Tax Law in Birmingham, AL

Tax law refers to the regulations governing the calculating, filing, and paying of taxes. When handling tax law cases, attorneys may manage taxes at various levels, such as local, state, and federal. The practice of this type of law involves understanding, defending, and resolving issues related to payment or non-payment.

If you hire a qualified , Alabama professional to handle your business or personal taxes, you may feel protected from disputes. However, even a misplaced comma or added zero can cause the IRS to believe you owe more than you do. In some instances, accountants might also take deliberate actions that result in legal and financial repercussions.

Most Birmingham residents pay a state income tax on their earnings within Alabama. The rate is typically 5% for most taxpayers. However, the rates are as low as 2% for income under $3,000. In addition, people who work in Birmingham are subject to the city’s additional 1% occupational tax. Alabama taxpayers can elect to take a standard deduction of $2,500 to $7,500, depending on filing status. Alternatively, the state allows for numerous itemized deductions. In addition to income tax, most Birmingham residents must pay property taxes. These include a combination of state, Jefferson County, and the City of Birmingham taxes.

Tax Law Topics to Understand

If you find yourself facing , Alabama taxation issues, understanding tax law and how it works can help. Most Americans have only basic knowledge of how the tax systems work, and with good reason. They are complex. Small business owners need to understand tax law and how it impacts their business. Here are some essential tax law topics to get you started.

IRS Audits

An IRS audit is a review of an experienced Birmingham, Alabama individual’s or an organization’s finances and accounts to ensure accuracy. The audit may also uncover discrepancies business owners were not aware existed.

These are just a few of the things the IRS looks for when conducting an audit:

• Does your lifestyle match your income?
• Are you passing off personal expenses as business expenses?
• Are you overstating any of your business expenses?
• Did you fail to report any business income or did you inflate that income?
• Do your payroll taxes match that of your employees?
• If your business handles a lot of cash,  are you diverting any of this into your own pocket?

If you are about to have your business audited, consider hiring a qualified Birmingham tax law attorney. They can help you to navigate the complex process ahead and offer advice as issues arise.

Tax Evasion

Tax evasion refers to any activity an individual or business in , Alabama engages in to reduce or avoid their tax liabilities. There are two types of tax evasion: evasion of assessment and evasion of payment.

Evasion of assessment means the taxpayer performed an action with the goal of defeating the assessment of a tax. The under-reporting of taxes is a common example of this. Evasion of payment means that you avoid paying the IRS by hiding money or assets that should become taxed. Here are some examples of tax evasion:

• Keeping a double set of books
• Overstating deductions
• Destroying financial records
• Concealing sources of income
• Filing a false return
• Making false invoices
• Holding property in another person’s name to avoid taxation

If you are found guilty of tax evasion in Birmingham, Alabama you can face hefty fines, prison time, or both.

Income Tax and Fraud

Income tax fraud is the willful attempt to evade or defraud the IRS and Birmingham tax laws. Tax fraud occurs when an individual or business does any of the following:

• Prepares and files a false tax return
• Willfully fails to pay taxes
• Intentionally fails to file an income tax return
• Intentionally fails to report income received
• Makes fraudulent or false claims on the tax return

Alabama’s tax evasion laws are patterned after similar federal laws. The crime is a felony, punishable by fines of $100,000 for individuals and $500,000 for corporations. In addition, the sentence may include incarceration for up to 5 years.

When Would You Need an Experienced Birmingham, Alabama Tax Law Attorney?

Facing Legal Issues Regarding Taxes

If you’re under investigation from the IRS or planning a lawsuit against, you will need a qualified , Alabama attorney who practices tax law. To illustrate, counsel can help collect the information you need and create a viable defense.

When Starting a Business

There’s more to starting a business in , Alabama than selling products or services. You also need to determine the business type and structure. This status, in turn, determines how the business and your earnings get taxed. Choosing the wrong business structure can cost you.

Like many states, Alabama taxes businesses in two ways. Most businesses in Birmingham are subject to Alabama’s Business Privilege Tax. The exceptions are sole proprietorships and standard partnerships. In addition, C corporations must also pay a Corporate Income Tax. This tax consists of 6.5% of the corporation’s taxable net income. The City of Birmingham does not charge a municipal business tax. However, most Birmingham businesses require a Birmingham business license, which is subject to renewal on an annual basis.

If You Have a Taxable Estate

If your estate is worth more than $11.58 million, or $23.16 million if you’re married, your estate might get taxed up to 40% for surpassing that threshold. No one wants a huge portion of their estate going to the IRS instead of their heirs. This is why wealthy people involve tax lawyers in their estate planning process.

According to the Alabama Department of Revenue, Alabama does not levy an estate tax for deaths after 2004. As in many states, the Alabama estate tax was dependent on the now-defunct federal estate tax credit. However, Birmingham estates are still subject to the federal tax if they meet the minimum value threshold.

Work With an Experienced Tax Law Lawyer In Birmingham, Alabama

Facing issues related to tax law can feel overwhelming. No one wants to go head-to-head with the IRS. Experienced , Alabama tax law lawyers have the expertise you need. From conducting audits to defending you in court.  We can even help you connect with an attorney across Alabama state lines.

Submit a request online or call us today at (866) 345-6784 to get in touch with an experienced lawyer in your area!