Tax costs are the additional funds that a company must allocate for taxes following a business transaction. It can also pertain to the party that has been unsuccessful in a legal dispute and is attempting to evade the payment of the opposing party’s legal expenses. This can be achieved through a “motion to strike” or a “motion to tax costs” based on legal statutes or agreements, as legal fees can be quite costly and the losing party may seek to avoid them.
Tax costs arise from corporate transactions or when a losing party in litigation is required to pay certain costs of the winning party. For instance, when a company merges with another, it may result in increased tax liabilities. Similarly, in a lawsuit, the winning party may incur litigation costs and seek reimbursement from the losing party. However, the losing party can dispute their obligation to pay these costs by filing a “motion to strike” or a “motion to tax costs” based on relevant laws or contractual agreements. These examples demonstrate the occurrence of tax costs in corporate transactions and litigation, as well as the potential for the losing party to challenge their responsibility for specific expenses.
Income tax, property tax, sales tax, and payroll tax are some of the common types of taxes individuals and businesses may have to pay.
You can reduce your tax liability by taking advantage of tax deductions, credits, and exemptions, as well as contributing to retirement accounts and making charitable donations.
Failure to pay taxes can result in penalties, interest, and even legal action by the government, such as wage garnishment or property seizure.
In some cases, the IRS may be willing to negotiate a lower tax debt through an offer in compromise or installment agreement.
The IRS generally has three years from the date you filed your tax return to audit you, but this time period can be extended in certain circumstances.
Legal fees related to tax advice or representation in tax disputes may be deductible, but it depends on the specific circumstances and the nature of the legal services.
Selling property can result in capital gains tax, which is based on the difference between the sale price and the property’s basis (usually the purchase price).
In some cases, business owners can be held personally liable for their business’s tax debts, especially if they have engaged in fraudulent or illegal activities.
Inheritances are generally not subject to income tax, but any income generated by the inherited assets may be taxable.
To avoid tax scams and fraud, be cautious of unsolicited communication claiming to be from the IRS, and always verify the legitimacy of any tax-related requests or offers.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 17th April 2024.
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