was well.

Then, a couple of months later, a letter from the Internal Revenue Service turned up in your mailbox, and from your point of view, that could only mean bad news.

IRS has substantial power to collect data with a summons

When the Internal Revenue Service issues a summons to a taxpayer in Georgia or third-party performing services for taxpayers, the document represents a serious request for information. Failure to comply with a summons for information could prompt the federal government to file a lawsuit against the person or organization. Although a party might have a good reason to resist disclosing information, the chances of gaining a favorable ruling in court against the IRS are low.

A summons could demand information such as the books for a business, other financial records or data about account holders at a financial institution. A party that chooses to ignore or refuse a summons could end up facing a court order obtained by the U.S. Department of Justice that will force compliance. The option to fight the summons in court remains, but a court will want legitimate reasons for withholding information from the tax agency. While the legal standards are high, attorney-client privilege or work product protection might satisfy a court.

IRS proposing regulations for qualified business income deduction

Revamped rules governing small business taxes may result in tax breaks for Georgia business owners. The Internal Revenue Service has proposed regulations that shed light on the qualified business income deduction, including which company owners might be able to claim the deduction. According to the rules, many small business owners can take a deduction of 20 percent of qualified business income.

Qualified business income means income earned by a company operating as an S-corporation, partnership or sole proprietorship. These business entity forms are sometimes referred to as pass-through with regard to taxation because company income is taxable to the owner; generally, the owner of the company reports company income on his or her personal 1040. There is a ceiling on the deduction. Small business owners can take the deduction up to an amount equal to 20 percent of taxable income less capital gains.

An overview of a taxpayer's rights

If a person is audited by the IRS, he or she has rights that the agency must respect. For instance, Georgia residents have the right to have questions answered promptly and to expect employees to act professionally at all times. If a taxpayer does not receive good service, he or she may ask to speak with a supervisor about his or her experience.

In the event that a person is audited, he or she can challenge whatever position that IRS has taken in the matter. The IRS must take objections or documentation into consideration assuming that information has been provided promptly. Furthermore, the agency must respond if it objects to a taxpayer's rebuttal and must generally act in a fair manner when considering the taxpayer's position. Taxpayers have a right to know how much time that they have to send in a document or otherwise respond to an audit.

Tax code change may result in more owing money

Taxpayers in Georgia and throughout the country could owe the IRS money in April 2019 according to the Government Accountability Office, which says that up to 30 million people have not had enough money withheld for taxes by their employers. This is because of changes to the tax code implemented in 2017. Conversely, simulations run by the GAO show that many other taxpayers have had too much withheld and will receive a refund.

On average, the tax cut resulted in a middle-class family receiving an extra $930 per year. Simulations that did not account for the new law found that 18 percent of taxpayers had too little withheld compared to the 21 percent after taking the change into account. In both scenarios, only 6 percent of workers had the right amount of withholding from their paychecks.

How can I stop the IRS from garnishing my wages?

If you owe back taxes, you might find yourself wondering how you can prevent the IRS from garnishing your wages. You are not alone; many people in the Atlanta area find themselves stressing out about their tax debts and wage garnishments. It is best not to procrastinate or ignore the situation, because you could miss out on options that could protect your wages from garnishment from the IRS. You might think your situation is hopeless, but there are options that you might qualify for. 

Keep in mind that the IRS just wants what you owe; garnishments are a last resort that is often used for delinquent taxpayers. Once you receive notice from the IRS that they will place a levy on your personal assets until repayment is complete or acceptable arrangements are made that qualify for IRS levy release, consider the following options: 

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