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National Tax Resolution Blog

When a startups shoddy accounting causes W-2 problems

It is the season to collect tax documents. Payroll tax problems that may have been too small to catch on a pay period basis may show up as you review your W-2.

You place a lot of trust in an employer to withhold and pay over taxes to federal and state agencies. For many startups, the focus might be on developing an idea – for example, synchronization and file backup services that rival competitors – instead of payroll practices. Transition is ownership or venture capital acquisitions can exacerbate problems. What happens if your tech startup has never invested in proper accounting protocols and screws up your W-2?

The impact of FATCA remains strong

According to Swiss international financial advisors, the Foreign Account Tax Compliance Act (FATCA) continues to impact dealings when it comes to international accounts and investments. This is true even though we hear talk of phasing FATCA out.

FATCA went into effect in 2010. It requires foreign banks and institutions to report information concerning U.S. citizens with more than $10,000 in accounts. By requiring such information, the IRS can learn the identities of individuals who have not reported offshore financial assets. The penalties for failing to report on such assets are severe. These penalties include bank levees, seized assets, wage garnishments, and even jail time.

What you need to know when it comes to taxes owed

While it is easy to get behind on taxes, it is a mistake for Michigan taxpayers to ignore notices received from the IRS. The criminal penalties you potentially face mean that you need to take immediate attention.

This does not mean you are defenseless, however. In 1998, there was a bill designed to restructure the IRS, and it provided taxpayers rights concerning a number of circumstances. This included having the IRS provide you of an explanation of your rights when the collection process takes place.

The new tax legislation and offshore assets

The tax bill is now law. While there will be debates about the merits of the new legislation, Michigan residents will have to abide by its language until another tax bill replaces it.

The specifics of the bill will be of particular importance to those wishing to protect their offshore assets. Those having more than $10,000 in offshore investments have long received attention from the IRS. When these assets remain undeclared, taxpayers may then face bank levees, wage garnishments, asset seizure and even jai time.

Tax provision the subject of Supreme Court case

We’ve long discussed on this blog the power the IRS has in imposing criminal penalties. For example, Tax Code Section 7212(a) imposes penalties upon individuals who obstruct, impede or even endeavor to obstruct or impede “the due administration” of the Internal Revenue Code.”

This particular clause is now the subject for a U.S. Supreme Court case. The concerns pertain to the broad use of the clause and the way federal prosecutors interpret it.

The rights you have as a taxpayer

It is intimidating for any Michigan taxpayer to have to deal with the IRS. However, not many people know that the IRS adopted a taxpayer bill of rights.

While it seems fair that taxpayers have certain rights, the tremendous power of the IRS to enforce tax laws can prove intimidating for taxpayers facing IRS scrutiny. The IRS can punish taxpayers through the use of audits, liens, and wage garnishments. In some instances taxpayers may even face criminal penalties and jail time.

What the new tax bill means to you

While the new tax bill just signed by President Trump promises to cut individual income tax rates, the bill does not mean filing taxes will be any easier for Michigan taxpayers. The tax bill is complex.

As it is currently set up, the bill will raise $4.5 trillion by cutting a number of deductions for individuals and through elimination of the personal exemption. Nevertheless, the bill would during the next 10 years also add $1.4 trillion to our federal debt.

FATCA and underreporting of income

The Foreign Account Tax Compliance Act (FATCA) governs reporting of foreign financial institutions concerning assets held by American citizens. Such institutions face substantial penalties for failing to report these assets.

U.S. tax officials deal with this underreporting through FATCA. In 2010, President Obama stated the primary purpose of FATCA was to "combat tax evasion."

Technology and identity theft

While the IRS has in place a number of tax return protection measures, these methods have not always been so successful in preventing identity fraud from taking place. Those inventing schemes to file false tax returns while using someone else’s identify often stay ahead of the preventive measures used by tax officials.

Though technology provides all of us certain advantages when it comes to tasks such as shopping or making travel arrangements, it also has its downside. It makes it easier for hackers and cybercriminals to steal personal data.

Levies and collection of tax debt

There are a number of ways the IRS can collect back taxes from Michigan residents. Methods to collect tax debt can include property seizure known as a levy. IRS agents can also take legal action to secure payment (known as a lien).

An understanding of these processes can prove beneficial for taxpayers. Though the Internal Revenue Code (IRC) allows for the IRS to collect delinquent debts through use of a levy, the agency can only use this tool in certain circumstances.

When you hire us, we can help: you:

  • Obtain emergency relief from IRS actions
  • Stop the IRS from garnishing your wages
  • Prevent levees from being placed on your bank accounts
  • Keep tax payments and penalties from spiraling out of control

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