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New York City Tax Law Blog

Use caution when selecting a tax preparer last minute

If you are one of the many New York residents who are waiting until the last minute to file your 2013 income tax return, you may be starting to panic and desperate for help.

However, before you turn to just any tax preparer, make sure that you find someone you can trust and that you find out their fees upfront.

Tax records: Keep or shred?

Unless you are someone who likes to wait until the last minute, chances are that you have already filed your 2013 income tax return. And maybe, unless you are someone who is very neat and tidy, the papers you used to do so are still in a messy pile on your desk.

You may have stared at the pile of W2s, property tax statements, receipts and other papers, and contemplated putting them right into the shredder. But you probably decided that wouldn’t be a good idea in case you get audited, which was a good decision to make.

More deductions that could trigger an audit

We are in the middle of tax season in New York and the rest of the country, and it seems like everyone who is preparing their income taxes have a common fear in the back of their minds: getting audited.

Because the IRS does some random auditing there is no way to protect yourself 100 percent; however, knowing what the IRS looks for can reduce your chances of getting targeted.

Home-business expense and charitable deductions may trigger audit

Have you ever wondered how the IRS chooses whom to audit? We'd all love to know. After all, the IRS performs hundreds of thousands of audits every year -- about 1 percent of all tax returns in 2012 -- and that number seems to be rising.

The exact method used by the IRS to flag a tax return for an audit, however, is a closely-held secret. We do know that one way is through a computer-based scoring system called the Discriminant Information Function, or DIF. The DIF compares each tax return to the average return among similarly-situated taxpayers. Basically, the program appears to evaluate whether the exemptions, deductions and credits being claimed on a particular return fit within the expected norm.

The exact formulas used in the DIF are confidential, but researchers have been able to spot some trends. What factors could put you at risk for an IRS audit? Here are a few to keep your eye on:

  • High income: According to Crain's Wealth, the risk of an audit is higher than average for taxpayers earning more than $200,000 per year -- and higher still for those earning $1 million or more.

Is your tax preparer certified by the IRS? Quite possibly not

Financial stability is something that all of us seek. Having that stability disrupted by problems with our tax returns, and being subjected to a tax audit, can be a huge source of stress. However, many people don't necessarily put the same care into preparing and filing their taxes as they do with obtaining and securing their wealth in the first place.

When it comes to having one's taxes prepared by a professional, many New Yorkers might assume that some kind of certification or registration with the Internal Revenue Service is required. In fact, the IRS did issue regulations in 2011 that required people who act as paid tax-return preparers to become certified, complete several hours of continuing education training annually and pay an annual fee to the agency. According to the IRS, this would require action on as many as 700,000 tax preparers.

One of the Baldwin brothers closer to paying off state tax debt

As anyone in New York who has been faced with a large amount of back taxes can tell you, the state takes the situation very seriously. It follows, then, that a tax debt amount in the hundreds of thousands of dollars would garner the intense attention of state officials. And when the debtor is a celebrity, then the media coverage of the situation can grow to great heights.

This is what's going on with Stephen Baldwin, one of the acting Baldwin brothers. Last year, Stephen Baldwin pleaded guilty to failing to file income tax returns for the state of New York in three different years. At the time of the plea, Baldwin owed $400,000 to the state to make up for the delinquency.

Ex-clients of disgraced tax preparer put on alert

In many cases, when it comes to tax returns, if something appears too good to be true, it might very well be. Thousands of clients have learned that the hard way from a tax preparer in Chicago who claimed higher education tax credits that did not apply to them. Now, the tax preparer is facing a five-year prison term, and her clients could be on the hook for the tax problems that they now find themselves with.

The woman apparently didn't realize any financial gain from her activities. However, her clients reaped the gains of paying less in taxes, and the government was shorted considerable sums as a result: more than $3 million over a three-year period.

Sales Tax Responsible Party- Tax Attorney NY

The legal term responsible party for NYS sales tax purposes often arises when a sales tax obligation is not paid, and the State of New York is attempting to hold a person other than the company liable for the unpaid sales tax. The legal term itself, under NYS tax law, relates to defining an individual or group of individuals who have a level of control over the assets of the entity. Typically, this would either be an owner of the company or an officer/ managing member of the company (or LLC). Therefore, the logic is that since they made the financial decisions of the company, they should be liable when those debts are not paid.

Brooklyn man faces charges of evading city, state cigarette taxes

Taxes in New York have made national news in recent years because of some eye-catching laws. New York State taxes cigarettes, for example, at the highest rate in the country among states; New York City adds on additional tax on top of that. Thus, it can be tempting for some people to try to get around these tax issues by finding cheaper cigarettes from other jurisdictions.

However, this is not merely difficult, it is also illegal. Cigarette packs sold in New York must have a tax stamp from our state. Having unstamped cigarettes -- or those that bear the stamp of another state -- is a violation taken very seriously by the state taxation department.

Make sure you're prepared to comply with overseas banking laws

Some of our readers in New York may be familiar with what is known as FATCA, the Foreign Account Tax Compliance Act. The law was passed back in 2010 and is finally scheduled to take effect in 2014. Basically, the law is intended to provide transparency for Americans with foreign bank accounts. Contrary to what some people might think, the law is not intended to restrict people's ability to put their money wherever they wish; instead, it is intended to require disclosure of where that money is being kept.

This is because income that is earned all over the world is subject to U.S. taxes. Many people may have put their money into foreign accounts because they were more difficult for American authorities to find; banks that developed a reputation for secrecy and discretion became popular havens.

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