Taxes, Regulations, Appeals, Problems, Representatives

Ronald Anthony Sarno

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Litigation Lawyer

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Posted about 5 years ago. 3 helpful votes



Types of Taxes

Federal Income Tax is a taxation on wages, interest, dividends, business profits, capital gains, rents, royalties, commissions, unemployment benefits, prizes, in some cases social security benefits etc. Requires deduction from paycheck and/or quarterly payments for self employment income. Social Security-- to set up a fund for retirement or disability. Deducted from paychecks and/or paid quarterly by paying the income tax due. At the end of the year self-employed people fill out a Schedule C and SE with their tax return to determine if they owe additional SS taxes, which are paid with the return or by reducing the refund due to the taxpayer. Medicare is to pay for medical insurance for the elderly retired. Usually paid as a portion of social security taxes. State Income Tax-follows the same rules as federal income tax,with certain modifications. For example my home state of NJ does not tax social security or unemployment benefits.


Types of Taxes-- Continued

Disability is a state payroll deduction to fund payments in case of injury. In some states it is mandatory in others voluntary. Unemployment is a state payroll deduction to fund weekly payments when out of work. Property Taxes are usually due to the municipality or county. Pays for local services and schools. Local tax assessor calculates market value of property, and the owner is taxed a percentage of every $100 of value. Sometimes paid through the Mortgage holder. Sale/Use tax.Paid to the state when a taxable item is purchased; added on by the vendor. Business people can be exempt from sales tax if they are not the final user of the product. This requires a filing with the state for sales tax exemption. A use tax comes into play when an item such as a boat or car is bought out of state and not subject to sales tax, but used within a state and therefore subject to a use tax.Usually collected when the owner registers the item in the state for a license.



All taxpayers need to file an annual tax return (usually a 1040) to qualify for a refund and/or to pay additional taxes. There are penalties and interest due for not filing on time. The most common taxpayers who fail to file are those who are undocumented immigrants and/or those who make unreported income. Federal and state fines on not filing returns can be quite heavy. Businesses also have to file returns,and those who collect sales tax must file returns with the state. Also, those who withhold payroll taxes from their workers must report those withholdings and send the money to the federal and state government.There are severe penalties and fines for not doing this.



With the IRS, or federal return a taxpayer can receive 1) a letter challenging an aspect of the return, a demand for more tax money or a warning that their return is overdue . Many times this can be resolved with an amended return, and/or payment of the taxes. 2) an audit which can be simple,or full blown with auditors combing through documents. This audit review is best done together with a professional tax preparer. 3) or even a criminal charge. This is very serious and involves the government convinced there is concealed income, incomplete returns, and tax avoidance. This is best resolved with a criminal defense attorney working with a professional tax preparer. State exceptions follow the same procedures. There are similar exceptions to business returns including sales tax challenges.


Problems continued

A very critical problem is the failure to pay payroll taxes after withholding them from employees. In situations like this, the business veil against personal liability disappears and the owners and officers of the company become jointly and severally liable (which means each one is personally liable for the entire amount due and personal assets can be attached as well as company ones). See below on tax representatives for resolving such an issue. The federal and state governments can issue tax liens on taxpayers which act just like judgment orders leading to the attachment of assets and garnishment of wages,


Property Taxes

Unpaid property taxes can lead the government liens on the property making it difficult to sell and hampering the owners' ability to obtain credit. When an assessor evaluates a property, one suggestion before negotiating a lower adjustment is to review the property card at the assessor's office to make sure it is accurate as to both the rooms and the amenities in the home. It is never a good idea to bar assessor agents from visitng the property, because then they estimate the value -not always to the advantage of the owner. After the review, the taxpayer can negotiate with the assessor. If that fails, the next step is to file an appeal with the tax board. Most governments require a professional appraiser to do a comparison of recent sales in the neighborhood of like houses to determine the property's true value. Most governments require all taxes to be up to date before permitting an appeal. If the tax appeal fails on this level, the taxpayer is permitted to sue in tax court


Tax Representatives

The following are the best professionals to assist a taxpayer. A tax preparer to do the returns. If there is a dispute after the return is submitted, some times the tax preparer can resolve it. If there is an audit. a certified public accountant can assist the taxpayer. With more difficult matters, an enrolled agent or a tax attorney may be the best choice. Avoid any organization which promises a quick fix, or boasts they can reduce your tax burden to "pennies on the dollar." Keep in mind that accountants and attorneys are licensed by the state, have a professional code of ethics and normally carry liability insurance. Con artist do not and you can be sure that you will owe the same taxes after you hire them as before.


The new home purchase $8,000 credit

First time buyers are being told that there is $8,000 available to new home buyers. Some of the advertisements imply you will be handed an $8,000 check from the IRS as soon as you sign the contract. The money is a credit on taxes owed, and there are rules and applications which reduce the dollar amount. An $8,000 credit is meaningless to a taxpayer who normally gets most of their taxes back in a refund anyway. It can be useful for taxpayers who normally pay a large amount of taxes and will have a refund towards new home repairs and furnishings. All first time buyers are advised that the credit will probably not be given to divorcing couples who co owned a marital home prior to their divorce. Also, most tax accountants and tax lawyers are advising their clients that those who claim this credit will face a very thorough audit from the IRS.

Additional Resources

Tax Repair

Settlement Advice

Further Information

Tax Representatives

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