Besides its pleasant climate and diverse culture, Florida’s tax advantages and incentives for residents are among the most compelling reasons people choose to live in the state. 

Are you also considering relocating to Florida? If so, read on to know about Florida taxes and their implications, so that you know what to expect before you pack your bags and move.

Why Are So Many People Moving to Florida?

People move to Florida for several appealing reasons. First is the climate, averaging a high of 83.3°F and a low of 62°F, making it relatively comfortable year-round and popular among retirees. 

Second is the no-income tax policy. Florida is one of the seven states in the country that doesn’t apply income tax. 

And thirdly, the business-friendly environment created by favorable tax policies, including no income tax and a flat corporate tax rate of 5.5%, as well as pro-business regulations that encourage development. 

According to the Census Bureau, Florida ranks second, just behind Texas, with 467,347 people moving into the state from 2023 to 2024. 

Florida State Taxes 101

No Personal Income Tax

Under Article VII, Section 5 of the Florida Constitution, the state doesn’t impose a personal income tax. This includes income from wages, salaries, and commissions, as well as retirement income, such as Social Security, 401(k) distributions, pensions, and investment income, including dividends, interest, and capital gains. 

As for businesses in Florida, the state doesn’t have personal tax on pass-through entities (LLCs, S-Corps, Partnerships). However, corporations (C-Corporations) are subject to a 5.5% rate. 

Sales and Use Tax

The current Florida sales and use tax rate is 6%. Taxable items include tangible personal property, such as furniture, vehicles, and electronics; admission tickets; commercial leases; and hotel/transient rentals (if the stay is less than six months, Florida adds a 6% plus local lodging tax). 

Use Tax applies to out-of-state purchases (such as online purchases) from sellers who do not charge Florida sales tax. In this case, a self-report is required through Form DR-15. 

Property Taxes in Florida

Florida doesn’t apply a state-wide property tax. The taxes are levied at the local level (i.e., counties, cities, and districts); therefore, the rate varies. However, the effective average property tax rate in Florida is around 0.80%, which is lower than the national average. 

Other Taxes to Be Aware Of 

The state doesn’t levy income, inheritance, or estate taxes, making it an appealing place to live for many, including retirees and high earners. 

However, Florida does tax its residents on gas (39.9 cents/gallon), the Communication Services Tax (CST) on the sale of communication services at 7.44%, and an insurance premium tax (1.75%) on most types of insurance, including life, health, and property.

Establishing Residency in Florida for Tax Purposes

When you officially move to Florida and establish your residency, the new tax rule will apply.  Until then, your old state might still tax you until you prove your residency. 

Establishing your residency in Florida helps you cut ties with your prior state, enabling you to begin planning for Florida tax rules. 

To start becoming a taxpayer of Florida, you need to prove that you are a resident of Florida by obtaining some of the requirements that revolve around your intent to make Florida your home and objective evidence, which include establishing a domicile in Florida. 

Steps to establish domicile in Florida:

To establish and maintain a domicile in Florida, one must fulfill several requirements, including but not limited to: 

• Getting a Florida driver’s license and register to vote in Florida
• Filing a declaration of Domicile at a local Clerk of the Circuit Court’s office or online
• Updating legal documents, including residential lease agreements, and use the Florida address on all legal paperwork, including tax returns.  

Common Florida Tax Implications After Relocating

Selling a Home in Another State

Florida doesn’t have a capital gains tax. However, your previous state might still tax the gain if you’re still a resident of that state at the time of sale. States like CA (up to 13.3%) or NY (up to 10.9%) tax gains sourced in-state, or if you’re deemed a resident. 

Timing the move and selling your home before establishing Florida residency may help you potentially qualify for the full federal exclusion. Selling immediately after you move could trigger a residency audit, especially if you retain ties, such as family or business, in your old state.

State Exit Taxes and Ongoing Liabilities

Your prior state, particularly those with high taxes, such as California and New York, may still try to tax you on everything from large sales to retirement distributions. 

Besides establishing Florida residency and domicile, you want to cut all ties with your previous state to get you out of the “statutory residency.” 

An individual can be deemed a resident if they maintain a “permanent place of abode,” such as a home, have bank accounts, and spend more than 183 days in the state annually. 

To minimize audit risks, track days meticulously, sell or rent out the old home (don’t keep it accessible), file a Florida Declaration of Domicile, and update your life in Florida (by taking steps to become a resident, as we have discussed earlier).

Florida Tax Benefits for Retirees and High Earners

Florida is especially appealing to retirees and high-income earners due to its tax-friendly environment. 

For example, the absence of state tax on all forms of retirement income means retirees can retain all their retirement funds, potentially saving significant amounts each year compared to states with income taxes. 

The absence of estate tax and inheritance tax also means high-net-worth individuals can protect their wealth transfers and pay nothing to the state on inherited assets,

When to Consult a Florida Tax Attorney

Florida is naturally an attractive place to relocate for many, including retirees, high-net-worth individuals, and entrepreneurs, thanks to its tax incentives and other perks that support wealth preservation and growth.

 However, relocating to a new place, such as Florida, entails new tax responsibilities that require meeting complex requirements to get the full benefits and avoid issues.  

Consult a Florida tax attorney to help you understand Florida tax implications and make the moving process as smooth as possible. 

If you haven’t begun your 2026 tax planning yet, it’s a great idea to start now. 

Tax planning allows you to save money and avoid unpleasant surprises when the filing season arrives. By being fully prepared and understanding your tax responsibilities, you can have all the tools to minimize losses and maximize the tax benefits that you’re eligible for. 

Below are our 2026 tax planning tips that can help you understand more about how crucial tax planning is to setting you up for financial success.

Why 2026 Tax Planning Starts Now

Dealing with taxes is not something you want to leave until the last minute.

Engaging in tax preparation early for the upcoming 2026 will help you avoid tax problems, as well as identify opportunities to save and grow your finances. 

1. Adjust Your Withholding and Estimated Payments

The first 2026 tax planning tip is to adjust withholding and estimated payments to prevent penalties and ensure you pay as you should. 

Start by reviewing your 2025 income projections and make adjustments according to life changes. For example, if you expect a raise at your job or have a child in 2026, these instances will have an impact on your tax liability. 

Use the IRS Tax Withholding Estimator to calculate the right withholding based on your income, deductions, and credits. 

Next, maximize cash flow and balance withholding so you’re not giving the IRS an interest-free loan that ties up your funds when they could be used for savings, investments, or expenses. 

Check your 2025 refund or balance due. If you received a large refund, you’re likely over-withholding. Adjust your W-4 to reduce withholdings and keep more money in your paycheck throughout 2026.

2. Maximize Retirement Contributions

2026 Contribution Limits

Part of your 2026 tax planning should include contributing to retirement accounts such as 401(k)s, Roth IRAs, and traditional IRAs. Contributions to these retirement accounts can reduce your taxable income and grow your fund tax-deferred or tax-free. 

For 401(k) plans, the total employee contribution limit for those under 50 will increase from $23,500 in 2025 to $24,500 in 2026, and the catch-up contribution limit will increase from $7,500 in 2025 to $8,000 in 2026. 

As for traditional and Roth IRAs, contribution limits will increase from $7,000 in 2025 to $7,500 in 2026. The catch-up contribution limit will rise from $1,000 in 2025 to $1,100 in 2026.

Tax-Deferred Growth and Deductions

The funds you contribute to a Traditional 401(k), 403(b), or deductible Traditional IRA are subtracted from your taxable income for the year. This means you pay less in taxes now, and the money grows tax-deferred until withdrawal in retirement. 

Now, how do you decide which accounts to contribute to: Roth or traditional contributions? While both accounts can help you save, they work differently on taxes. For example, contributions to traditional 401(k) s and IRAs are typically made with pre-tax dollars, while Roth IRAs provide tax-free growth and tax-free withdrawals. 

3. Plan for Capital Gains and Investment Income

Investments can create a big tax bill if you’re not careful, but with tax planning, you can control how much you owe, or even wipe out the tax entirely.

First, you want to harvest gains and/or tax-loss harvest before the year ends. Harvesting tax loss occurs when selling an investment at a loss to offset taxable gains. 

In other words, if you have investments that have lost value, you can sell them to cancel out those gains. IRS tax amount =  Gains – losses. So, for example, if you sold a stock and made $15,000 in gains, and sold another that’s down $13,000, you owe a tax of $2,000. 

4. Take Advantage of Tax Credits and Deductions

Common 2026 Tax Credits

Tax credits are one of the most effective tools for reducing your 2026 tax liability. Unlike deductions, which simply lower the amount of income subject to tax, credits reduce your tax bill dollar for dollar. 

Several tax credits, including the Child Tax Credit (CTC), the Earned Income Tax Credit (EITC), and education credits, are refundable, meaning that if they exceed what you owe, the IRS will send you a refund for the difference.

Child Tax Credit: Helps families with children under 17 to get a tax break. To qualify, the child must have a social security number, have resided with you for more than half of the tax year, be claimed as a dependant on your return, and meet several other criteria. 

Earned Income Tax Credit: Allows low to moderate-income earners to get a refundable credit for their earned income from jobs and self-employment. In 2026, the maximum Earned Income Tax Credit (EITC) is $8,231 for qualifying taxpayers with three or more qualifying children. 

Education Credit: Covers the costs of college. The two types of education credits are: the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC). 

Lastly, don’t overlook itemized deductions such as medical expenses, charitable contributions, and mortgage interest. Track and evaluate all records, and if the total qualifying expenses exceed the standard amount, itemize to save more. 

Conversely, if your itemized expenses are low (e.g., no big medical bills or donations), take the standard deduction; it’s simpler and often bigger. 

5. Meet with a Tax Attorney Early

If you have any doubt or confusion about how to go about 2026 tax planning, meet with a tax attorney with the right expertise who can help you not just plan, but deal with complex matters like audits, business structures, estate planning, and other IRS issues, to ensure you’re tax obligations are done right. 

Remember that working on taxes requires due diligence, accuracy, and effective communication to produce the result you want, which is conducive to your financial success. 

In contrast, any errors or discrepancies on your tax report will result in tax issues and dealing with the IRS. 

Final Thoughts on 2026 Tax Planning

Being successful in dealing with taxes requires planning and strategic execution. With early tax planning, you give yourself more time to look at your finances and tax obligations.

If you require assistance with tax planning or other tax-related matters, please do not hesitate to contact Greenberg Law Group. 

2026 Tax Planning Questions

What is the most important part of 2026 tax planning?

The goal of tax planning is to get everything in order ahead of time for what’s to come. Starting your tax planning early allows you to prepare and avoid surprises, which can cause stress and more complex problems.

When should I start planning my 2026 taxes?

You should start planning your 2026 taxes as soon as possible, certainly before the end of 2025. The earlier you begin, the more time you will have to complete all of your taxes and be ready to face the new year with ease and confidence.

With the end of the year fast approaching, now is the time to take action and resolve all your tax matters. Below, we have listed our year-end tax tips for 2025 to help you take advantage of all available opportunities while being compliant and avoiding tax problems. 

Review Your Income, Deductions, and Withholdings

Double Check Your W-2s, 1099s, and Income Sources

To avoid issues with the IRS, ensure you have all the necessary forms and information readily available. Forms like W-2s and 1099s are used to report your income sources, such as wages, freelance earnings, dividends, or other taxable income. 

Double-checking for details is one of our crucial tax tips for 2025. Besides confirming accurate personal information, such as name and Social Security number, check for other discrepancies. If any are discovered, contact your employer and resolve the issue as soon as possible.

Adjust Withholdings If Needed

Improper tax withholding can result in overpaying or underpaying taxes, potentially triggering tax audits or other tax issues. Review your withholdings, especially after major life changes such as marriage, the birth of a child, or a job change, as these can significantly impact your tax status and liability. 

Moreover, if you owe a large tax bill or received a substantial refund last year, adjusting your withholdings can help better align your payments with your tax obligation. 

Make use of the IRS Tax Withholding Estimator or consult a tax professional to fine-tune your W-4 forms for optimal results.

Maximize Retirement Contributions Before the Deadline

401(k) & Traditional IRA Contributions

Maximizing retirement contributions, such as those to 401(k) and IRA accounts, is a year-end tax tip that can help reduce your overall taxable income and boost your savings. 

Moreover, these retirement accounts have tax-deductible benefits. It’s essential to note, however, that there are certain eligibility restrictions and limitations, so please ensure you understand them. For example, individuals under the age of 50 can contribute $23,500 to both traditional and Roth 401(k) plans in 2025. 

Consider Roth Conversions Strategically

Unlike a traditional IRA, a Roth IRA allows you to withdraw tax-free in retirement. However, note that converting from a traditional to a Roth IRA, which involves transferring funds from a traditional account to a Roth, will result in taxable income in the year of conversion.

Lastly, take into account your overall tax brackets and consider future income predictions. This can help you determine the impact of your conversion. 

Don’t Miss Out on Tax-Advantaged Savings Accounts

Health Savings Accounts (HSA)

Having an HSA, or Health Savings Account, helps cover medical expenses while also growing your investments and taking advantage of tax breaks—an ideal combination for a retirement plan. 

HSA contributions are tax-deductible, grow tax-free, and withdrawals for qualified medical purposes are also tax-exempt. Like most savings accounts, there are specific requirements that must be met. 

For example, applicants must be registered in a high-deductible health plan that meets the IRS’s deductible and out-of-pocket maximum requirements, and the status cannot be claimed as a dependent on someone else’s tax return, such as your parents. 

Flexible Spending Accounts (FSA)

FSAs are tax-advantaged retirement accounts, usually offered by employers, that allow you to set aside some funds from your paycheck to spend on eligible expenses. These FSA contributions are tax-free. 

Eligible expenses include healthcare costs, such as medical bills, as well as dependent care FSA expenses, such as childcare, preschool, or eldercare. Putting money into an FSA ensures that you have cash available in the event of an emergency, all of which is tax-free. 

Review and Harvest Capital Gains & Losses

Review and manage capital gains and losses from your investments to minimize your tax bill.

Review your portfolio and sell any investments that have lost value before the end of the year to offset gains and reduce your taxable income. Keep an eye out for trading fees and ensure your sales align with your long-term investment objectives. 

Make Strategic Charitable Donations

Donating to charity causes is one approach to save money on taxes while also helping important causes. Donations to eligible charities, such as 501(c)(3) organizations, can be deducted up to 60% of the taxpayer’s adjusted gross income (AGI) if itemized. 

Another strategy for donating while saving on taxes is to donate an investment that has increased in value. For example, if you have a $3,500 stock that you have held for a year and its value has increased to $7,000, donating it allows you to deduct the entire $7,000 without paying taxes on the $3,500 gain.

When making donations, ensure they are made by the December 31, 2025, deadline, and maintain accurate records of all documents. Also, ensure that the charities you want to donate to meet the IRS’s qualifications.

Final Thoughts: A Smart Finish for a Strong Start

Getting all your tax matters sorted out before the new year is the recipe for avoiding tax issues and starting the new year off strong. 

As you can see, there are numerous ways for you to save on taxes and critical expenses while increasing your savings and lowering your taxable income. All the choices presented here are viable, but they may not be suitable for everyone due to varying needs and goals. 

Therefore, the key is to choose the right options by considering your specific situation. Consult a tax professional to assist you in sorting out your taxes and devising the best approach for avoiding tax difficulties and maximizing your rewards.

Greenberg Law specializes in all aspects of tax law. We have a team ready to help you every step of the way!

A tax holiday provides a temporary reduction or elimination of specific taxes, providing significant opportunities for both businesses and consumers. Understanding tax holidays thoroughly can help you navigate these opportunities, maximize the benefits they offer, and ensure compliance. Continue reading to learn more.

What is a Tax Holiday?

A tax holiday is a temporary time during which the government reduces or removes specific taxes to relieve taxpayers’ burdens and stimulate economic activity, such as consumer spending, company investment, and job creation. 

A tax holiday is usually only for a few days or months. For example, the government may declare a tax holiday on weekends or during specific time periods, such as before the start of the school year or before storm season.

How Do Sales Tax Holidays Work?

A sales tax holiday aims to reduce costs for consumers, increase sales for retailers, and boost local economies overall. For example, a sales tax holiday is frequently used in many states for back-to-school shopping and disaster preparedness.

These tax breaks frequently apply to specific products under certain conditions. For example, a sales waiver applies to school supplies such as notebooks, calculators, backpacks, apparel, and footwear with a price limit. 

Batteries, generators, and flashlights are all examples of disaster preparedness items. 

Some states additionally provide a sales tax break for energy-efficient appliances such as Energy Star-rated air conditioners and refrigerators. The sales tax holiday may apply to both in-store and online purchases, subject to certain criteria, such as payment within the holiday period.

Retailer Responsibilities During a Tax Holiday

During a tax holiday, retailers are responsible for following the right implementation according to state-specific guidelines and ensuring accurate records to maintain compliance. 

Retailers must adjust their tax-collecting procedures, such as upgrading the system, to ensure that qualifying items are excluded during the tax holiday and that online platforms display exemptions for eligible products.

To comply with state guidelines, follow the specific regulations for qualifying items, price limitations, and holiday duration. Maintain thorough records of tax-exempt transactions and file accurate sales tax returns by separating taxable and exempt sales over the holiday season.

Examples of Tax Holidays in Florida

Florida’s Back-to-School Sales Tax Holiday

Florida has an annual back-to-school sales tax holiday that runs from August 1 to August 31. During this sales tax holiday, qualified items include: 

• Clothing, footwear, wallets, bags, handbags, backpacks, fanny packs, and diaper bags priced at $100 or less per item.  

• Specific school supplies priced at $50 or less per item. 
• Learning aids and jigsaw puzzles with a sales price of $30 or less.  
• Personal computers and computer-related accessories priced at $1,500 or less, purchased for noncommercial home or personal use. 

Disaster Preparedness Sales Tax Holiday

Florida’s disaster preparedness sales tax holiday, effective August 1, 2025, is a permanent, year-round sales tax holiday on selected supplies. Qualifying items such as batteries, generators, fire extinguishers, smoke detectors, and others are tax-free at any time of the year.   

Tool Time Sales Tax Holiday

Unlike previous years, Florida’s 2025 tax relief package does not include a tool time sales tax holiday, which is typically a tax-free purchase of equipment commonly used by skilled workers, such as power tools and work boots. 

However, the state has included other sales tax holidays, such as the fishing, hunting, and camping sales tax holiday, which runs from September 8 to December 31, as well as a sales tax exemption for admissions and gold, silver, or platinum.

Energy-Efficient Appliances or Gas Tax Holidays

Energy-efficient appliances that support sustainability, such as Energy Star-rated washers, dishwashers, and refrigerators, are tax-exempt. 

However, Florida currently does not offer an energy-efficient tax and gas exemption; instead, the state has transitioned to a permanent disaster preparedness exemption, with some qualified products overlapping with energy-efficient products.

Are Tax Holidays Effective?

Pros of Sales Tax Holidays

Sales tax holidays help boost local economies, benefiting both consumers and businesses. Sales tax holidays provide immediate relief to customers by lowering the prices of highly sought-after essentials, such as those for back-to-school qualified items, resulting in savings and a temporary ease in expenses for families, particularly those low-income families.

Moreover, sales tax holidays help strengthen local economies, benefiting both consumers and shops. 

The disaster preparedness sales tax also encourages the community to stock up on crucial supplies, such as generators and batteries, ahead of extreme weather events like hurricane season, which improves public safety. 

Cons of Sales Tax Holidays

As beneficial as it seems, the sales tax holiday also has its drawbacks. 

For starters, it can create potential confusion in its rules, such as price caps and item definitions, resulting in misunderstandings between consumers and retailers and potentially causing compliance issues. 

Second, studies have found that, while tax breaks increase spending, they change the timing of purchases rather than creating additional demand. For example, consumers may postpone purchases until the tax-free period, impeding long-term economic growth. 

Lastly, temporary revenue dips as a result of tax exemptions can make it difficult for state and municipal governments to estimate accurately, complicating budgeting and adding additional uncertainty. 

Legal Implications of Tax Holidays

During the period of tax holidays, it’s crucial for businesses to stay in compliance with the current regulations to prevent penalties and other tax issues, such as back taxes and audits.

In Florida, the sales tax holidays are governed by Chapter 212 of the Florida Statutes and administered by the Department of Revenue, which requires businesses to ensure proper application of exemptions.

This includes properly identifying qualifying items, correctly advertising tax holidays to consumers, and accurately reporting sales tax returns. Non-compliance with the rules may result in civil and criminal penalties, depending on the severity of the violations, such as those between negligence and willful intent. 

Final Thoughts from Greenberg Law

Tax holidays are no doubt helpful for both consumers and retailers. Consumers can buy essentials at a lower cost, allowing them to save more, while retailers benefit from increased sales during this temporary period. 

Although these exemptions provide temporary assistance, they are not a replacement for a comprehensive tax plan. Tax holidays are temporary, limited in scope, and don’t offer long-term financial benefits for managing taxes year-round. 

For more about tax planning, guidance, or resolution, reach out to Greenberg Law Group. Our expertise can simplify your tax journey and help you achieve optimal results.

IRS jurisdictions of monitoring and ensuring tax compliance among US taxpayers extend not only to accounts on US territory, but also to financial accounts held abroad. 

To ensure that these requirements are met, the government requires FBAR submissions from all qualified taxpayers with foreign accounts to comply with the country’s tax laws. 

Continue reading to learn more about unreported foreign accounts, FBAR filing, and the consequences for violating the law. 

What Is FBAR Filing and Who Needs to File?

FBAR Basics (Report of Foreign Bank and Financial Accounts)

The Foreign Bank Account Report (FBAR), also known as FinCEN Form 114, is an annual report required to be filed by U.S. taxpayers with a foreign financial account. 

The FBAR is mandated by the Bank Secrecy Act (BSA) to monitor overseas account transactions held by US citizens. The FBAR is designed to prevent financial crimes, such as money laundering, tax evasion, and other financial offenses. 

Who Must File an FBAR

Those who must file FBAR include those who meet the following criteria:

• Citizens, alien residents, or U.S. entities such as corporations, partnerships, trusts, or limited liability companies.
• Have a financial stake in, or signature authority over, one or more overseas financial accounts. These accounts may include bank accounts, securities, mutual funds, cash-value insurance policies, and accounts held in foreign branches of U.S. banks or U.S. branches of foreign banks.
• With a threshold exceeding $10,000 at any time during the calendar year.

Reporting Foreign Income: IRS Filing Obligations Beyond FBAR

IRS Form 8938 (FATCA Reporting)

FATCA, commonly known as IRS Form 8938 or Statement of Specified Foreign Financial Assets, is another tax form that U.S. taxpayers must file along with their annual income tax return (Form 1040). FATCA complements the FBAR by requiring the reporting of any foreign assets and accounts owned. 

Similar to the FBAR, U.S. citizens who own financial accounts in foreign financial institutions and other foreign financial assets and interests (such as stocks, securities, partnerships, corporations, and mutual funds) are required to file FATCA. 

Taxpayers who have a total value of foreign financial assets exceeding the following amounts are bound to FATCA regulations:

• $50,000 on the last day of the tax year or $75,000 at any time during the year (for unmarried individuals living in the United States)
• $100,000 on the last day of the tax year or $150,000 at any time (for married filing jointly residing in the United States)
• $200,000 on the last day of the tax year or $300,000 at any time (for unmarried individuals living outside the United States) 
• $400,000 on the last day of the tax year or $600,000 at any time (for married individuals residing outside the country) 

Other Common Forms

In addition to the FBAR and FATCA, US taxpayers with foreign income or assets may be required to file additional IRS forms (3520, 5471, 8621) to record specific foreign financial activities or interests.

Form 3520 is used to report transactions involving foreign trusts (such as distributions and donations) and substantial gifts from overseas corporations or persons.

Form 5471 reports ownership or control of certain foreign firms to guarantee income and transaction transparency, especially for Controlled Foreign Corporations (CFCs).

Form 8621 reports direct or indirect distributions and gains from a Passive Foreign Investment Company (PFIC) or Qualified Electing Fund (QEF). 

Consequences of Unreported Foreign Accounts and Income

Unreported overseas accounts and income can result in significant issues, including penalties and even imprisonment. Non-willful violations, which include failing to report a financial account due to negligence, misunderstanding, or other reasons without intent to evade taxes, can result in penalties of up to $10,000 per violation. 

Wilful violation, which occurs when a taxpayer knowingly or recklessly fails to report foreign accounts or income—indicating intent to evade taxes—is punishable by the greater of $100,000 (adjusted for inflation, approximately $160,944 for 2025) or 50% of the account balance at the time of the violation per violation.

Criminal FBAR applies when non-compliance results from intentional tax evasion, fraud, or other illegal activities. The penalties can include fines of up to $250,000 and/or imprisonment for up to 5 years. 

If taxpayers are part of a conspiracy or a pattern of illegal activity (e.g., money laundering or hiding income), penalties can increase by $500,000 or more, and imprisonment can be up to 7 years. 

Additional IRS Penalties

Other penalties that may be imposed for failing to comply with IRS foreign reporting requirements include accuracy-related penalties of up to 20% of the underpayment and 40% of the underpaid tax for underpayments related to undisclosed foreign financial assets.

Failure to file a tax return that includes foreign income or Form 8938 may result in both the failure-to-file penalty and the form-specific penalty. 

Late tax returns are subject to a monthly penalty of 5% of the unpaid tax, up to a maximum of 25% of the total tax amount. Similarly, undeclared foreign income that results in underpaid taxes can lead to a failure-to-pay penalty of 0.5% per month of the unpaid tax, up to a maximum of 25%.

Furthermore, failure to meet your tax requirements, including the disclosure of foreign accounts, may result in an audit and potentially lead to long-term tax consequences. 

What Triggers IRS Scrutiny?

Non-compliance or inconsistencies in these filings are the main trigger for an IRS audit or scrutiny. 

The IRS cross-references data, for instance, FATCA disclosure, with U.S. taxpayers’ filings (e.g., FBAR, Form 8938, or Form 1040) and checks for accuracy. Large international or frequent transfers, or those with suspicious patterns, are more likely to get more scrutiny from the authorities. 

Minimize scrutiny by taking the necessary steps, such as filing on time and accurately, disclosing all accounts and assets, and paying taxes in a timely manner. 

How to Correct Unreported Foreign Accounts or Income

Just like with filing taxes or paying taxes late, taxpayers are given opportunities to fix unreported foreign accounts or income. This is possible through:

IRS Voluntary Disclosure Programs (VDP): Allows taxpayers who willfully failed to report foreign accounts or income to disclose their non-compliance proactively, potentially avoiding criminal prosecution while resolving tax and penalty obligations. 

To qualify, one must be a U.S. taxpayer with unreported foreign accounts or income and have a valid Taxpayer Identification Number (TIN). Moreover, it is essential to apply for VDP promptly, before the IRS initiates an audit or investigation. 

Streamlined Filing Compliance Procedures: The Streamlined Filing Compliance Procedures allow non-willful taxpayers to correct unreported foreign accounts or income with reduced or no penalties. 

U.S. taxpayers must certify non-willful conduct with a signed statement under penalty of perjury, be free of IRS audits or criminal investigations, and have a valid TIN.

Delinquent FBAR or Informational Return Submissions: This option allows for filing delinquent forms accompanied by a reasonable cause statement to avoid penalties, for individuals with no unreported income (no tax liability) who failed to file their FBAR.

Eligibility includes no underreported income or unpaid taxes, being neither under IRS audit nor investigation, and not having committed a non-willful failure to file (e.g., due to ignorance or oversight).

Why You Need To Hire an Expert Tax Attorney for FBAR Issues

Unreported foreign accounts and income are a severe tax issue that should not be overlooked. 

Therefore, if you wish to take any action, such as filing an FBAR, resolving a problem, or communicating with the IRS, we strongly advise you to seek expert assistance. A tax attorney has familiarity with all aspects of the tax system, including determining the best answer for your unique case.

Contact Greenberg Law today and let us help you avoid tax difficulties!

Tax issues arise for various reasons, and their implications range from mild to severe. Liens and levies are two severe problems that all taxpayers want to avoid. These types of tax issues will affect not only your finances but also your assets. 

So, what are the differences between a tax lien vs tax levy? Let’s explore these topics today. 

What Is a Tax Lien?

Definition and Purpose

A tax lien is a tool employed by the IRS to secure outstanding debts by legally placing a claim against taxpayers’ assets. A tax lien entails filing a legal document that informs the public of the government’s legal claim against the taxpayer’s assets. 

What a Lien Affects 

Once a tax lien has been filed, the IRS has precedence over other parties in claiming your assets, which include real estate, personal property, and financial assets.

When Is a Tax Lien Filed?

A tax lien is filed after several notices to the debtor have been sent, informing the taxpayer of outstanding tax liabilities. 

If taxpayers neglect these notices, the IRS can issue a Notice of Federal Tax Lien, a public notice informing them that they have claimed the assets of the concerned persons or businesses.  

What Is a Tax Levy?

Definition and Purpose

A tax levy is the legal seizure of property and assets to repay outstanding obligations. Levies can occur when taxpayers continually ignore IRS letters or notices. In contrast to a tax lien, which is a legal claim on the taxpayer’s assets, a levy is the actual collection action. 

What the IRS Can Levy? 

The IRS has the authority to levy everything from bank accounts to wages, real estate, automobiles, and retirement savings.

When Does a Tax Levy Occur?

A tax levy is imposed when individuals and businesses continue to fail to pay their tax bills. 

The IRS sends multiple notices, including a Notice of Federal Tax Lien and a Final Notice of Intent to Levy, to notify taxpayers of the tax issue and provide them with the opportunity to resolve the issue using the various available options.

Key Differences Between a Tax Lien vs Tax Levy

How Liens and Levies Affect You

Financial Consequences

When it comes to the financial consequences of liens vs levies, both will have a significant impact on your finances. 

These two actions can restrict your access to your finances and assets, such as being unable to withdraw money due to a bank freeze, having accessible funds decreased due to wage garnishment, or being unable to sell or refinance your property. 

This can all result in financial difficulty, not to mention the mounting penalties and interest that accrue from unpaid debts.  

Legal Consequences

Liens and levies also carry the same legal implications. 

As the IRS is a legal entity supported by the country’s laws, it takes efforts to ensure taxpayers fulfill their tax obligations. Any requests that are not met will result in legal ramifications. For instance, ignoring these notices can result in asset seizure and the creation of a public record, which will notify others of the claim on your property, potentially complicating any subsequent legal issues.  

Can a Lien or Levy Be Removed?

Removing a Tax Lien

There are various options for removing a tax lien. The first step is to settle all tax debts in full, including fines and interest. 

Once paid, you must still request a withdrawal using Form 12777. The IRS will typically remove the lien within 30 days and provide the taxpayer with a Certificate of Release of Federal Tax Lien. 

Discharge or subordination are other options to stop a tax lien temporarily. 

A discharge is an option if you need to sell or transfer a specific property; you can request a discharge  (Form 14135) to remove the lien from that property. The IRS may approve if the property’s worth exceeds the tax liability and the IRS receives an equivalent amount (for example, sale proceeds).

A subordination permits other creditors to take precedence over the IRS lien (Form 14134), facilitating loans or refinancing. The IRS may agree if it facilitates debt repayment without removing the lien.

Releasing a Tax Levy 

Levies, like tax liens, can be removed by paying the entire amount owed. Settling with the IRS through an agreement, such as an Offer in Compromise or Installment Agreement, also halts any collection activities as long as the individual or business adheres to the arrangement. 

Another way to release a tax levy is to prove that the levy causes immediate economic hardship (e.g., inability to pay for basic living expenses). Request for relief by filing Form 1127. 

Lastly, if you believe there was an error that resulted in the levy, you can file an appeal (Form 12153) within 30 days of receiving the IRS levy notice. The levy may be suspended until the validity of the challenged levy is determined. 

What Should You Do If You Receive a Lien or Levy Notice?

Receiving a notice of lien or levy is understandably distressing. However, if you have reached this point, you should take precautions to prevent further complicating the situation. As we covered in this article, there are steps you can take to avoid the problem from escalating, such as paying off all debts or getting into a payment agreement with the IRS. 

Your choice should also be based on your specific situation. That is why you should be diligent and informed while making a decision. Consult with a professional to ensure the best potential outcome for your situation.   

How Greenberg Law Group, P.A. Can Help

Greenberg Law’s team of tax professionals has extensive experience managing a variety of tax matters, including liens and levies. We understand the process and know how to devise the best resolutions for your specific circumstance. 

It is of utmost importance that if you are experiencing tax issues, you should not delay taking action. The more you delay, the more problems will come your way. 

Contact us immediately, and let’s develop a specific approach to prevent the issues from escalating.