Tax Law in Connecticut

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 Connecticut 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.

Under Connecticut legislation, anyone who earns income in Connecticut must pay state income tax. The rate is dependent on your income, and ranges from 3% to 6.99%. In addition, the rates are different if you file jointly with your spouse, or as a head of household. Furthermore, Connecticut does not have a standard deduction. However, some taxpayers are eligible for a personal exemption of $15,000. Alternatively, you could qualify for a personal tax credit ranging from 1-75% of your adjusted gross income.

Tax Law Topics to Understand

If you find yourself facing Connecticut 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 , Connecticut 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 Connecticut 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 Connecticut 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 Connecticut, you can face hefty fines, prison time, or both.

Income Tax Fraud

Income tax fraud is the willful attempt to evade or defraud the IRS and Connecticut 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

Connecticut statute breaks criminal tax fraud into three types of offenses. For fraudulent intent, the penalty is a fine of $1,000 plus the amount of the tax owed. However, for willful failure to pay or file or willfully submitting a fraudulent return, penalties are harsher. In fact, you could face a fine of up to $5,000 and 1-3 years in jail.

When Would You Need an Experienced Connecticut 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 Connecticut 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 Connecticut 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.

Connecticut has both a Corporation Income Tax and a Business Entity Tax (BET). Depending on the organization type, a business may owe one, both, or neither. Typically, the corporate income tax applies to C corporations. They must pay either 7.5% of their net income, .0031% of their capital holdings, or $250. Whichever is the greatest. On the other hand, businesses subject to the BET will pay a flat rate of $250 every two years.

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.

Under the state’s Estate Tax laws, Connecticut levies a tax on estates worth $7.1 million or more. So, you may be subject to this tax even if you do not meet the threshold for the federal tax. The rate is dependent on the size of your estate, and for 2021 it ranges from 10.8-12%. However, in 2023, the state will switch to a flat rate of 12%.

Work with an Experienced Tax Law Lawyer in Connecticut

Facing issues related to tax law can feel overwhelming. No one wants to go head-to-head with the IRS. Experienced Connecticut 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 Connecticut 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!

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