Some lawsuit settlements are tax-exempt, but others can come with a significant tax bill. If you receive a legal settlement, you need to understand the tax rules so that you're prepared for any tax liabilities. To reduce your tax as much as possible, you also need to know when attorney's fees are deductible. 

The IRS has been disallowing Employee Retention Credits at very high rates. The agency claims that a significant portion of these credits were claimed improperly, and if you filed amended 941 payroll tax returns to claim the Employee Retention Credit for 2020 or 2021, you should be aware that the IRS may disallow your credit if it has not yet been processed. 

The Massachusetts Department of Revenue is offering amnesty for taxpayers with unfiled returns and/or unpaid taxes. The program runs from November 1 to December 30, 2024, and if the state accepts your request for amnesty, the DOR will waive the penalties on your account as long as you file the missing returns and pay the tax by the last day of the amnesty period. 

The IRS has taken its new funding and set its sites on high-income filers. During the last week of February 2024, the agency sent out letters related to 125,000 cases of unfiled returns from high-income earners. The unfiled returns date back to 2017, and information received from third parties indicates that these taxpayers have over $100 billion in unreported income. 

In January 2024, the IRS plans to start sending notices about unpaid taxes from 2020 and 2021. The agency stopped sending most automated collection letters during the COVID pandemic and through 2023. If you have unpaid taxes from 2020 or 2021, you may have thought that the IRS forgot about the bill. That is not the case, and collection actions are resuming.