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Orange County Tax Law Blog

Amending a tax return: When is it necessary?

It’s a common scenario, especially this time of year: filing a tax return, but realizing later that the information is inaccurate or incomplete.

Every year, several million people choose to amend their returns to address this situation.

New twist to an old tax scam

Almost every year, the IRS has an update on the newest variant of the fraudulent refund tax scam. This year is no different.

The process starts with a hack to steal your personal information required to file a tax return. You generally have no way of knowing about the initial theft or fraudulent filing of a tax return. A red flag is someone contacting you with a claim that tax refund money was mistakenly deposited into your account.

State and local tax deduction caps coming

Since 1913, people have been able to deduct state and local taxes, known as SALT, on their federal income tax returns. In essence, this means that the federal government through this reduction in taxes owed indirectly subsidizes state and local tax revenues. This has been an accepted part of our federal tax code for decades, but in 2018, it will be significantly capped. 

The limitation will be in effect through tax year 2025.

IRS clarifies new tax law's effect on home-equity interest deductions

The high cost of housing in Southern California makes the deductibility (or not) of interest on a mortgage or a home equity loan an important issue.

The recently enacted federal tax overhaul significantly downsized the size of the mortgage interest deduction for newly-purchased homes. The size of the deduction has been cut from the first $1 million of mortgage interest (plus $100,000 in equity debt) to the first $750,000.

What questions will the IRS answer over the phone?

Confused by withholding changes or how the IRS is going to treat prepaid property taxes? You are not alone, Nina Olson the National Taxpayer Advocate has reported that these are common questions.

She predicts that the Service is not prepared to answer questions that relate to the Tax Cuts and Jobs Act. What can an IRS agent answer for you after you wait and listen to hold music?

FAQs on the IRS Taxpayer Bill of Rights

If you fail to follow the rules or pay sufficient taxes, you probably know that you risk an audit that might lead to an assessment of back taxes, penalties and interest. It is not a one-way street though; the IRS also has to follow rules.

In 2015, the Service formally adopted 10 basic taxpayer rights. We have written about this topic before. Tax season is a good time for a reminder post about the rights you have as a taxpayer.

Innocent spouse relief revisited

I regularly represent people in the Irvine, Mission Viejo and Laguna Niguel areas of California who are liable for federal taxes because their spouses mistakenly or intentionally entered inaccurate information on joint returns — or failed to report information that should have been entered — that left my clients surprised to be holding the bag for the tax bill through no fault of their own. The IRS allows tax relief to the “innocent spouse” in some of these circumstances. 

(Because California is a community property state, even if a joint return was not filed, there could be some relief available.) 

5 FAQs on passport restrictions for tax debt

After two years of procedural preparations by the IRS and the State Department, passport restrictions for people with certain types of tax debt are coming into effect.

Congress passed the authorizing law in 2015, directing the IRS to revoke or deny the passports of taxpayers with “seriously delinquent” taxes.

Avoid alimony deduction repeal by finalizing divorce in 2018

One of the provisions of the tax reform package that did not immediately go into effect was the repeal of the alimony deduction. The delay until 2019 allows couples who finalize their divorces this year to take advantage of current rules.

The status quo for more than 75 years has been that the ex-spouse who pays alimony takes a deduction. The ex-spouse who receives it pays tax on the amount received. The current rules take into account that is often more expensive to maintain two households.

A perfect storm for tax fraud may be brewing this spring

Tax season is upon us and although some residents find the process frustrating as it is, you may face some extra complications this year.

Specifically, there could be a greater amount of fraudulent tax returns filed this spring than in the past. Marketwatch reports that fraud levels might surpass any year prior, partly due to the national Equifax security breach.