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Los Angeles Tax Law Blog

Millennials and taxes: Avoid these three big mistakes

Taxes are complex. There is rarely a simple answer to a tax matter. However, one question often does have a simple answer: do I need to file taxes? Millennials are often struggle with this question. The wrong answer to this, and two other common errors, can cause serious problems.

One big problem to watch out for: becoming the subject of an audit by the Internal Revenue Service (IRS).

Answer this before using online, do-it-yourself tax software

Frugality is often beneficial, but there are certain situations when a good deal ends up costing a lot more than expected in the long run. This can be the case when using a low cost, do-it-yourself tax software program. These programs are not always bad, some tax filers find these systems helpful and may benefit. However, others could set themselves up for additional problems in the future.

So how do you know which category you fit into? Should you use the tax software or find another method of tax preparation services? Ask yourself these three questions to help find the answer:

Will the new tax law lead to more tax scams?

Tax filers beware: scammers are working hard this tax season. Their attempts generally increase this time of year, as tax payers are putting together their filings. However, it is likely that fraudsters will find even more success this year as confusion over the new tax law abounds throughout the country.

Tax payers can take steps to protect themselves from becoming a victim. One of the most important steps is to gather some basic knowledge about how the Internal Revenue Service (IRS) works. One tip that will help reduce your risk of becoming a victim: it is extremely unlikely that the IRS will call you. The agency is also unlikely to reach out through an email or via social media. Any attempts using these methods are likely a scam.

Payroll vs. employment tax: Is there a difference?

You may have heard the terms "payroll tax" and "employment tax" used interchangeably. Many people--even some tax professionals!--think that these terms are synonyms. Granted, the terms do have their similarities. After all, they both refer to the taxes owed by an employer.

But the Internal Revenue Service actually considers each term different, and they both have distinct definitions. If you are an employer who will have to pay these taxes, it is important to know the similarities and differences between the two. 

Three end-of-year tax savings tips you can implement now

While the 2017 election season pales in comparison to last year’s cycle, it is no less important for those who are in office on Capitol Hill and in state legislatures around the country. Senate Republicans may be feeling the pressure of producing at least one major piece of legislation before the year is out, and after the failure of health care reform, tax reform is a worthy goal.

According to several media sources, Senate Republicans will introduce their tax plan this week. It is rumored to be an ambitious agenda aimed at lowering corporate income taxes and easing the financial pain on middle class families.

Tax considerations for military members

Life in the military is not the same as the life of a civilian. Those in the military are often required to move for training and other obligations. The basics of their compensation can be different than those who work within the private sector. Due to these and other considerations, the tax filings of a military serviceman are often more complex than their civilian peers.

Military versus civilian: The difference in pay

Taxpayers beware: IRS and settled credit card debt

The Internal Revenue Service (IRS) rarely makes life easy. This is particularly true for those who are able to negotiate with a credit card company about an outstanding debt. In some cases, a successful negotiation can result in a dismissal of the debt. Although the consumer may no longer need to pay off the bill with the credit card company or other lender, his or her financial woes are far from over.

This is when the financial woes shift to matters involving the IRS. In the eyes of this federal agency, the deal noted above results in a gain for the consumer. The IRS views this as a financial benefit to the consumer and expects the consumer to list the benefit as income on his or her tax returns.

Will the temporary government shutdown impact tax returns?

The Internal Revenue Service (IRS) is in the midst of a very stressful January. In addition to the passage of a new tax law, the federal agency has also had to deal with a government shutdown.

What happens during the shutdown? CNN recently published a piece answering this question. Essentially, a shutdown does not mean every government funded program stops. If this were so, schools, police stations, various health and social programs would all cease to operate. This would include the IRS.

Behind in taxes? Your passport could be in jeopardy.

The Internal Revenue Services (IRS) recently issued a statement encouraging taxpayers to pay their overdue tax bills. A failure to do so, the agency reminds taxpayers, could result in a forfeiture of one’s passport.

Who could lose their passport? The agency states that anyone that is “seriously delinquent” in tax obligations is at risk of losing their passport. This is defined to include those who owe over $51,000 in taxes as well as penalties and interest.

Should you be paying estimated quarterly taxes for your side gig?

If you’re working in the gig economy, you may not be setting aside enough to pay your taxes. This is especially true if you’re used to working as an employee, receiving a W-2 and paying your taxes once a year. As a Lyft driver, a food delivery person or an AirBnB host, you’re probably classified as an independent contractor. That means receiving a 1099 and paying estimated taxes on a quarterly basis.

Even if you’re an employee who receives a W-2, you may still end up owing a substantial amount at the end of the year. That’s because it’s common to under-withhold on second jobs. It’s important to take all your earned income into account when filling out your W-4 for each job.

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