A recent Court of Federal Claims decision, Kwong v. United States, held in the refund-claim-timeliness context that IRC Sec. 7508A(d) postponed certain tax-related deadlines during the COVID-19 disaster period. The IRS has appealed, and the law remains unsettled.
Get Ahead With a Midyear Tax Review
Life changes can affect your tax picture more than you might expect. Taking time now to review key areas can reduce the risk of certain penalties and uncover tax savings opportunities.
Start by reviewing your withholding and estimated tax payments. If your income has changed, you may need to update your Form W-4 so that your withholding accurately reflects your current circumstances. If you’re self-employed or have significant income not subject to withholding (such as dividends or capital gains), you may need to make quarterly estimated tax payments to avoid underpayment penalties.
What Could Happen if You Don’t File a Required Tax Return?
Taxpayers who are required to file a federal tax return but don’t may be in for a costly surprise. If the IRS receives a document like a Form W-2 indicating taxable income, it may file a Substitute for Return (SFR) on your behalf.
The High Cost of Worker Misclassification: Tax Implications & Risks
The consequences of misclassifying an employee as an independent contractor can be costly. You could be liable for back taxes (including the employee’s shares of unpaid payroll and income taxes), penalties, and interest. There may be serious nontax consequences as well.
Small Business Alert: Watch Out for the 100% Penalty
Some tax sins are much worse than others. An example is failing to pay over federal income and employment taxes that have been withheld from employees’ paychecks. In this situation, the IRS can assess the trust fund recovery penalty, also called the 100% penalty, against any responsible person.
Could You Be Hit with the Trust Fund Recovery Penalty?
If you own or manage a business with employees, you could be personally responsible for paying a harsh tax penalty. It’s called the Trust Fund Recovery Penalty (TFRP). It applies to the mishandling of Social Security and income taxes that must be withheld from employees’ wages.