In general, the workforce is divided into categories, including salaried employees and independent contractors. Both groups of workers have similar deductions available to them, with a few key differences. Employees who work at home or are self-employed encompass a growing part of the workforce and are eligible for certain deductions that are unavailable to employees who work in an office.

In order to claim deductions—both for salaried employees and independent contractors—you must make sure you meet the criteria put forth by the IRS. If you are ineligible for a deduction but claim it anyway, you could potentially face penalties and additional taxes. If you are struggling to navigate the complexities of your taxes, it could be in your best interest to work with a tax resolution lawyer. A skilled tax attorney can help ensure you file your taxes correctly. Here are five considerations to remember when filing taxes as a remote employee.

Claim Your Home as a Deduction

It’s becoming increasingly common for employees to work from home, especially if employed by a company located outside their state. This usually works out as a win for both the employer and the employee, as the employer doesn’t have to pay to lease an office space and the employee has more flexibility in their workday. For tax purposes, this means that if your home office is used exclusively for business purposes, you may be able to deduct some of your home expenses, such as mortgage interest, property taxes, and utilities.

Keep Track of Travel Expenses

If you are using your personal vehicle for any business travel, track your mileage to later claim as a deduction. Additionally, if you are paying for any business travel and lodging out of pocket, you can also claim that as a tax deduction. However, if your employer reimburses you for any business expenses you originally paid for, those will not qualify for a deduction.

Save All Your Receipts

In order to claim any employee expenses as deductions, you’ll need to keep accurate records throughout the year of all your costs. The IRS recommends keeping a written logbook of how the expenses you claim are business-related in the case that any questions arise about your deductions. The best way to have the most accurate records is to keep all of your receipts from any business expenses.

Be Aware of the Limitations on Deductions

Deductible employee expenses are reported on Form 2106, which is usually attached to Form 1040. These deductible expenses are entered on your Schedule A, which lists your itemized deductions. This means that if you do not itemize your deductions, you won’t be able to subtract any unreimbursed employee expenses. Another thing to be aware of is that employee expenses fall under the umbrella of miscellaneous deductions, so they are subject to a 2% floor. This means that you can only deduct amounts that are greater than 2% of your adjusted gross income.

Use the Correct Forms for Self-Employed Workers and Independent Contractors

Although independent contractors and self-employed workers are not considered employees, they are still eligible for most of the same deductions. Self-employment income expenses are usually outlined on Schedule C. The total amount of qualifying expenses is then used to offset the income of the independent contractor or self-employed worker. Unlike Schedule A, Schedule C does not have a floor on expenses.

Consult a Skilled Tax Resolution Attorney

No one likes filing their taxes. However, understanding which expenses are eligible for deductions can help reduce your tax bill. If you are struggling to claim deductions on your taxes, you should contact a skilled tax resolution attorney. A tax lawyer can ensure you claim the maximum deductions you are eligible for without violating any of the IRS criteria.

At Morgan Sebastian Law, Attorney Becky Sebastian is eager to help you navigate the complexities of your tax situation. We understand the challenges of paying taxes while experiencing financial hardship, and we are here to help you handle negotiations with the IRS. To schedule a consultation with an experienced tax resolution lawyer, call (877) 223-6605 or fill out our online contact form.

Many people underestimate the importance of filing taxes before Tax Day or later with a valid extension from the IRS. In fact, most taxpayers are unaware of the risks and penalties that are associated with a failure to uphold the tax return deadline, such as being charged with fines or, in extreme cases, criminal charges.

If you are struggling to file your taxes before the deadline, work with an experienced tax attorney to ensure you don’t incur any expensive fines or serious penalties. Here are some of the issues that those who fail to file their taxes can expect to encounter.

You May Not Be Able to Collect a Tax Refund

Of all the consequences associated with failing to file on time, losing your eligibility for a refund is one of the worst. Federal and state tax refunds have a statute of limitations, meaning you have a set amount of time—which is usually three to four years—to receive a refund after you file your taxes. If a taxpayer fails to file their taxes within this time frame, the IRS will prevent the taxpayer from participating in and benefiting from certain advantageous tax programs, including:

● Receiving a tax refund

● Applying for tax credits

● Overpaying on taxes

There are certain unique scenarios that allow a taxpayer to delay the statute of limitations for their tax returns. However, you should never assume that you have the option to delay your filing deadline.

You May Lose Social Security Benefits

Another issue people will face who don’t file their taxes is the potential to lose their Social Security benefits. Specifically, taxpayers who are self-employed who fail to file their tax returns are unlikely to receive credits for Social Security retirement or disability benefits, as their income was not reported to the Social Security Administration.

You May Struggle to Receive a Loan

If you plan on taking out a loan but haven’t paid your taxes, it could complicate the approval process. To receive a loan, you usually have to provide copies of your recent tax returns to the financial institutions and lenders from whom you wish to obtain the loan. If you haven’t filed your taxes, you won’t have the necessary documents needed for loan approval.

Penalties for Non-Filers

In addition to the general issues outlined above, a failure to file your taxes could result in penalties. In fact, the IRS has various avenues—such as filing a substitute return or issuing a tax lien—they can take to penalize individuals who fail to file their taxes.

When an individual fails to file their taxes, the IRS may file a substitute return on their behalf, which usually does not take into account the typical advantages taxpayers have at their disposal, such as deductions, exemptions, and other tax breaks. As a result, these substitute returns tend to hurt rather than help a taxpayer. If you receive a notice from the IRS of their intent to pursue a substitute return, seek legal representation to ensure you are best protected.

Another path the IRS may take to penalize a taxpayer is to place a tax lien on their property. This lien essentially acts as a claim against the person’s property for the unpaid amount of tax that is owed. Any property with a federal tax lien attached to it cannot be sold until the taxes are paid and the lien is removed. This tax lien could be placed on all kinds of property, including personal property, real estate, and any other assets owned by the taxpayer. Tax liens are serious business. Therefore, if you are notified of a potential lien, you should seek legal counsel in a timely manner.

Consult a Skilled Tax Resolution Attorney

If you have been informed of a field audit being conducted against you or of a tax lien or levy placed on your property by the IRS, it’s in your best interest to seek legal representation. At Morgan Sebastian Law, Attorney Becky Sebastian is eager to help you navigate the complexities of your tax situation. We understand that accurately filing your taxes can be a challenge, and we’re here to help guide you through the audit process.

To schedule a consultation with an experienced tax resolution lawyer, call (877) 223-6605 or fill out our online contact form.

Cryptocurrency has created unique challenges for the Department of Justice (DOJ) and other regulatory bodies that seek to monitor its use. The primary concern is that if they go unregulated, cryptocurrencies could potentially impact public safety and national security. In response, the DOJ recently published an extensive outline on how they plan to regulate tax payments and the other issues cryptocurrencies present.

If you own or are investing in cryptocurrency, it’s important to continually educate yourself on the rapidly evolving landscape of the crypto market. Failure to understand updated regulations could result in incorrect tax reporting and an ensuing IRS audit. The best way to stay current with crypto regulations is to consult a skilled tax attorney.

What Is Outlined in the Recent DOJ Publication?

In October 2020, the DOJ published “Cryptocurrency: An Enforcement Framework,” which outlines how they plan to enforce cryptocurrency issues—specifically tax-related discrepancies. In the publication, the DOJ noted that cryptocurrency does have the potential for some economic benefits, such as reducing the cost of financial transactions. However, they also stated that since cryptocurrencies are challenging to monitor, there is the potential for them to be harnessed for illegal activities. The publication is divided into three sections, including:

● The illegal use of cryptocurrencies

● The laws and regulations that will pertain to cryptocurrencies

● The current and future challenges that cryptocurrencies present in managing criminal activities and strategies for addressing these problems

The Illegal Use of Cryptocurrencies

The allure of cryptocurrencies is that they allow their holders to make direct transactions with other people or vendors—cutting out third-party financial institutions that typically serve as the middle man. Unlike dollars, which are regulated and centralized by the Federal Reserve, cryptocurrency has a high level of anonymity, making it difficult to track and regulate. For many, this characteristic of cryptocurrency is simply another benefit, and for others, it serves as a way to mask criminal activity.

The DOJ publication featured three overarching categories of illegal uses of cryptocurrencies that they will prioritize regulating. These include:

The commissioning of crimes. Such crimes include selling narcotics and other drugs, buying unregistered weapons, selling and purchaing of child pornography, and so on.

Money laundering and incorrect tax reporting. This would target individuals who take advantage of the anonymity of cryptocurrency to underreport tax liability.

Crimes that directly affect the cryptocurrency marketplace. This would target individuals who hack online platforms where cryptocurrency is traded and those who engage in illegal investing behaviors.

How Will the DOJ Enforce Cryptocurrency Tax Reporting?

As a governing federal agency, the DOJ has access to a variety of laws that they can utilize to enforce cryptocurrency tax reporting. This means that any taxpayers who own and trade cryptocurrency could face fines and prison time for incorrectly reporting their earrings.

One law the DOJ is likely to use to enforce tax payments on cryptocurrencies is the Bank Secrecy Act (BSA), which requires financial institutions—including online trading platforms for cryptocurrency—to cooperate with federal agencies to prevent money laundering and illegal activity. Additionally, the DOJ could use federal regulations on the following illegal activities to enforce fines and criminal penalties on individuals who avoid tax payments on cryptocurrencies:

● Wire and securities fraud

● Identify theft and fraud

● Operating an unlicensed money transfer business

● Child exploitation behaviors

These are a few examples of activities with strict federal regulations. However, there are a variety of other federal tools the DOJ could use to enforce tax payments on cryptocurrencies. If you believe that you might be facing penalties associated with incorrect tax reporting on cryptocurrency, seek representation from a skilled tax resolution lawyer.

Consult a Skilled Tax Resolution Attorney

If you are concerned that you may be subject to any penalties associated with incorrect tax reporting it is in your best interest to seek legal representation. At Morgan Sebastian Law, Attorney Becky Sebastian is eager to help you navigate the complexities of your tax situation. We understand that accurately filing your taxes can be a challenge, and we’re here to help guide you through the audit process.

To schedule a consultation with an experienced tax resolution lawyer, call (877) 223-6605 or fill out our online contact form.