Bendure & Thomas Bendure & Thomas 2026-04-14T07:47:05Z https://www.bendurethomaslaw.com/feed/atom/ WordPress /wp-content/uploads/sites/1104403/2023/04/cropped-bt-site-icon-32x32.png On Behalf of Bendure & Thomas <![CDATA[When is forgiven debt considered taxable income?]]> https://www.bendurethomaslaw.com/?p=48163 2026-04-14T07:47:05Z 2026-04-14T07:47:05Z Recognizing canceled debt as taxable income The IRS generally treats any debt that is forgiven, canceled or discharged as taxable income. The logic behind this rule is simple: when you originally borrowed the money, you did not pay tax on it because there was an obligation to repay. Once that obligation disappears, the IRS views the forgiven balance as money you effectively received and kept. This principle applies broadly to credit card balances, personal loans, auto loans, medical bills and mortgage deficiencies. If a creditor agrees to settle a $15,000 debt for $5,000, the remaining $10,000 may be treated as ordinary income for the year the cancellation took place.

Identifying exceptions that may apply

Federal tax law includes the following exclusions that may reduce or eliminate the taxable portion of a canceled debt.
  • Discharge through a bankruptcy case under Title 11
  • Insolvency at the time of cancellation because your debts exceeded your assets
  • Student loan forgiveness under applicable education programs
  • Real property business debt under the rules set by statute
Each exception follows its own set of rules and requires specific records. Working with an attorney can help you determine which exception applies and guide you in gathering the proper documentation to support your position.

Responding to a 1099-C from a creditor

Receiving this document does not automatically mean you owe tax on the entire amount listed. The form simply notifies the IRS that a creditor has canceled $600 or more in debt, and the agency expects you to address it when you file. It is worth reviewing the form carefully for accuracy, particularly the reported amount and the date of cancellation. Mistakes on 1099-C forms do happen, and filing your return based on an incorrect figure could lead to complications with the IRS later. If an exclusion applies to your situation, you may need to attach Form 982 to your federal return. This form requires you to identify the specific exclusion you are claiming and, in the case of insolvency, document how your liabilities compared to your assets at the time the creditor canceled the debt. Reaching out to an attorney can help you evaluate your options and handle the reporting correctly. The distinction between taxable and excludable forgiven debt is not always clear. Taking the time to assess your situation before filing may help you avoid unnecessary tax liability or IRS scrutiny.]]> On Behalf of Bendure & Thomas <![CDATA[Self-employment taxes: What Michigan freelancers might owe]]> https://www.bendurethomaslaw.com/?p=48099 2026-03-05T15:54:42Z 2026-03-05T15:52:26Z The federal self-employment tax If you are earning $400 or more in net self-employment income for the entire year, the Internal Revenue Service (IRS) requires you to pay self-employment tax. The combined rate of 15.3% breaks down into the following:
  • 12.4% for Social Security applies only to the first $184,500 in net earnings for the 2026 tax year
  • 2.9% for Medicare applies to all net earnings with no cap
There is also an additional surtax on earnings above $200,000 for single filers or $250,000 for married couples filing jointly.

Michigan's flat income tax on freelance earnings

The state does not impose a separate self-employment tax. Instead, it applies a flat individual income tax rate that stays the same regardless of how much you earn, which makes it relatively straightforward to estimate what you might owe. For the 2026 tax year, the individual income tax rate remains at 4.25%. Michigan bases its calculation on your federal adjusted gross income, so the deductions you claim at the federal level can also influence your state tax liability. Certain cities also levy their own local income taxes on top of the state rate. Detroit, for example, charges residents an additional 2.4%, while cities like Grand Rapids and Saginaw impose their own local rates as well.

Deductions that could shrink your tax bill

One of the advantages of freelancing is the range of deductions available to self-employed workers. The following could lower both your federal and state tax obligations:
  • Home office expenses, if you use a dedicated space in your home exclusively and regularly for business purposes
  • Half of your self-employment tax, which the IRS allows as an adjustment to your gross income
  • Business-related supplies, software, equipment and mileage you use for work
Tracking expenses consistently throughout the year makes tax season smoother and helps you catch deductions you might otherwise miss.

A tax planning strategy going forward

Every freelancer's tax situation looks a little different depending on income level, business structure and filing status. What works for one independent contractor may not apply to another, which is why a one-size-fits-all approach rarely covers all the bases. An attorney can review your specific circumstances and help identify deductions or credits you may not realize you qualify for. They can also assist with setting up quarterly estimated tax payments, which helps you avoid underpayment penalties and keeps your cash flow more predictable throughout the year.]]> On Behalf of Bendure & Thomas <![CDATA[What you need to know about tax fraud and tax evasion charges]]> https://www.bendurethomaslaw.com/?p=48084 2026-01-29T16:14:41Z 2026-01-29T16:14:41Z Facing charges for tax fraud or tax evasion can feel overwhelming. You need to defend yourself, but you can't fight what you don't understand. The terms may sound similar, yet they carry different legal meanings and consequences. Before you can build a strong defense, you must know exactly what you're up against. Thus, understanding these charges is your first step toward protecting your rights and your future.

Understanding tax fraud charges

Tax fraud occurs when you intentionally deceive the Internal Revenue Service (IRS). To secure a conviction, the government must prove you acted willfully. Common examples include claiming false deductions or hiding income through fake receipts. Additionally, you might face charges for filing a return you know contains false information. The key word here is ‘intentional’. Simple mistakes don't usually equal fraud. Within this broader category of tax fraud, however, certain actions fall into a more specific offense that prosecutors often pursue.

How tax evasion fits into tax fraud

Meanwhile, tax evasion is a specific type of tax fraud that involves deliberately avoiding paying taxes you owe. While all tax evasion is fraud, not all tax fraud rises to the level of evasion. Evasion charges typically involve underreporting your income or inflating your business expenses.  In more complex cases, this can include hiding money in offshore accounts or using cash transactions to avoid creating a paper trail. Like other fraud charges, evasion requires prosecutors to prove you knowingly broke the law. The distinction between these offenses matters because the consequences vary in severity.

The penalties you could face

Tax fraud charges can often result in several years in prison per count. But beyond incarceration, you may also face fines reaching hundreds of thousands of dollars for individuals.  On the other hand, tax evasion, as the more serious charge, carries harsher penalties. Prison sentences can extend up to five years in federal custody. Furthermore, fines can climb even higher, sometimes reaching half a million dollars for corporations. Additionally, the government can also pursue both criminal and civil penalties at the same time, multiplying your financial and legal exposure. Thus, understanding these potential outcomes helps you grasp why your response to these charges requires careful consideration.

Understanding the limits of financial advise

When facing criminal charges, many people naturally turn to their trusted accountant for guidance. However, criminal tax cases operate under different rules than standard tax preparation. In criminal proceedings, conversations with your accountant receive no legal protection and courts can compel them to testify about your discussions. Thus, having professional legal guidance becomes important when navigating the complexities of criminal proceedings and understanding your rights throughout the process.]]> On Behalf of Bendure & Thomas <![CDATA[How can you handle unfiled tax returns?]]> https://www.bendurethomaslaw.com/?p=48082 2026-03-23T09:39:18Z 2026-01-07T20:14:05Z What are the penalties associated with unfiled tax returns? There are several. Generally, the IRS can levy a late filing fee and a late payment fee, which can collectively add up to nearly 50% of your unpaid tax amount. If you have several years of unfiled returns, each requiring you to pay thousands of dollars, then these penalties can quickly consume your finances and leave you in a dire financial predicament. Also, the IRS could file a substitute for return, where they essentially submit your taxes for you but without any credits. This increases your tax bill and, in turn, increases the amount you’ll have to pay in penalties. Keep in mind, too, that you’ll likely be charged interest on any tax amounts owed. There are other ramifications for not filing tax returns. For example, it may be difficult, if not impossible, to prove your income when seeking a car loan or mortgage, and you may be unable to rent an apartment or even qualify for social programs. Also, choosing to forgo tax filing can put you at risk of being charged with a criminal offense. If convicted of tax evasion or tax fraud, you could wind up facing serious penalties, including incarceration. We don’t bring that up to scare you but rather to stress the importance of dealing with unfiled tax returns as expeditiously as possible.

What are your options when you have unfiled tax returns?

The good news is that you have legal options if you’ve failed to file past tax returns even though you were required to do so. These include the following:
  • Engaging in voluntary disclosure: If you willfully failed to file tax returns, then you can disclose non-compliance with tax law to avoid criminal prosecution. You have to make this disclosure before the IRS initiates any kind of proceedings against you, though, so the sooner you act the better. When you make the disclosure, you have to have a plan for paying your tax liability in full, even if you have to do so through an installment agreement.
  • Seeking penalty abatement: Under certain circumstances, you may be able to request a penalty abatement, where the IRS foregoes implementing penalties against you. Generally, you have to have a history of tax compliance before the IRS will grant this sort of relief.
  • Utilize tax repayment programs: Even if you’re hit with a large tax bill and significant penalties, you may be able to resolve your tax debt in a manageable way. For example, an installment agreement may make your payments more affordable so that you alleviate your tax obligation over time, or an offer in compromise may allow you to satisfy your tax debt with by only paying a portion of what you owe.

Tackle your tax issues now

You can’t afford to put off your tax woes any longer. That’s why now is the time to discuss your tax-related concerns with your attorney. Hopefully then you can develop a legal strategy that protects your interests and your finances as fully as possible.]]> On Behalf of Bendure & Thomas <![CDATA[Strategies when businesses face a Trust Fund Recovery Penalty]]> https://www.bendurethomaslaw.com/?p=48065 2025-12-10T16:04:39Z 2025-12-05T18:16:36Z it can lead to a Trust Fund Recovery Penalty (TFRP). The business owner should be aware of what this means, how to avoid personal liability, keep the business operating, try to find a viable way to repay what is owed, and avoid a repeat of this issue. Anyone receiving notifications from the IRS must be protected. This is especially true for the overwhelmed business owner, who will need advice to address these matters and reach a positive outcome.

Understanding TFRP and unpaid payroll taxes

A willful failure to pay or collect payroll taxes can lead to a TFRP. The penalty will be equal to the full amount of that which was not paid plus interest. The IRS investigates and decides who is to blame for the taxes not being paid. This is known as a responsible person. The responsible person is who controls the business and its finances. The owner will generally get caught up in the investigation. There might be subordinates such as a manager or bookkeeper, but ultimately, the owner will bear the brunt of the allegations. If the IRS believes the behavior was willful, it does not necessarily mean the person was committing criminal acts intentionally, but they might have taken steps to try and retain some financial flexibility to continue the business operation and used money that was earmarked for the payroll tax to do it. Paying vendors is one example. There are myriad potential penalties along with 100% of what was unpaid. It could include penalties for failing to deposit; failure to file; interest; and criminal penalties. The criminal penalties will come about if particularly excessive behaviors took place such as failing to pay the taxes for an extended time-period. There are defenses to these allegations and ways to appeal.

Recognize the problems with TFRP and know how to be protected

There are several negative outcomes that can come with the TFRP. They include business and personal assets being seized; criminal charges; the business closing entirely; damage to the individual’s and the business’s reputation; not being sure where to turn; and the nonstop notices from the IRS. As the investigation proceeds, it is imperative for the business owner to understand all aspects of tax law and be aware of the available options. There could be a settlement to pay what is owed. There could be a review of the charges, an appeal, and mediation. Regardless of the allegations, the business owner must be protected and have assistance from professionals who are fully experienced in tax law and know how to help those in trouble.]]> On Behalf of Bendure & Thomas <![CDATA[How to get a handle on potential tax fraud allegations]]> https://www.bendurethomaslaw.com/?p=48049 2025-11-04T22:57:12Z 2025-11-04T22:57:12Z tax fraud accusations is to avoid them in the first place. There are several ways to avoid landing in hot water with the IRS, including taking the following steps:
  • Report all income: If you have multiple streams of income, it can be easy to overlook or otherwise misrepresent your income. This can be a huge red flag for the IRS and can lead to allegations that you’ve committed fraud by misreporting your income to trying to avoid taxes. So, carefully think through where you’ve gained income and be sure to report it on your taxes.
  • Use only those credits and deductions for which you’re eligible: There are a lot of tax credits and deductions out there, and many of them are misunderstood. But if you wrongly utilize some of them, then you could be accused of falsifying your tax return to acquire financial gain. To avoid these allegations from being lobbed at you, be sure you fully understand what you’re claiming and claim only those credits and deductions for which you truly qualify.
  • Keep detailed records: If you come under audit, you’ll want to be able to show your true income and why you made the credit and deduction claims you did on your tax return. If you have poor recordkeeping, then the IRS is left to take you at your word, which probably won’t go well for you. The more detailed you can be in your recordkeeping the better.
  • Review your return before signing off on it: Whether you complete your tax return on your own or hire someone to assist you, you must fully review your return before signing off on it and filing it. If you don’t, you may give the impression that you’ve intentionally tried to mislead the IRS when you simply missed a mistake.

What should you do if you’re accused of tax fraud?

Facing these sorts of allegations can be incredibly stressful. If you come under investigation, though, or are accused of tax fraud, then you should consider doing the following:
  • Avoid trying to explain your way out of the situation.
  • Speak to your tax attorney about the legal options available to you.
  • Gather evidence to build an effective tax fraud defense.
  • Refrain from tampering with, concealing or destroying evidence.
  • Avoid talking about your case with others.
By being careful and diligent in the preparation of your defense, you may be able to resolve your tax matter in a favorable matter. Before you can get to that point, though, you have to understand your legal options. That’s why it can be extremely helpful to discuss these matters with your attorney. By doing so, you’ll hopefully be able to find an effective path forward that fully protects your interests.]]> On Behalf of Bendure & Thomas <![CDATA[Mistakes to avoid when your taxes are audited]]> https://www.bendurethomaslaw.com/?p=48036 2025-10-02T18:52:56Z 2025-10-02T18:52:56Z Avoid these mistakes when facing a tax audit You’ll have a lot of questions to answer when being audited. As you prepare yourself to interact with the IRS during an audit, you should be sure to avoid the following:
  • Volunteering too much information: When answering the IRS’s questions, you should only provide them with the information they request. If you volunteer too much information, then you could allow the IRS to open new areas of inquiry that could be problematic for you. So, be sure to carefully read their questions so that you have a full understanding of what it is they’re asking for and so that you can respond appropriately.
  • Failing to respond: Responding to an audit isn’t optional. You have to comply with the government’s requests unless you want to be subjected to additional penalties. So, be sure to take an audit notice seriously and respond within the timeframes laid out.
  • Speculating: If you don’t know the answer to a question posed by the IRS, don’t guess. Speculating will only lock you into an answer that you don’t even know is true. If you need additional time to find the answer, simply inform the auditor and get back to them with the requested information in a timely manner.
  • Being disorganized: The IRS will want documentation to support what you’ve claimed on your taxes. If you’re disorganized and can’t find that documentary evidence, then you’re going to be in a tougher position to avoid a bad outcome.
  • Mixing business and personal finances: Taxes can become even more difficult when you’re a business owner. If you come under an audit, it’s best to have your business and personal finances separate so that it’s easier to distinguish between the two. If you’ve mixed them together, then it might be hard to answer the auditor’s questions, and you could struggle to demonstrate that you’ve satisfied your tax obligations.

Competently navigate your tax audit

There are many other mistakes that can be made during the tax audit process. While that can be nerve-wracking to think about, the truth is that there’s a lot you can do to simplify the process while still protecting your interests and your future. So, prepare yourself to tackle the process head on. If you want to know more about what that entails and the additional steps you can take to protect yourself, then please continue reading our blog and consider discussing the unique circumstances of your case with your tax law attorney.]]> On Behalf of Bendure & Thomas <![CDATA[No Tax on Tips Act may cut tax bills for service workers]]> https://www.bendurethomaslaw.com/?p=48031 2025-09-24T09:50:21Z 2025-09-24T09:50:21Z The Senate passed the No Tax on Tips Act, moving federal tax relief for tipped employees one step closer. If enacted, the law could save restaurant, hotel and service workers thousands of dollars each year in Michigan.

What the federal bill would change

The No Tax on Tips Act allows employees to deduct up to $25,000 in reported cash tips from federal income taxes. To qualify, employees must work in jobs where tipping is customary and report tips to their employer for payroll tax purposes. The law excludes high earners. Workers with annual income over $160,000 in 2025 do not qualify though the threshold will rise with inflation. Within 90 days of passage, the Treasury Secretary must publish a list of jobs that count as “traditionally tipped occupations.” This measure could reduce the federal tax burden by as much as $2,700 per year for a single server.

Michigan proposal could add state tax relief

Some states are moving further. The Michigan House approved a budget plan that eliminates state income tax on tips for restaurant servers and other tipped employees. With a state tax rate near 4%, a worker could save about $4 for every $100 in tips if the bill becomes law. Industry leaders argue that tax relief may help restaurants fill jobs by making tipped work more financially attractive.

Why IRS collection still matters

Even with new deductions, the IRS will still enforce tax obligations. If you fall behind, the IRS may file a lien against your property or levy your assets. To avoid seizure, you must act quickly. Your options include:
  • Offer in compromise: Settle debt with a reduced lump sum.
  • Payment plan: Make monthly installments to stay in compliance.
  • Non-collectible status: Request temporary relief if you cannot pay.
  • Collection due process hearing: Challenge or negotiate after a seizure notice.
  • Full payment: Pay the full balance if possible.
Each option has limits but taking action early protects your property.

Considering your options

Tax relief bills may reduce burdens for tipped workers but IRS enforcement for unpaid debts remains strict. If you worry about how these changes affect you or if you already face collection actions, you may consult an attorney to review your situation. Legal counsel can explain IRS procedures and help you protect your rights.]]> On Behalf of Bendure & Thomas <![CDATA[How can you avoid IRS asset seizure?]]> https://www.bendurethomaslaw.com/?p=48025 2026-03-30T13:31:52Z 2025-09-17T19:01:14Z
  • Make an offer in compromise: Ultimately, the government just wants to recoup a significant portion of what you owe. This leaves you the opportunity to offer a lump sum payment that is sufficient for the IRS to discharge your remaining debt obligation. Before you can utilize this option, though, you’ll have to convince the government that you’re unable to pay your full debt amount.
  • Set up a payment plan: Here, you agree to pay your tax obligation over time. If the IRS sees that you’re on an installment plan and making your payments on time, then they aren’t going to seize your assets.
  • Seek a finding that you’re currently in non-collectible status: If your finances are depleted and you don’t have much income, then there isn’t much left for the government to seize from you. To prevent them from taking what you have left, then, you can seek a determination that you’re in non-collectible status. Keep in mind, though, that this status is temporary in nature, so it isn’t a true answer to your tax debt woes. That said, it might buy you enough time to formulate a more effective long-term plan.
  • Request for collection due process: Within 30 days of receiving notice of the IRS’s intent to seize your assets, you can request due process. Once you do so, a hearing will be set at which you can seek alternatives to asset seizure or dispute your tax obligation. At this hearing you can also demonstrate that asset seizure would create an undue hardship, which may lead to some leniency.
  • Pay your tax burden in full: This may not be an option for you, but if you have the money, you can simply pay off your tax obligation in full, at which time the IRS will cease its collection efforts.
    • You have several options when it comes to protecting yourself against the IRS’s aggressive debt collection practices. You have to simply figure out which option is best for you under the circumstances and act to protect yourself.

    Do you have lingering questions about how to address your outstanding tax debt?

    If so, then find answers to your tax problems now. Don’t wait until the IRS comes knocking for full payment under the threat of asset seizure. The sooner you act the more cooperation you might receive from the IRS. If you’d like to learn more about what you can do to get through this tough time in life, it may be wise to discuss the matter with your attorney so that you can develop the strategy that best protects your interests.]]>         On Behalf of Bendure & Thomas <![CDATA[Allegations of underreported business income must be met head-on]]> https://www.bendurethomaslaw.com/?p=48013 2026-03-30T13:33:14Z 2025-08-25T20:15:47Z The IRS treats accuracy-related penalties seriously Underreporting income falls under the IRS’s rules mandating an accuracy-related penalty. Failing to pay what the income dictates should be paid under the law is illegal. So too is it illegal to take deductions that are not applicable. In some instances, this is done based on negligence or simply ignoring the law. On others, it is a significant understating of how much income tax is owed. Ignoring the tax laws when completing a tax return could lead to severe ramifications. It can include failing to report income. Perhaps a person owns a construction business in Michigan, a client paid them in cash, and they reported part or none of what they were paid. Taking off too much in deductions for supplies would be another example. If the IRS finds out about this, they will pursue the business owner for what is owed. In egregious circumstances, there could be harsh penalties including large fines and the possibility of jail time. Understating how much is owed is another form or an accuracy-related failure. It is categorized as “substantial” if it is 10% less than what was supposed to be paid or $5,000, whichever is higher. Financial penalties will be 20% of the underpayment that was because of disregarding the law or negligence. If it is substantial, the amount is 20% of the amount of the underpayment. The IRS also charges interest.

    People accused of underreporting can fight the charges

    Simply because a person has been accused of underreporting their income in any way does not mean they are guilty. The penalties can be extensive and that does not even mention the negative perception potential customers might have for a business that was accused of failing to pay its taxes. In extreme cases, there can be jail time. This can damage or outright destroy the person’s business and reputation. When dealing with the IRS amid accusations of underreporting or other tax law violations, it is important to be protected. Having legal representation from the outset can assess the case, find strategies to fight back, seek solutions, and even prove that the person had paid what they were supposed to under the law. Consulting with professionals experienced in tax law can be helpful.]]>