Does filing bankruptcy discharge federal Tax Debts?
Does filing bankruptcy discharge federal IRS tax debts? Yes, some federal IRS tax debts can be discharged in a personal bankruptcy. Bankruptcy Code Section 523 provides exceptions to the general discharge order entered pursuant to Section 727 (Chapter 7) or Section 1328 (Chapter 13). Section 523(a)(1) does not discharge a taxpayer from income tax debt if the taxpayer violates any of the following 6-part test:
Filed a fraudulent tax return;
Willfully attempted to evade the payment of taxes or the government’s collection of the tax debt;
Failed to file a tax return;
Filed an untimely tax return less than two (2) years before the filing bankruptcy;
Government assessed the income tax less than 240 days before the bankruptcy case filing; or
The tax return due date is less than three (3) years before the bankruptcy case filing.
Tax debt and tax resolutions can be complex. Therefore, you need a tax lawyer on your side. Chicago tax lawyer and CPA Brian J. Thompson offers tax debt relief via installment agreements and offers-in-compromise. Brian@BrianThompsonLaw.com or 773-307-0181.
Wesley Snipes’ Tax Problems . . . More money, more problems. Not even Blade himself could slay these tax debts.
Wesley Snipes has federal tax liabilities of approximately $23.5 million for tax years 2001-2006, largely as a result of his failure to file income tax returns. The court convicted the movie star of three misdemeanor counts and he served three years in prison for failure to file tax returns. He was released in 2013. However, his tax problems did not end there as the IRS rejected his offer in compromise:
Cryptocurrency taxation is similar to the taxation of other investment gains and losses. If capital gains tax applies to a taxpayer’s cryptocurrency transactions, the gain or loss is calculated as the difference between the taxpayer’s basis in the cryptocurrency and the net proceeds received in the sale of the cryptocurrency.
I am a Chicago CPA and tax lawyer. Among other things, I prepare federal income tax returns which may include capital gains and losses from sales of stocks, bonds, real estate and cryptocurrency. To report cryptocurrency gains or losses, the taxpayer needs to provide the basis, net proceeds, acquisition date and sales date.
The IRS’ Security Summit initiatives produced steep declines in tax-related identity theft in 2017. The number of taxpayers reporting themselves as victims of identity theft dropped 40 percent in 2017. This marks the second sharp annual decline. Since 2015, the number of tax-related identity theft victims has fallen by almost two-thirds. Therefore, the IRS’ efforts protected billions of dollars of taxpayer refunds from theft.
The IRS reported Wednesday it has a total of $1 billion of unclaimed tax refunds related to unfiled 2013 income tax returns.
The IRS estimates the median tax refund is $763. Taxpayers can claim their refunds by filing a 2013 federal income tax return by Tuesday, April 18, 2017. That is the same day as the filing deadline for the 2016 tax year.
IRS Commissioner John Koskinen, in a statement to Tax Pro Today, said, “We’re trying to connect a million people with their share of 1 billion dollars in unclaimed refunds for the 2013 tax year. People across the nation haven’t filed tax returns to claim these refunds, and their window of opportunity is closing soon. Students and many others may not realize they’re due a tax refund. Remember, there’s no penalty for filing a late return if you’re due a refund.”
The Internal Revenue Code gives taxpayers three years to claim refunds for income tax returns they have not yet filed. If they don’t file a return within that time, the refund expires and becomes the property of the U.S. Treasury. To claim a 2013 tax refund, taxpayers need to properly address, mail, and postmark their federal income tax return by April 18, 2017.
However, taxpayers may not receive the refund. The IRS warned it may still hold onto the 2013 federal income tax refund money if taxpayers have not yet filed their tax returns for 2014 and 2015. The IRS will also apply the tax refund to any amounts still owed to the IRS or a state tax authority. Finally, the government may apply the tax refunds to unpaid child support or other past due federal debts, such as student loans.
To claim the home office deduction, a taxpayer must meet 2 requirements: 1) Regular and exclusive use for business – you must use part of your home regularly and exclusively for conducting business; 2) Principal place of your business – you must show that you use your home as your principal place of business. If you conduct business at a location outside of your home, but also use your home substantially and regularly to conduct business, you may qualify for a home office deduction.
Both self-employed taxpayers and employees can claim the home office deduction. However, if the taxpayer is an employee, there is an additional requirement that the home office also must be for the convenience of the employer. This generally means the employer does not have a local office.
How to Report the Home Office Deduction
As an employee, you must itemize deductions on Schedule A (Form 1040) to claim a deduction for the business use of your home and any other employee business expenses. Self-employed tax filers who use part of their home in a trade or business and file Schedule C (Form 1040), report the deduction for business use of their home on line 30 of Schedule C (Form 1040).
Actual Method for Home Office Deduction
There are 2 options for calculating the dollar amount of the home office deduction.
The first option is based upon the actual percentage of your home used regularly and exclusively for business. This option requires the taxpayer to track expenses such as utilities, insurance, depreciation (or rent) for the entire house and then allocate those expenses based upon the percentage of the home used for regularly and exclusively for business purposes.
Simplified Home Office Deduction
Beginning in 2013, there is a second option. The new simplified method permits a $5 per square foot deduction for up to 300 square feet. Therefore, the maximum home office deduction is $1500 under this method. The new simplified home office deduction is electable on a year-by-year basis
Did you receive an IRS CP2000 Notice? What is the purpose of the CP2000 Notice? This notice means the income and/or payment information the IRS has on file (from a 1099 or W-2) doesn’t match the information the taxpayer reported on his tax return. This could affect your tax return; it may cause an increase or decrease in your tax, or may not change it at all.
What should you do upon receipt of a CP2000 Notice?
Read the notice carefully – it explains the info the IRS received and how it affects your tax return.
Complete the notice response form whether you agree or disagree with the notice.
If the info is wrong, contact the business or person who reported it to the IRS and ask them to correct it. Then, provide this corrected info to the IRS.
Consider whether the mistake may have affected other tax returns such as your state income tax return.
What are this risks in LLC member buyouts? Chicago business lawyer Brian J. Thompson cautions LLC members considering a membership interest buyout to consider the risks involved when the buyout agreement provides for money to be paid in the future. Agreeing to accept payments in the future exposes the separating member of an LLC to several forms of counterparty risk. This counterparty risk has 2 components:
1) Default risk – the counterparty simply chooses not to perform as agreed in the buyout or separation agreement; and
2) Credit risk/bankruptcy risk – the counterparty is unable to perform due to insolvency or bankruptcy.
Corporate shareholders take on the same risks noted above when they agree to accept payment at a later date.
Chicago business lawyer and CPA Brian J. Thompson strongly encourages those considering an LLC member buyout to consider the default risk and credit risk. For these reasons, it is important to receive as much of the proceeds of the LLC buyout in cash at closing.