Federal tax law is complicated. Oftentimes, tax disputes and conflicts can occur among individuals and organizations. Taxation disputes have proved to have costly impacts, like interest imposition and penalty assessments, back tax, and sometimes criminal charges. Here are some essential things you need to know about taxation disputes.
Foreign bank accounts
Persons holding investments in foreign financial institutions should provide specific information regarding their accounts to the IRS. Foreign financial institutions must also report accounts held by US citizens overseas in accordance with the Foreign Account Tax Compliance Act (FATCA). Those who choose to withhold this information may be subject to criminal charges and penalties for failing to disclose assets to the IRS.
Unfiled tax returns
Forgetting to file your tax returns before the due date can result in various consequences such as:
- Paying penalties and interests
- A substitute return filed by the IRS on your behalf
- Facing tax collection action
- Criminal charges
- Loss of refund and tax benefits by IRS
Bitcoin and Cryptocurrency
The IRS treats cryptocurrency as property, but there is some degree of confusion regarding the correct calculation of taxable loss or gain. When the value of a virtual currency increases and the owner sells it, that is considered a taxable gain. A similar logic is applied regarding a taxable loss if its value decreases. Lack of proper disclosure on cryptocurrency transactions can be viewed as tax evasion by the IRS.
Tax preparers like H&R Block and Liberty Tax
Many taxpayers utilize a specialized service to file their taxes each year. Companies like H&R Block and Liberty Tax employ tax specialists trained to file on behalf of a client. While most tax preparers file accurately and competently, errors can occur. These mistakes can happen unintentionally due to the high volume of returns filed, or the tax preparer may not be knowledgeable in unique tax situations. Intentional or not, the taxpayer is responsible for the accuracy of the filing, not the tax preparer, and mistakes can result in penalties or even jail time.
Employment tax disputes
It is the responsibility of employers to collect and pay taxes withheld from their employee’s salaries and wages. The employment taxes include withheld federal income tax, Medicare taxes, and the employees’ share of social security. Criminal investigations may result against individuals or companies who do not comply with employment tax responsibilities.