At tax time, you do not wish to end up paying the IRS too much or too little. Filling out your W-4 form can be tricky, but if you adjust your tax withholding correctly, you will be maximizing your efficacy in paying taxes.
A large tax reimbursement isn't a positive situation, though you may believe so. You're basically loaning the government funds minus interest when you could be putting that money in a savings account that earns interest. The portion deducated from your paycheck may not seem like much, but when it all adds up, it is really a considerable amount.
What you wish to accomplish when determining on how much tax withholding you should have is to only pay exactly what you owe in taxes. Checking your exemptions is a good idea as your tax profile may shift throughout the year. So you have time to make changes by the end of the year, the first weeks of November is a good time to achieve this. This is really important if it seems as though you have not been withholding ample money from your paychecks. Also, to steer clear of an IRS issue, ensure you update your tax return after you file it.
Not being able to declare someone as dependent, getting divorced, bearing a child, or getting married are a few circumstances when you should review your withholding. To make sure you don't end up underpaying or overpaying the IRS and having an IRS issue, check the amounts of your tax withholding.
The W-4 worksheet is complicated to many people. It actually is easier than it looks. In fact, regardless of how hard you may believe that the W-4 form is, it's always worth it to take the time to properly select the proper amount of withholding. You don't want to end up having to pay the IRS a considerable sum because you accomplished it incorrectly. Situations like these occur often to many taxpayers, and it's really unfortunate, considering how easily it can be avoided.
Basing on your particular circumstance, it may be advantageous to discuss your withholding levels with a tax preparer. You can always update and change the withholding amount several times a year, even if you've already accomplished the W-4 at your current job. You want to ensure that you only pay what you owe to the IRS, so check the amount of your tax withholding if you get promoted or switch to a lower paying job. You'll steer clear of a huge IRS problem by accomplishing so.
Sunday, July 27, 2008
Thursday, July 24, 2008
How To Handle Wage Garnishment By The IRS
Your employer has no choice but to directly give a part of your paycheck to the Internal Revenue Service if he gets a notice that you're under wage garnishment. You'll never see that money, making it as bad as it seems.
How significant of a fraction do they remove? Typically, 80-85% of your net wages is removed by the IRS in a levy. You'll only be bringing home $200 from your $1000 paycheck. It is a really drastic method that the IRS takes when they begin to garnish your wages.
Depending on your specific case, you may be able to get the IRS wage garnishment released. It is best to work with a tax attorney or other tax professionals who are experts in these situations and can offer quality advice.
Tax professionals will understand everything about levy rules. Whether you have options or not can be decided by them. Being helpful is one thing the IRS isn't famous for.
The IRS wishes to take money from you in the shortest possible time, that's why your wages are garnished. Basically, the argument can be made that this is really the job of every single person employed by the IRS. Although numerous employees who work in the IRS are very nice and polite, they all possess that underlying and basic job factor which can ultimately ruin your life.
You need a tax lawyer or any tax professional who are not merely familiar with the IRS guidelines, but also have a successful track record in dealing with the IRS regarding wage garnishments. You are positive that the IRS sticks to their own rules and your case goes through the proper channels this way.
Lastly, does it seem as though your tax attorney works well with you? You need to ensure that you choose somebody you can work with comfortably. Most proceedings take some time. You definitely need somebody who you can work with comfortably, or else you will only make things worse by having hired a tax professional who is difficult to work with.
How significant of a fraction do they remove? Typically, 80-85% of your net wages is removed by the IRS in a levy. You'll only be bringing home $200 from your $1000 paycheck. It is a really drastic method that the IRS takes when they begin to garnish your wages.
Depending on your specific case, you may be able to get the IRS wage garnishment released. It is best to work with a tax attorney or other tax professionals who are experts in these situations and can offer quality advice.
Tax professionals will understand everything about levy rules. Whether you have options or not can be decided by them. Being helpful is one thing the IRS isn't famous for.
The IRS wishes to take money from you in the shortest possible time, that's why your wages are garnished. Basically, the argument can be made that this is really the job of every single person employed by the IRS. Although numerous employees who work in the IRS are very nice and polite, they all possess that underlying and basic job factor which can ultimately ruin your life.
You need a tax lawyer or any tax professional who are not merely familiar with the IRS guidelines, but also have a successful track record in dealing with the IRS regarding wage garnishments. You are positive that the IRS sticks to their own rules and your case goes through the proper channels this way.
Lastly, does it seem as though your tax attorney works well with you? You need to ensure that you choose somebody you can work with comfortably. Most proceedings take some time. You definitely need somebody who you can work with comfortably, or else you will only make things worse by having hired a tax professional who is difficult to work with.
Monday, July 21, 2008
The IRS's 1099 Bank Garnishment of Wages
Because creditors collect settlements direct from paychecks, salary garnishment is a tough situation for people in debt. People can get their wage garnished for a multitude of reasons.
Wage can be collected automatically from a person's paycheck or other income sources when a verdict is decided. For the following reasons, wage can be garnished:
*
* Debt to credit card companies.
* Unpaid child support.
* Court fines owed.
* Unpaid taxes.
* Student loans in arrears.
* Other debts.
Varying in each state, federal law caps garnishment at 25%. Some states provide garnishments of lower amounts, while states like Texas, South and North Carolina, and Pennsylvania don't allow garnishment. If income is insufficient, there's a specific heirarchy for garnishments to be collected: federal, then state, and finally, credit cards.
Here's the procedure that the IRS follows when garnishing salary:
*
* Serve a Notice or Demand for Payment.
* At least thirty days before garnishment, a Final Notice is served. A lot of people don't know their wage will be garnished because these do not have to be served in person and often not received.
* Unless other payment deals are made, salary is garnished until debt is settled in full. Garnishment can't be declined.
To declare income to the IRS, companies that employ freelancers or private contractors should file a 1099 form. Taxes are computed by the 1099 freelancers themselves.
If an employee has his wage garnished, the employer has no choice but to take the settlement out of the paycheck. If the employee quits and becomes a freelancer or a 1099 independent contractor, then the employer is definitely released from that obligation. Instead of garnishing wage from an employer, the credit can levy the contractor's accounts receivable. This means that when an independent contractor receives a check from a company for work, the bank account can be levied.
Money in the account is frozen and collected when a bank account is levied. This is most commonly done by the IRS, though other creditors can do it, too. Creditors can levy bank accounts unless the dues are paid.
Bank levies or garnishment of wages are tough situations. Get IRS help from a seasoned tax lawyer like Darrin T. Mish before debt gets beyond control.
Wage can be collected automatically from a person's paycheck or other income sources when a verdict is decided. For the following reasons, wage can be garnished:
*
* Debt to credit card companies.
* Unpaid child support.
* Court fines owed.
* Unpaid taxes.
* Student loans in arrears.
* Other debts.
Varying in each state, federal law caps garnishment at 25%. Some states provide garnishments of lower amounts, while states like Texas, South and North Carolina, and Pennsylvania don't allow garnishment. If income is insufficient, there's a specific heirarchy for garnishments to be collected: federal, then state, and finally, credit cards.
Here's the procedure that the IRS follows when garnishing salary:
*
* Serve a Notice or Demand for Payment.
* At least thirty days before garnishment, a Final Notice is served. A lot of people don't know their wage will be garnished because these do not have to be served in person and often not received.
* Unless other payment deals are made, salary is garnished until debt is settled in full. Garnishment can't be declined.
To declare income to the IRS, companies that employ freelancers or private contractors should file a 1099 form. Taxes are computed by the 1099 freelancers themselves.
If an employee has his wage garnished, the employer has no choice but to take the settlement out of the paycheck. If the employee quits and becomes a freelancer or a 1099 independent contractor, then the employer is definitely released from that obligation. Instead of garnishing wage from an employer, the credit can levy the contractor's accounts receivable. This means that when an independent contractor receives a check from a company for work, the bank account can be levied.
Money in the account is frozen and collected when a bank account is levied. This is most commonly done by the IRS, though other creditors can do it, too. Creditors can levy bank accounts unless the dues are paid.
Bank levies or garnishment of wages are tough situations. Get IRS help from a seasoned tax lawyer like Darrin T. Mish before debt gets beyond control.
Friday, July 18, 2008
IRS Levy Must-knows
The levy is the IRS's way of ensuring that you pay your tax debt or penalties. Your income and your properties may be levied. It is a drastic method that can financially incapacitate you, so if you receive a Levy Notice, it's best to act immediately.
The initial step to stopping a levy is to enlist the help of a tax attorney. When you consult with the lawyer, you will need to reveal your IRS issues and any settlement details or notices received from the IRS. Taxpayers normally receive a Demand for Payment statement from the IRS prior to being served the Levy Notice. Why this Demand for Payment wasn't settled will need to be justified. There are many valid reasons for this, including IRS processing errors, financial hardship, or bankruptcy, but you need to have documentation that effectively explains why the taxes or penalties have been unpaid.
Ignoring an IRS Levy Notice is the error numerous people make. You should ask a tax lawyer who can counsel you and help you ask for a Collection Due Process hearing at the IRS Office of Appeals in your area. If you've settled your taxes and were levied because of an IRS mistake, you can present evidence that the IRS committed an error in the hearing.
Immediate settlement following the Levy Notice and filing for bankruptcy are a few causes why a levy cannot be continued by the IRS. Because of the statute of limitations, taxes assessed over ten years ago cannot be collected by the IRS. If the IRS levy was served after the expiration of the tax collection period, you do not need to pay your taxes.
Working out an installment plan to settle unpaid taxes can also be achieved in the Collection Due Process hearing. If you do really owe the IRS money but aren't able to pay the entire amount, you will need to work out a settlement plan with the Office of Appeals. While not the best option, the installment option will be less of a financial problem than having your wages garnished or your bank account levied.
The IRS will continue the levy, until your debt is paid off, it it's released officially, or the statute of limitations is met. If you file for refund within thirty days after the IRS erroneouslyly levied your bank account, your bank charges will be reimbursed.
Your IRS problems will only worsen if you ignore a Levy Notice. To safeguard your assets, it's better to get immediate help.
The initial step to stopping a levy is to enlist the help of a tax attorney. When you consult with the lawyer, you will need to reveal your IRS issues and any settlement details or notices received from the IRS. Taxpayers normally receive a Demand for Payment statement from the IRS prior to being served the Levy Notice. Why this Demand for Payment wasn't settled will need to be justified. There are many valid reasons for this, including IRS processing errors, financial hardship, or bankruptcy, but you need to have documentation that effectively explains why the taxes or penalties have been unpaid.
Ignoring an IRS Levy Notice is the error numerous people make. You should ask a tax lawyer who can counsel you and help you ask for a Collection Due Process hearing at the IRS Office of Appeals in your area. If you've settled your taxes and were levied because of an IRS mistake, you can present evidence that the IRS committed an error in the hearing.
Immediate settlement following the Levy Notice and filing for bankruptcy are a few causes why a levy cannot be continued by the IRS. Because of the statute of limitations, taxes assessed over ten years ago cannot be collected by the IRS. If the IRS levy was served after the expiration of the tax collection period, you do not need to pay your taxes.
Working out an installment plan to settle unpaid taxes can also be achieved in the Collection Due Process hearing. If you do really owe the IRS money but aren't able to pay the entire amount, you will need to work out a settlement plan with the Office of Appeals. While not the best option, the installment option will be less of a financial problem than having your wages garnished or your bank account levied.
The IRS will continue the levy, until your debt is paid off, it it's released officially, or the statute of limitations is met. If you file for refund within thirty days after the IRS erroneouslyly levied your bank account, your bank charges will be reimbursed.
Your IRS problems will only worsen if you ignore a Levy Notice. To safeguard your assets, it's better to get immediate help.
Tuesday, July 15, 2008
How To Address IRS Tax Problems
As the deadline for filing taxes draws ever nearer, many people are plagued with IRS tax problems. IRS issues can be costly, complicated, and overwhelming, from excessive tax debt to surprise penalties. The IRS has an army of employees eager to get your money. Having some basic tax knowledge and the assistance of a Tax Specialist, you can safeguard your earnings by escaping harsh fees.
Be aware that you're not alone if you're faced with IRS tax problems. Each year, thousands of Americans are not able to settle their taxes on time or get notice of a problem from the IRS. Usually, the IRS is the one at fault and fails to give correct information on your rights as a taxpayer. You have to be persistent and informed when dealing with the IRS. You can pursue the course of action that is in your best interest if you are informed of your options and you know your rights.
A common tax issue is not being able to pay your taxes on time, resulting in excessive penalties and interest. Using Form 4868, you can file for an extension and explain why you cannot settle the taxes. In a financial crisis, the Form 9465 can be used to negotiate an Installment Agreement. With this, the IRS will not be able to enforce property seizure, wage garnishment, and other drastic measures.
Another common issue met by those dealing with IRS tax problems is incurring penalties added to your tax bill. Penalties can be imposed on taxes already settled, and the IRS can charge you at will with over 140 penalties. Between 10-100% of the owed amount is the range of penalties. The IRS assesses penalties for a score of reasons, including mistakes on tax returns, filing late, and settling late. Fortunately, there are several options for avoiding penalty fees.
The simplest and least stressful method for handling IRS tax issues is to employ the assistance of a Tax Specialist. These are people knowledgeable in the complicated details of tax law and the numerous loopholes existing in it. A Tax Specialist could be an accountant, a lawyer, or even an ex-IRS officer. Look online for a Tax Services Specialist in your locality, making sure to check their credentials and experience prior to scheduling a meeting.
If you get penalties by not reporting income or filing or settling taxes late, you can request a Penalty Abatement. Documented circumstances like a death in the family, hospitalization, or a natural disaster are valid excuses. You can file a Penalty Abatement request on your own or with the help of a Tax Specialist at the IRS Service Center in your area. Address it to the Penalty Abatement Coordinator, attach documentation such as a death certificate, doctor's letter, or insurance statement, and attach a copy of the IRS penalty notice. It is simpler to handle your tax problems if you know your rights.
Be aware that you're not alone if you're faced with IRS tax problems. Each year, thousands of Americans are not able to settle their taxes on time or get notice of a problem from the IRS. Usually, the IRS is the one at fault and fails to give correct information on your rights as a taxpayer. You have to be persistent and informed when dealing with the IRS. You can pursue the course of action that is in your best interest if you are informed of your options and you know your rights.
A common tax issue is not being able to pay your taxes on time, resulting in excessive penalties and interest. Using Form 4868, you can file for an extension and explain why you cannot settle the taxes. In a financial crisis, the Form 9465 can be used to negotiate an Installment Agreement. With this, the IRS will not be able to enforce property seizure, wage garnishment, and other drastic measures.
Another common issue met by those dealing with IRS tax problems is incurring penalties added to your tax bill. Penalties can be imposed on taxes already settled, and the IRS can charge you at will with over 140 penalties. Between 10-100% of the owed amount is the range of penalties. The IRS assesses penalties for a score of reasons, including mistakes on tax returns, filing late, and settling late. Fortunately, there are several options for avoiding penalty fees.
The simplest and least stressful method for handling IRS tax issues is to employ the assistance of a Tax Specialist. These are people knowledgeable in the complicated details of tax law and the numerous loopholes existing in it. A Tax Specialist could be an accountant, a lawyer, or even an ex-IRS officer. Look online for a Tax Services Specialist in your locality, making sure to check their credentials and experience prior to scheduling a meeting.
If you get penalties by not reporting income or filing or settling taxes late, you can request a Penalty Abatement. Documented circumstances like a death in the family, hospitalization, or a natural disaster are valid excuses. You can file a Penalty Abatement request on your own or with the help of a Tax Specialist at the IRS Service Center in your area. Address it to the Penalty Abatement Coordinator, attach documentation such as a death certificate, doctor's letter, or insurance statement, and attach a copy of the IRS penalty notice. It is simpler to handle your tax problems if you know your rights.
Saturday, July 12, 2008
The IRS Cannot Touch These Types of Income
To prevent IRS problems like a wise taxpayer, you understand you should not be paying less or more of what you owe the IRS in taxes. What numerous taxpayers do not realize is that there are various income types that the government cannot collect taxes on legally.
Because tax law doesn't allow it, the IRS cannot tax particular types of income. You can keep your money if you understand what the IRS can't tax you with, but to prevent tax problems, you must do it right.
One of these types of income is tax-free interest. This is income earned from instruments like state-issued bonds, or any other political entity which is entitled to freedom from federal taxes. Municipal bonds is the common name for these types of investment instruments, and the value of their tax benefit basically rises when your marginal tax rate increases. Essentially, if your overall income rises, the value of the bonds increases in parallel.
Money earned from charging payments in a car pool is a source of income that can't be taxed. If you happen to drive to work every day in a car pool and charge your passengers a small payment, that money can be excluded from your reported earnings without an IRS problem.
The selling of a house is a source of income that involves many people. When you sell your house, you can exclude revenue gained of up to $250,000. If 2 people file a joint tax return, the amount can go as high as $500,000. You don't have to reinvest the money and you can claim this exclusion every 2 years. Also, if you happen to sell your home earlier than the two years, you will still be able to claim a partial exclusion. As an example, you can exclude half of the $250,000 limit if you sold your house after a single year and you made a revenue of $75,000. Since that $75,000 is less than half of the $250,000, you can, in essence, pay no sales tax on that transaction. An error, though, could cost you $75,000 rather than keeping it, so be sure you do this right by consulting a tax professional as there are other restrictions.
A lot of people think that a raise can only be had as more money in their paychecks. You may in truth be able to ask your employer for a more unique way of a raise, depending on your situation. For example, if you get your employer to pick up the cost of a better insurance option, this saves you money and makes it impossible for the IRS to tax your raise. Also, if you pick a higher healthcare policy, you would be making those payments with after-tax money, compared to having your employer cover the payment for you. When you pick an option such as this, you win in numerous ways without the hassle of addressing any potential IRS issues.
Because tax law doesn't allow it, the IRS cannot tax particular types of income. You can keep your money if you understand what the IRS can't tax you with, but to prevent tax problems, you must do it right.
One of these types of income is tax-free interest. This is income earned from instruments like state-issued bonds, or any other political entity which is entitled to freedom from federal taxes. Municipal bonds is the common name for these types of investment instruments, and the value of their tax benefit basically rises when your marginal tax rate increases. Essentially, if your overall income rises, the value of the bonds increases in parallel.
Money earned from charging payments in a car pool is a source of income that can't be taxed. If you happen to drive to work every day in a car pool and charge your passengers a small payment, that money can be excluded from your reported earnings without an IRS problem.
The selling of a house is a source of income that involves many people. When you sell your house, you can exclude revenue gained of up to $250,000. If 2 people file a joint tax return, the amount can go as high as $500,000. You don't have to reinvest the money and you can claim this exclusion every 2 years. Also, if you happen to sell your home earlier than the two years, you will still be able to claim a partial exclusion. As an example, you can exclude half of the $250,000 limit if you sold your house after a single year and you made a revenue of $75,000. Since that $75,000 is less than half of the $250,000, you can, in essence, pay no sales tax on that transaction. An error, though, could cost you $75,000 rather than keeping it, so be sure you do this right by consulting a tax professional as there are other restrictions.
A lot of people think that a raise can only be had as more money in their paychecks. You may in truth be able to ask your employer for a more unique way of a raise, depending on your situation. For example, if you get your employer to pick up the cost of a better insurance option, this saves you money and makes it impossible for the IRS to tax your raise. Also, if you pick a higher healthcare policy, you would be making those payments with after-tax money, compared to having your employer cover the payment for you. When you pick an option such as this, you win in numerous ways without the hassle of addressing any potential IRS issues.
Wednesday, July 9, 2008
How To Keep Your Money If You Earn Over 100K
The case is definitely common. The rich gets away with settling taxes because of all the tax loopholes. As a result, the poor ends up giving more money to the IRS than they do!
The system has been abused over the years. Tax professionals can definitely find loopholes to let people pay less taxes. However, only the people making at least $100,000 yearly can afford them. Taking advantage of a loophole and acting illegally are considerably different. If you wish to pay less taxes while keeping the IRS away or staying out of prison, there are various steps you must avoid and some steps you can do.
People who make more than $100,000 each year pay almost 60% of all taxes. Because the IRS focuses their attention on people within this bracket, they have a higher likelihood of being audited. In case there is an IRS problem or audit, always save important records to use as reference and keep your exposure to a minimum.
How they are cheating the IRS of taxes with offshore accounts are what most people like to show off about. These people typically get caught. This is because anyone who reports such offenders are rewarded by the IRS of up to 10% of the amount settled through their fraud hotline. Such offenders can get what they deserve if you keep your ears open.
You have likely heard of 'secret' ways and strategies to avoid paying taxes to the IRS. The tax code is on hand to anyone who wants to study it. Do you really believe there are various secrets out there? Almost all of these 'secret' methods that are being sold to people wanting to keep their money out of the government's hands have been rejected by the IRS, and then again when the problem was brought to court. Not only will you face rejection, you can be fined up to $25,000 for blatantly wasting the government's effort with a frivolous tax return.
The deduction of business expenses is a loophole normally abused by business owners. The IRS has cause to audit them when they try to deduct personal expenses as business expenses. If you don't want IRS problems on your hands, it's best to distinguish between personal and business expenses.
The system has been abused over the years. Tax professionals can definitely find loopholes to let people pay less taxes. However, only the people making at least $100,000 yearly can afford them. Taking advantage of a loophole and acting illegally are considerably different. If you wish to pay less taxes while keeping the IRS away or staying out of prison, there are various steps you must avoid and some steps you can do.
People who make more than $100,000 each year pay almost 60% of all taxes. Because the IRS focuses their attention on people within this bracket, they have a higher likelihood of being audited. In case there is an IRS problem or audit, always save important records to use as reference and keep your exposure to a minimum.
How they are cheating the IRS of taxes with offshore accounts are what most people like to show off about. These people typically get caught. This is because anyone who reports such offenders are rewarded by the IRS of up to 10% of the amount settled through their fraud hotline. Such offenders can get what they deserve if you keep your ears open.
You have likely heard of 'secret' ways and strategies to avoid paying taxes to the IRS. The tax code is on hand to anyone who wants to study it. Do you really believe there are various secrets out there? Almost all of these 'secret' methods that are being sold to people wanting to keep their money out of the government's hands have been rejected by the IRS, and then again when the problem was brought to court. Not only will you face rejection, you can be fined up to $25,000 for blatantly wasting the government's effort with a frivolous tax return.
The deduction of business expenses is a loophole normally abused by business owners. The IRS has cause to audit them when they try to deduct personal expenses as business expenses. If you don't want IRS problems on your hands, it's best to distinguish between personal and business expenses.
Sunday, July 6, 2008
Is the IRS's Automated Collection System Efficient?
What's the Automated Collection System? Controlling IDRS (Integrated Data Retrieval System) non-filer and balance due cases that require communication via telephone is the ACS (Automated Collection System). Suffice to say, taxpayers who owe the IRS money is a major IRS problem, and the ACS contacts these taxpayers through its computerized network.
Data saved in the ACS include taxpayer and audit details. This was developed in the 1980s to provide taxpayer examiners an opportunity to communicate with delinquent taxpayers, examine cases, and issue notices.
Every item of information that is saved in the ACS is verified by other methods, such as bank statements, corporate files, court records, and by contacting creditors. The system is built with checks for consistency and validity.
The question remains if the ACS is an effective method to collect taxes. A hearing to decide if private methods were better than the ACS was held by congress.
An IRS National Taxpayer Advocate, Nina Olsen emphasizes that ACS is less costly than privatization. The private program costs $12 million each year to utilize plus commissions of up to 24% with net revenues of only $11 million.
The ACS, on the other hand, can bring in revenues of $91.8 million to $145 million with just $7 million in investment and no commissions. As opposed to the privatization of collections that cost the government $81 million per year, this is more feasible.
On the flip side, the IRS reasons that it has resorted to outsourcing because it can't afford to hire more revenue employees to address the IRS issue of debt collection. They're currently addressing in-house particular cases they regained from private collection firms to test the effectiveness of the method. They intend to determine which method is more effective by comparing the outcomes.
The use of private collectors, rather than hiring revenue employees puts at risk taxpayer information and is more expensive, according to Colleen Kelley, NTEU, or National Treasury Employees Union, president.
Kelley also stresses that IRS officers are the most cost effective tax collectors in the United States, costing only 40 cents for each $100 collected. She states that with this resource, there is no need to outsource to private debt collection.
Compared to private debt collection, utilizing the ACS is more cost effective. With the work of IRS officers, the government has the opportunity to regain revenues.
Data saved in the ACS include taxpayer and audit details. This was developed in the 1980s to provide taxpayer examiners an opportunity to communicate with delinquent taxpayers, examine cases, and issue notices.
Every item of information that is saved in the ACS is verified by other methods, such as bank statements, corporate files, court records, and by contacting creditors. The system is built with checks for consistency and validity.
The question remains if the ACS is an effective method to collect taxes. A hearing to decide if private methods were better than the ACS was held by congress.
An IRS National Taxpayer Advocate, Nina Olsen emphasizes that ACS is less costly than privatization. The private program costs $12 million each year to utilize plus commissions of up to 24% with net revenues of only $11 million.
The ACS, on the other hand, can bring in revenues of $91.8 million to $145 million with just $7 million in investment and no commissions. As opposed to the privatization of collections that cost the government $81 million per year, this is more feasible.
On the flip side, the IRS reasons that it has resorted to outsourcing because it can't afford to hire more revenue employees to address the IRS issue of debt collection. They're currently addressing in-house particular cases they regained from private collection firms to test the effectiveness of the method. They intend to determine which method is more effective by comparing the outcomes.
The use of private collectors, rather than hiring revenue employees puts at risk taxpayer information and is more expensive, according to Colleen Kelley, NTEU, or National Treasury Employees Union, president.
Kelley also stresses that IRS officers are the most cost effective tax collectors in the United States, costing only 40 cents for each $100 collected. She states that with this resource, there is no need to outsource to private debt collection.
Compared to private debt collection, utilizing the ACS is more cost effective. With the work of IRS officers, the government has the opportunity to regain revenues.
Thursday, July 3, 2008
Filing and IRS Bankruptcy Guidelines
In its original sense, bankruptcy already has a bad tone and this negativity is increased with the new developments in the laws governing it. For many people, however, this becomes their only bet. Hence, it is important that we comprehend what the concept really is, what the filing requisites and guidelines are and what the process is. The option to refer to a Tampa tax lawyer should not be missed as his services is instrumental in bankruptcy filings.
First, how is bankruptcy defined? It is when a person or business is deemed unable to pay his dues. There are three different forms, or more legally referred to as Chapters, of bankruptcy for individuals, married or domestic partners. Let’s take a glance at each Chapter.
• Chapter 7 – debtors, mostly individuals or couples, are given the time to liquidate their assets to settle their debts and given permission to handle sufficient money to help them redeem their balance in the financial arena.
• Chapter 12 – especially designed for family farmers and fishermen
• Chapter 13 is also named as “debt reorganization.” This is for people who show the ability to settle some or all of their debts. Usually, debtors are given three to five years to pay off their debts.
Business entities can employ the use of Chapters 7, 11 or 15. In the first chapter, businesses are closed as a result of bankruptcy. The 2nd option allows businesses to stay in operation while re-organizing their debts. Chapter 15 focuses more on foreign debt management. To reiterate, the importance of employing the services of a Tampa tax lawyer should not be taken for granted.
What is covered under bankruptcy relief? Credit card debt, medicine bills, and unsecured loans are examples of debt that can be covered. Child or spousal support and some tax debts are not covered.
What are the filing requisites? Again, this is an area where a Tampa tax lawyer can give worthy pieces of information. The bankruptcy provisions were reworked in 2005, making the procedures more complex and challenging for debtors. Written below are some rules and regulations:
• A pile of documents detailing your income as well as expenses is needed to support your filed bankruptcy.
• Debt counseling from pre-approved counseling institutions is needed six months before filing.
• You need to meet income requisites, which should fall somewhere in your state’s median income. Incidentally, this changes from one place to another.
There are two ways in checking if you qualify for Chapter 7:
a. Turn to the US Trustee Program of the Department of Justice
b. Seek advice from a qualified Tampa tax lawyer
Now, the ultimate question is on how to file for bankruptcy. Yes, you can do it by yourself but the fact that this is a legal process implores for the services of a Tampa tax lawyer. Then , after deciding as to which provision you will file under, whether Chapter 7 or 13, you can now file your claim in any bankruptcy court. A trustee, in charge of ensuring you have all the information, is then assigned to you. You will also be obliged to inform your creditors so they will cease in their attempts of collecting payment from you. As your bankruptcy claim is being deliberated, you may be required to confer with your creditors. With all these specific guidelines, it can be seen that filing for bankruptcy is a long process; you are then required to muster sufficient patience to wait it out.
Finally, what is the consequence of a bankruptcy claim to your income taxes or IRS standing? It depends. First, a forgiven debt is considered a taxable income, except in the case of bankruptcy. Second, filing for one shrinks the other tax benefits entitled to a debtor. Third, it generates a bankruptcy estate, which includes all your assets and is considered a separate taxable entity when the claim is filed under Chapter 7 or 11. Consequently you have to pay taxes for this other asset.
The rules and guidelines of bankruptcy can be very daunting. For more information, you can check with the IRS for specific tax inquiries. You should also consult with a Tampa tax lawyer. The choice to file for bankruptcy is a monumental life decision: make sure you are equipped with all the assistance and paperwork you need to make an informed choice.
First, how is bankruptcy defined? It is when a person or business is deemed unable to pay his dues. There are three different forms, or more legally referred to as Chapters, of bankruptcy for individuals, married or domestic partners. Let’s take a glance at each Chapter.
• Chapter 7 – debtors, mostly individuals or couples, are given the time to liquidate their assets to settle their debts and given permission to handle sufficient money to help them redeem their balance in the financial arena.
• Chapter 12 – especially designed for family farmers and fishermen
• Chapter 13 is also named as “debt reorganization.” This is for people who show the ability to settle some or all of their debts. Usually, debtors are given three to five years to pay off their debts.
Business entities can employ the use of Chapters 7, 11 or 15. In the first chapter, businesses are closed as a result of bankruptcy. The 2nd option allows businesses to stay in operation while re-organizing their debts. Chapter 15 focuses more on foreign debt management. To reiterate, the importance of employing the services of a Tampa tax lawyer should not be taken for granted.
What is covered under bankruptcy relief? Credit card debt, medicine bills, and unsecured loans are examples of debt that can be covered. Child or spousal support and some tax debts are not covered.
What are the filing requisites? Again, this is an area where a Tampa tax lawyer can give worthy pieces of information. The bankruptcy provisions were reworked in 2005, making the procedures more complex and challenging for debtors. Written below are some rules and regulations:
• A pile of documents detailing your income as well as expenses is needed to support your filed bankruptcy.
• Debt counseling from pre-approved counseling institutions is needed six months before filing.
• You need to meet income requisites, which should fall somewhere in your state’s median income. Incidentally, this changes from one place to another.
There are two ways in checking if you qualify for Chapter 7:
a. Turn to the US Trustee Program of the Department of Justice
b. Seek advice from a qualified Tampa tax lawyer
Now, the ultimate question is on how to file for bankruptcy. Yes, you can do it by yourself but the fact that this is a legal process implores for the services of a Tampa tax lawyer. Then , after deciding as to which provision you will file under, whether Chapter 7 or 13, you can now file your claim in any bankruptcy court. A trustee, in charge of ensuring you have all the information, is then assigned to you. You will also be obliged to inform your creditors so they will cease in their attempts of collecting payment from you. As your bankruptcy claim is being deliberated, you may be required to confer with your creditors. With all these specific guidelines, it can be seen that filing for bankruptcy is a long process; you are then required to muster sufficient patience to wait it out.
Finally, what is the consequence of a bankruptcy claim to your income taxes or IRS standing? It depends. First, a forgiven debt is considered a taxable income, except in the case of bankruptcy. Second, filing for one shrinks the other tax benefits entitled to a debtor. Third, it generates a bankruptcy estate, which includes all your assets and is considered a separate taxable entity when the claim is filed under Chapter 7 or 11. Consequently you have to pay taxes for this other asset.
The rules and guidelines of bankruptcy can be very daunting. For more information, you can check with the IRS for specific tax inquiries. You should also consult with a Tampa tax lawyer. The choice to file for bankruptcy is a monumental life decision: make sure you are equipped with all the assistance and paperwork you need to make an informed choice.
Monday, June 30, 2008
Filing Taxes Checklist
It does not hurt to have a checklist that you can apply as a guide when you are gathering everything you require to make sure that you'll have no issues when tax time does come around. Effectively following these steps will let you address the trouble of filing your taxes and make the entire process much easier and less stressful than it has to be.
When you decide that you are ready to do your taxes and get everything prepared to mail out, you must ensure that you actually get serious about the entire thing. You must pay attention and stay focused. Mistakes could lead to a huge IRS problem, that is why you must avoid getting distracted by other thigs. Even if you're not going to sit down and do your taxes in one sitting, you can do other things like plot certain times when you know that you must focus on so you can get ready accordingly.
The next step after you focus is to start the task at hand. Getting everything prepared is done by many people. They can get other things done, except the most essential task - their tax returns. An essay due the next day is the best way to get college students to tidy their room. The same thing occurs to many adults when it comes time to file their taxes. They'll get other things ready, and then procrastinate until they end up filing an extension. The issue that many people face is that when they really begin doing their taxes, everything moves quite slowly. You'll be breezing through those tax forms eventually, though, because this won't last long. You just have to get started.
You are lucky if you do not have too many income sources or assets because your taxes will be considerably simple. You are all good because all you should do is accomplish a W-2 form and a 1040EZ. If your finances are a little more complex, though, you seriously must get organized. You can represent yourself in an audit without showing up with a box full of receipts, and filing taxes will be easier.
You should keep yourself updated of the tax code's recent ammendments. The latest guidelines might affect your circumstance, and you may be able to maximize your deductions. You can read up on updates online, or read all 298 pages of the free IRS Publication 17 to get informed. To help you out, you can also employ a tax professional.
When you decide that you are ready to do your taxes and get everything prepared to mail out, you must ensure that you actually get serious about the entire thing. You must pay attention and stay focused. Mistakes could lead to a huge IRS problem, that is why you must avoid getting distracted by other thigs. Even if you're not going to sit down and do your taxes in one sitting, you can do other things like plot certain times when you know that you must focus on so you can get ready accordingly.
The next step after you focus is to start the task at hand. Getting everything prepared is done by many people. They can get other things done, except the most essential task - their tax returns. An essay due the next day is the best way to get college students to tidy their room. The same thing occurs to many adults when it comes time to file their taxes. They'll get other things ready, and then procrastinate until they end up filing an extension. The issue that many people face is that when they really begin doing their taxes, everything moves quite slowly. You'll be breezing through those tax forms eventually, though, because this won't last long. You just have to get started.
You are lucky if you do not have too many income sources or assets because your taxes will be considerably simple. You are all good because all you should do is accomplish a W-2 form and a 1040EZ. If your finances are a little more complex, though, you seriously must get organized. You can represent yourself in an audit without showing up with a box full of receipts, and filing taxes will be easier.
You should keep yourself updated of the tax code's recent ammendments. The latest guidelines might affect your circumstance, and you may be able to maximize your deductions. You can read up on updates online, or read all 298 pages of the free IRS Publication 17 to get informed. To help you out, you can also employ a tax professional.
Friday, June 27, 2008
The IRS Can't Collect If You are Bankrupt!
Many people need to pay money because of problems financially. To collect tax debts, the IRS uses particular techniques, making it the most unforgiving of creditors. You can get the IRS off your bank with the protection made available by a bankruptcy claim.
Bankruptcy is typically misunderstood by taxpayers. It is viewed as a simple method to escape from debts. This is not so. Bankruptcy was first created as a method that allows people to look for legal debt relief, and that includes tax debt relief. When you file for a Chapter 7 bankruptcy, there's a considerable chance that, along with all of your regular debts, your tax debt will also be cancelled. There's no guarantee that tax debt will be considered, but this can occur. For anyone filing a Chapter 11, 12, or 13 bankruptcy, they'll be provided the opportunity to convince the IRS into settling for an installment plan and settle their IRS problem.
Filing for bankruptcy gives you an 'automatic stay', legally protecting you from all actions against you made by the IRS and other creditors. The sole way for the automatic stay to be lifted is when creditors appeal to the bankruptcy court. But this happens very rarely. Creditors such as the IRS should prove fraud in the bankruptcy claim for an automatic stay to be lifted. A more serious IRS issue is inevitable if fraud is uncovered.
Tax debts are simply frozen until the bankruptcy claim is dismissed or discharged. The statute of limitations is lengthened and continued when bankruptcy is dismissed.
The sole form of bankruptcy that will clear any tax debts definitely is the Chapter 7 bankruptcy. For tax debts to be eligible for discharge in a Chapter 7 bankruptcy claim, certain conditions must be accomplished. For instance, the three-year rule have to be met during the bankruptcy proceeding. A tax return filed at least 3 years prior to filing for bankruptcy is the basis for tax debts in the 3-year rule. This includes extensions, although often pertaining to April 15 of the year the return was filed.
Taxes filed two years prior to bankruptcy is included in the two-year rule. Taxes assessed 240 days prior to filing the bankruptcy claim is applicable in the 240-day rule.
If a tax lien was filed prior to filing bankruptcy, the IRS still has rights to the taxpayer's property, even by filing a Chapter 7 bankruptcy. The IRS applies this significant loophole. The taxpayer basically is bought time to settle the IRS problem by re-organization when a Chapter 11, 12, or 13 bankruptcy is filed.
Bankruptcy is typically misunderstood by taxpayers. It is viewed as a simple method to escape from debts. This is not so. Bankruptcy was first created as a method that allows people to look for legal debt relief, and that includes tax debt relief. When you file for a Chapter 7 bankruptcy, there's a considerable chance that, along with all of your regular debts, your tax debt will also be cancelled. There's no guarantee that tax debt will be considered, but this can occur. For anyone filing a Chapter 11, 12, or 13 bankruptcy, they'll be provided the opportunity to convince the IRS into settling for an installment plan and settle their IRS problem.
Filing for bankruptcy gives you an 'automatic stay', legally protecting you from all actions against you made by the IRS and other creditors. The sole way for the automatic stay to be lifted is when creditors appeal to the bankruptcy court. But this happens very rarely. Creditors such as the IRS should prove fraud in the bankruptcy claim for an automatic stay to be lifted. A more serious IRS issue is inevitable if fraud is uncovered.
Tax debts are simply frozen until the bankruptcy claim is dismissed or discharged. The statute of limitations is lengthened and continued when bankruptcy is dismissed.
The sole form of bankruptcy that will clear any tax debts definitely is the Chapter 7 bankruptcy. For tax debts to be eligible for discharge in a Chapter 7 bankruptcy claim, certain conditions must be accomplished. For instance, the three-year rule have to be met during the bankruptcy proceeding. A tax return filed at least 3 years prior to filing for bankruptcy is the basis for tax debts in the 3-year rule. This includes extensions, although often pertaining to April 15 of the year the return was filed.
Taxes filed two years prior to bankruptcy is included in the two-year rule. Taxes assessed 240 days prior to filing the bankruptcy claim is applicable in the 240-day rule.
If a tax lien was filed prior to filing bankruptcy, the IRS still has rights to the taxpayer's property, even by filing a Chapter 7 bankruptcy. The IRS applies this significant loophole. The taxpayer basically is bought time to settle the IRS problem by re-organization when a Chapter 11, 12, or 13 bankruptcy is filed.
Tuesday, June 24, 2008
Procedures in Back Taxes Filing
People do not file their taxes for many reasons. The inconvenient reality, however, is that the IRS still requires the filing of late and back taxes even though most of the reasons for doing otherwise are acceptable. To classify, late taxes include those returns that should have been filed for a single year while back taxes are the tax dues dating as early as the mid 1980’s. Doing so will certainly help you lessen and avoid probable problems with the IRS.
There might be occasions when all tax records are not available. This is especially true in cases of fire, flood and other natural calamities when all of a person’s belongings are damaged. The great news is that a tax attorney or an accountant can help in the reconstruction or retracing of a client’s tax records dating as far back as 15 to 20 years ago. These options make the area of back taxes clearer.
A number of circumstances, including simply not having enough funds to settle the amount due on their returns, cause many taxpayers to have accumulated back taxes. But alternatives for filing a missing tax return or back taxes are always available. This move keeps you from potentially paying for a substantial penalty of 25%, which is the fee for late tax returns. Certain states, however, penalize you with larger fees if you fail to file your income tax return.
If you are able to keep all of your tax information from previous years, a great amount of time and effort can be saved. What you just have to do now is prepare your tax returns. It is at this point that many people will see the need for professional assistance in order to avoid further IRS issues. The thought of not knowing whether or not you owe back taxes or knowing that you haven’t paid for this is agonizing. Clients have observed that just making an appointment to meet with a tax professional who can help them sort through the web of forms and procedures makes their worries vaish.
Many people assume that back taxes can be filed through electronic filing methods. This, however, is not acceptable as these requests should be hand-delivered or mailed to the IRS. To have proof that the IRS has received these documents, you must send them using certified mail.
Those who are aware that they owe the IRS any amount of money will be required to pay the applicable interest and fees. In such a case, you can ask the IRS to help you set up a payment plan.
Filing for back taxes can actually be a relatively quick and easy process. What worsens the situation is your refusal to immediately deal with the issue and inaction in filing and paying back taxes. At worst, these IRS issues may cause you to owe substantial amounts of money and face more serious consequences.
There might be occasions when all tax records are not available. This is especially true in cases of fire, flood and other natural calamities when all of a person’s belongings are damaged. The great news is that a tax attorney or an accountant can help in the reconstruction or retracing of a client’s tax records dating as far back as 15 to 20 years ago. These options make the area of back taxes clearer.
A number of circumstances, including simply not having enough funds to settle the amount due on their returns, cause many taxpayers to have accumulated back taxes. But alternatives for filing a missing tax return or back taxes are always available. This move keeps you from potentially paying for a substantial penalty of 25%, which is the fee for late tax returns. Certain states, however, penalize you with larger fees if you fail to file your income tax return.
If you are able to keep all of your tax information from previous years, a great amount of time and effort can be saved. What you just have to do now is prepare your tax returns. It is at this point that many people will see the need for professional assistance in order to avoid further IRS issues. The thought of not knowing whether or not you owe back taxes or knowing that you haven’t paid for this is agonizing. Clients have observed that just making an appointment to meet with a tax professional who can help them sort through the web of forms and procedures makes their worries vaish.
Many people assume that back taxes can be filed through electronic filing methods. This, however, is not acceptable as these requests should be hand-delivered or mailed to the IRS. To have proof that the IRS has received these documents, you must send them using certified mail.
Those who are aware that they owe the IRS any amount of money will be required to pay the applicable interest and fees. In such a case, you can ask the IRS to help you set up a payment plan.
Filing for back taxes can actually be a relatively quick and easy process. What worsens the situation is your refusal to immediately deal with the issue and inaction in filing and paying back taxes. At worst, these IRS issues may cause you to owe substantial amounts of money and face more serious consequences.
Saturday, June 21, 2008
Paying Alimony as a Way of Lowering Your Withholding Tax
It appears that the IRS makes itself known in everything you do in your life. Getting married, getting divorced, delivering a baby, transferring to a new job, buying a home and even purchasing an energy efficient car have tax implications. In this article, you will learn how alimony can cause your withholding tax to decrease and how you can get IRS assistance on this area.
Estimated tax and Withholding tax are the ways of paying for federal income taxes. Estimated tax is commonly used by people who work for themselves. To quote the IRS: “estimated tax is used to pay not only income tax, but self-employment tax and alternative minimum tax as well.” Employees, on the contrary, pay their taxes by withholding, meaning their employers withhold income tax from their monthly checks. Whether taxes are taken from your job or other types of income like pensions, gambling winnings, bonuses and commission, they will always be filed under your name.
Your salary and specific data in your W-4 (including details on whether you are withholding at the single rate or the lower married rate, how many withholding allowances you can claim, and whether you want any additional income withheld) influence the amount that will be withheld from your pay. You can use the IRS’ Withholding Calculator for easier computation of your withholdings.
As mentioned before, a number of instances can cause your withholdings to change, and alimony adjustment is among these. How should you go about this method? In general, if you wish to change the amount of income withheld, you have to fill out a new W-4 and forward it to your employer.
Alimony payments are categorized as taxable income. Hence, you should fill out a new W-4 if you are receiving these so this will be reflected as an increase in your income. Doing otherwise might leave you with more taxes to settle at the end of the year.
On the other hand, if you are the one paying for the alimony, then this expense is tax deductible. For the alimony to qualify as a tax deduction, it has to be given in cash, through a check or through money order. Direct payments to certain bills of an ex-spouse do not qualify as alimony. Again, you simply need to fill out a new W-4 to reflect your expenses on paying for alimony.
Change is unavoidable. When they do occur, be sure to update your personal records so your taxes can be adjusted accordingly.
Estimated tax and Withholding tax are the ways of paying for federal income taxes. Estimated tax is commonly used by people who work for themselves. To quote the IRS: “estimated tax is used to pay not only income tax, but self-employment tax and alternative minimum tax as well.” Employees, on the contrary, pay their taxes by withholding, meaning their employers withhold income tax from their monthly checks. Whether taxes are taken from your job or other types of income like pensions, gambling winnings, bonuses and commission, they will always be filed under your name.
Your salary and specific data in your W-4 (including details on whether you are withholding at the single rate or the lower married rate, how many withholding allowances you can claim, and whether you want any additional income withheld) influence the amount that will be withheld from your pay. You can use the IRS’ Withholding Calculator for easier computation of your withholdings.
As mentioned before, a number of instances can cause your withholdings to change, and alimony adjustment is among these. How should you go about this method? In general, if you wish to change the amount of income withheld, you have to fill out a new W-4 and forward it to your employer.
Alimony payments are categorized as taxable income. Hence, you should fill out a new W-4 if you are receiving these so this will be reflected as an increase in your income. Doing otherwise might leave you with more taxes to settle at the end of the year.
On the other hand, if you are the one paying for the alimony, then this expense is tax deductible. For the alimony to qualify as a tax deduction, it has to be given in cash, through a check or through money order. Direct payments to certain bills of an ex-spouse do not qualify as alimony. Again, you simply need to fill out a new W-4 to reflect your expenses on paying for alimony.
Change is unavoidable. When they do occur, be sure to update your personal records so your taxes can be adjusted accordingly.
Wednesday, June 18, 2008
Handling IRS Collections Procedures
Filing your tax return without putting in the amount due yet is the first phase in the IRS collections process. The IRS will then send you a bill for the amount owed. This first bill will just bear the reason for the amount due and then require you to make a payment in full. Another notice, this time this will reflect applicable charges, will be sent to you if you do not pay attention to the first bill. Continuing to ignore what the IRS sends you would lea to the receipt of notices that are more threatening in nature. These notices, on the other hand, follow a specific format and are sent in a particular order. You can actually look these up from the IRS to find out more details about them and know what each actually means. The bottomline is, if you get these letters, you clearly have problems with the IRS that need to be settled as soon as possible.
If you believe that the IRS committed errors in the computation of your taxes, you can send them a letter or even make a phone call and request for a discussion of your bill. They will be more than happy to grant this request and make the necessary adjustments should it be proven that they incurred some mistakes. If you already settled your bill yet still continue to receive IRS notices, you can just send them your proof of payment. Just ensure that you never send any original documents so will always have support data on your IRS payments.
If the bill bears the correct tax due and you are required to pay the full amount, several payment options are available. If the bill is a substantial amount of money and you feel you cannot pay it in full, you may request for an installment payment plan agreement. In this agreement however, you will be paying for the debt over time and still incur the applicable fees for any unpaid balance or be penalized until you finish paying off the full amount.
If, at the present, you are truly unable to make even a partial payment, it may be possible to convince the IRS to defer their collection efforts for a given length of time. During this time, you would be considered currently not collective. On the other hand, such state still entitles you to fees and further interests that will most likely accrue. This will only compound your IRS problem.
Offer in Compromise, also known as OIC, is one of the options that IRS offers to those who have problems paying their taxes. In this arrangement, you will only be required to pay a certain amount of your total dues, and the remaining portion is forgiven. Although you will be required to undergo a more stringent process, applying for this option is worth the risk. OIC effectively ends your IRS problems, at least until the next year.
In a number of occasions, all you really need to do is simply contact your nearest IRS office to settle your IRS tax issues. Some incidents, however, require that you employ the services of a professional tax attorney for advice on IRS collections methods. Even though you are in debt, you still have the right to be treated fairly and in a just manner. Just remember that it is to your advantage to respond to any IRS notice. Otherwise, they will resort to enforced collections process, which is much more invasive than the usual notices you will receive in the mail.
If you believe that the IRS committed errors in the computation of your taxes, you can send them a letter or even make a phone call and request for a discussion of your bill. They will be more than happy to grant this request and make the necessary adjustments should it be proven that they incurred some mistakes. If you already settled your bill yet still continue to receive IRS notices, you can just send them your proof of payment. Just ensure that you never send any original documents so will always have support data on your IRS payments.
If the bill bears the correct tax due and you are required to pay the full amount, several payment options are available. If the bill is a substantial amount of money and you feel you cannot pay it in full, you may request for an installment payment plan agreement. In this agreement however, you will be paying for the debt over time and still incur the applicable fees for any unpaid balance or be penalized until you finish paying off the full amount.
If, at the present, you are truly unable to make even a partial payment, it may be possible to convince the IRS to defer their collection efforts for a given length of time. During this time, you would be considered currently not collective. On the other hand, such state still entitles you to fees and further interests that will most likely accrue. This will only compound your IRS problem.
Offer in Compromise, also known as OIC, is one of the options that IRS offers to those who have problems paying their taxes. In this arrangement, you will only be required to pay a certain amount of your total dues, and the remaining portion is forgiven. Although you will be required to undergo a more stringent process, applying for this option is worth the risk. OIC effectively ends your IRS problems, at least until the next year.
In a number of occasions, all you really need to do is simply contact your nearest IRS office to settle your IRS tax issues. Some incidents, however, require that you employ the services of a professional tax attorney for advice on IRS collections methods. Even though you are in debt, you still have the right to be treated fairly and in a just manner. Just remember that it is to your advantage to respond to any IRS notice. Otherwise, they will resort to enforced collections process, which is much more invasive than the usual notices you will receive in the mail.
Sunday, June 15, 2008
Preventing an IRS Audit
A tax audit is dreaded by many mainly because those who have experienced the process shared horror stories about their experience. The painful reality, however, is that no matter how horrible and outrageous these stories seem, several of them are factual. At any time, both individual tax payers and business entities can be audited by the Internal Revenue Service. But based on statistical data, more or less 1.5% of all tax returns in the United States are ever audited yearly. This is due to the fact that a number of precautions can be taken to reduce your chances of getting an IRS audit.
The first step is making sure you declare all of your income completely, regardless of what source you get it from. No matter if you are an employee, an independent contractor or a business owner, the IRS guidelines clearly state what is required to be reported in a tax return. The simple earnings such as tips also need to be declared in your tax return to avoid IRS problems.
Another good tip in avoiding an IRS audit is ensuring that you have the pertinent documents available to be able to prove everything that you have listed, should it be necessary. One example is your W-2 or the 1099, which is provided by your employer and which reports the amount you have earned in the previous year while employed in that particular company. Verify as well that the numbers in your W-2 are the same as those on your tax return.
Ensuring that there are no mathematical errors in your tax return is another simple yet equally important tip. The IRS is quick to spot this kind of errors as these are very easy to recognize. You have to double check that the correct entries are in the correct lines of the tax forms. To the IRS, being sloppy in doing the math means being sloppy in all other areas of the tax return.
A common mistake that self-employed business owners or contractors commit is think that they use their home offices strictly for business. To qualify for the associated deductions, a home office should only be utilized for business purposes. Simply declaring that you have a home office is questionable and will bring your tax return to the attention of the IRS. Since this is the case, you may want to make sure that you have a solid case against any issues they may have so that you do not end up having a big IRS problem. A simple example is the fact that occasionally working in your dining room does not mean that such can be considered a home office. You should not keep personal belongings in your home office and personal activities such as parties or other social gatherings must not occur there. In addition, not more than 20% of your home should be declared as home office.
Although it may seem that the government is against you and you cannot adequately battle an audit, certain precautions are available to avoid one. Another important thing to remember is to remain calm and keep in mind that there are options you can take to protect yourself. After all, you would not want a small glitch in your tax return to cause you more inconvenience, would you?
The first step is making sure you declare all of your income completely, regardless of what source you get it from. No matter if you are an employee, an independent contractor or a business owner, the IRS guidelines clearly state what is required to be reported in a tax return. The simple earnings such as tips also need to be declared in your tax return to avoid IRS problems.
Another good tip in avoiding an IRS audit is ensuring that you have the pertinent documents available to be able to prove everything that you have listed, should it be necessary. One example is your W-2 or the 1099, which is provided by your employer and which reports the amount you have earned in the previous year while employed in that particular company. Verify as well that the numbers in your W-2 are the same as those on your tax return.
Ensuring that there are no mathematical errors in your tax return is another simple yet equally important tip. The IRS is quick to spot this kind of errors as these are very easy to recognize. You have to double check that the correct entries are in the correct lines of the tax forms. To the IRS, being sloppy in doing the math means being sloppy in all other areas of the tax return.
A common mistake that self-employed business owners or contractors commit is think that they use their home offices strictly for business. To qualify for the associated deductions, a home office should only be utilized for business purposes. Simply declaring that you have a home office is questionable and will bring your tax return to the attention of the IRS. Since this is the case, you may want to make sure that you have a solid case against any issues they may have so that you do not end up having a big IRS problem. A simple example is the fact that occasionally working in your dining room does not mean that such can be considered a home office. You should not keep personal belongings in your home office and personal activities such as parties or other social gatherings must not occur there. In addition, not more than 20% of your home should be declared as home office.
Although it may seem that the government is against you and you cannot adequately battle an audit, certain precautions are available to avoid one. Another important thing to remember is to remain calm and keep in mind that there are options you can take to protect yourself. After all, you would not want a small glitch in your tax return to cause you more inconvenience, would you?
Thursday, June 12, 2008
What You Need to Learn About Offer in Compromise
The ultimate purpose of an Offer in Compromise or an OIC, is the settlement and eradication your tax debt. This is an arrangement where both parties, composed of you as the taxpayer and the IRS, arrive at a mutually beneficial agreement.
Generally, the IRS entertains applications for OIC so that unpaid debts can be settled at a lower amount. A requirement of this payment scheme is your ability to prove that the full amount can’t be collected from you anymore. In the OIC, you will declare the amount that you feel you can afford to pay and this should be a reasonable one. This should be directly proportional to the likelihood that the full amount owed can be collected in the future.
If you would like to apply for an Offer in Compromise, it is a requisite that you have filed all of your tax returns for the applicable years you wish to compromise on for the debt. The government may have kept records of your dues but an OIC application will not be accepted if you can’t show your official tax returns. You will also be required to state the earnings that you could have earned during those years. Filing all of your tax returns also ensures that you will not be imprisoned for failing to do so. However, the possibility of being imprisoned as a result of tax issues is still a present in some instances.
While many people think that the Offer in Compromise has a great deal to do with how much you actually owe the IRS, they are mistaken. A greater factor is how much the IRS believes they will be able to collect from you. The central focus of your OIC is this belief and understanding. Taxpayers who are submitting an OIC, need to prove or otherwise demonstrate to the IRS that they will not be able to provide more money than what is offered in the said application. When done accurately, the likelihood that the OIC will be accepted is greatly increased.
While you are waiting for the decision on your OIC, the IRS will be attempting to collect the money from you. To collect your tax dues, they will enforce wage garnishments, tax liens or levies. Fortunately, you have the option to appeal to any of these collection methods by going through a process called the Collection Due Process Appeal. During the actual hearing, you can utilize an installment agreement and payment plan or your OIC. Both of these are substitutes to the collection methods that the IRS will be implementing.
To conclude, remember that tax debts will be settled eventually. Even if the IRS deems that you are capable of paying the full amount, if you can adequately demonstrate otherwise, you will still be able to put an end to these tax problems. As long as the IRS believes that tax settlement lowers overhead costs, it would agree to arrange one because such is important in keeping tax administration effective.
Generally, the IRS entertains applications for OIC so that unpaid debts can be settled at a lower amount. A requirement of this payment scheme is your ability to prove that the full amount can’t be collected from you anymore. In the OIC, you will declare the amount that you feel you can afford to pay and this should be a reasonable one. This should be directly proportional to the likelihood that the full amount owed can be collected in the future.
If you would like to apply for an Offer in Compromise, it is a requisite that you have filed all of your tax returns for the applicable years you wish to compromise on for the debt. The government may have kept records of your dues but an OIC application will not be accepted if you can’t show your official tax returns. You will also be required to state the earnings that you could have earned during those years. Filing all of your tax returns also ensures that you will not be imprisoned for failing to do so. However, the possibility of being imprisoned as a result of tax issues is still a present in some instances.
While many people think that the Offer in Compromise has a great deal to do with how much you actually owe the IRS, they are mistaken. A greater factor is how much the IRS believes they will be able to collect from you. The central focus of your OIC is this belief and understanding. Taxpayers who are submitting an OIC, need to prove or otherwise demonstrate to the IRS that they will not be able to provide more money than what is offered in the said application. When done accurately, the likelihood that the OIC will be accepted is greatly increased.
While you are waiting for the decision on your OIC, the IRS will be attempting to collect the money from you. To collect your tax dues, they will enforce wage garnishments, tax liens or levies. Fortunately, you have the option to appeal to any of these collection methods by going through a process called the Collection Due Process Appeal. During the actual hearing, you can utilize an installment agreement and payment plan or your OIC. Both of these are substitutes to the collection methods that the IRS will be implementing.
To conclude, remember that tax debts will be settled eventually. Even if the IRS deems that you are capable of paying the full amount, if you can adequately demonstrate otherwise, you will still be able to put an end to these tax problems. As long as the IRS believes that tax settlement lowers overhead costs, it would agree to arrange one because such is important in keeping tax administration effective.
Monday, June 9, 2008
Information about the Federal Tax Levy
Wage levies and bank account levies are two of the primary methods that the IRS utilizes for tax debt collection. Getting notices for any of the two means that you are in serious danger with the IRS.
The IRS has the authority to levy your wages, including retirement income, social security benefits and other bonuses, if you incur substantial tax debts. In fact, the IRS can directly garnish your paycheck without having to go through a trial. A simple notice from them obliges your employer to transfer a considerable amount of your paycheck to the IRS. Full payment of total taxes due and a levy release are your only alternatives in ending wage garnishment.
The IRS can actually go after your clients if you are an independent contractor or self-employed and require them to pay a certain amount on your behalf. Although you will still get something from them, this amount is significantly less than the amount that you could have earned. Questions and clarifications about this issue can be answered by referring to the IRS Publication 1494.
Issuing a bank account levy is the IRS’ second primary method of collecting tax debts. This method allows the IRS to take all of your money in any of the bank accounts registered under your name. There is no use arguing with your bank as they will always say their hands are tied up and they cannot defy a government order. However, only funds that are in your bank account on the day the levy is received will be frozen by the banks. Hypothetically, if the bank gets the levy notice on a Tuesday and you deposit a check on Friday, the IRS cannot take the money deposited on Friday unless they have another levy
You have up to 21 days to get a levy release if the IRS enforces a bank account levy on you. If under any circumstance you can’t obtain the levy release or you simply do nothing, the bank will transfer the funds frozen in your account to the IRS. They can send up to the actual amount that you owe the IRS. However, issuing repeated bank levies allows the Internal Revenue Service to take more money from any of your bank accounts.
Wage and bank account levies are just among the collection methods adopted by the IRS. If worse comes to worse, they can also levy your personal belongings like jewelry, house, insurance policies and collectables. Hence, be sure to promptly pay all your taxes so the IRS will not impose a tax levy on your income and your belongings.
The Federal tax levy is a serious issue no matter how you look at it. For anyone who owes the IRS any amount in tax debt, it is highly recommended that they pay off those debts before the government uses more serious collection methods like wage garnishment and bank account levies.
The IRS has the authority to levy your wages, including retirement income, social security benefits and other bonuses, if you incur substantial tax debts. In fact, the IRS can directly garnish your paycheck without having to go through a trial. A simple notice from them obliges your employer to transfer a considerable amount of your paycheck to the IRS. Full payment of total taxes due and a levy release are your only alternatives in ending wage garnishment.
The IRS can actually go after your clients if you are an independent contractor or self-employed and require them to pay a certain amount on your behalf. Although you will still get something from them, this amount is significantly less than the amount that you could have earned. Questions and clarifications about this issue can be answered by referring to the IRS Publication 1494.
Issuing a bank account levy is the IRS’ second primary method of collecting tax debts. This method allows the IRS to take all of your money in any of the bank accounts registered under your name. There is no use arguing with your bank as they will always say their hands are tied up and they cannot defy a government order. However, only funds that are in your bank account on the day the levy is received will be frozen by the banks. Hypothetically, if the bank gets the levy notice on a Tuesday and you deposit a check on Friday, the IRS cannot take the money deposited on Friday unless they have another levy
You have up to 21 days to get a levy release if the IRS enforces a bank account levy on you. If under any circumstance you can’t obtain the levy release or you simply do nothing, the bank will transfer the funds frozen in your account to the IRS. They can send up to the actual amount that you owe the IRS. However, issuing repeated bank levies allows the Internal Revenue Service to take more money from any of your bank accounts.
Wage and bank account levies are just among the collection methods adopted by the IRS. If worse comes to worse, they can also levy your personal belongings like jewelry, house, insurance policies and collectables. Hence, be sure to promptly pay all your taxes so the IRS will not impose a tax levy on your income and your belongings.
The Federal tax levy is a serious issue no matter how you look at it. For anyone who owes the IRS any amount in tax debt, it is highly recommended that they pay off those debts before the government uses more serious collection methods like wage garnishment and bank account levies.
Friday, June 6, 2008
Information about Filing an Amended Tax Return
It is always in your best interest to file for an amended tax return if you found out that there were mistakes on last year’s tax return or the one you just sent off in the mail. You do not want the IRS to learn about the discrepancy because this could lead to serious IRS problem for you in the future. There are instances when the IRS simply identifies and rectifies math errors and informs you of any changes. This will not necessitate you to file for an amended tax return. However, there are certain errors that you do not want the IRS to discover themselves and that call for you to file the amended tax return.
The most common errors are related to your deductions or credits, your total income, dependents and filing status. When you send a corrected tax return to the IRS, you may even be able to receive a refund. But if the error you made does not lead to you receiving more money, and in fact incurs any penalties, it is best to own up to that mistake as well.
Tax returns submitted through Forms 1040EZ, 1040A or 1040 can be amended using Form 1040x, Amended U.S. Individual Income Tax Return. Be sure to mail your requests for amendments as the IRS electronic system still doesn’t accept Forms 1040x. Essentially, pieces of information that need to be corrected as well as the reasons for such are the items that you will put in the 1040x.
The usual reasons to filing for amended tax returns include a correction in filing status. Taxpayers normally change status from single to a head of household filer. Such change entitles you to a refund as there is a considerable difference in the deductions available to those who qualify for head of household status.
If you have dutifully paid the taxes on the tax return in question, you may file for an amendment within the three year period following the return’s filing date. Otherwise, your grace period is lessened to only two years.
If you have discovered an error in the return you recently filed, it is best to wait until a refund is received and all the paperwork has been processed before you file for an amended tax return. This saves you from any mix up in your tax records or any duplication in your paperwork.
On the other side, there are circumstances when additional costs are incurred when filing for an amended tax return. No matter how tempting the choice of simply running away is, honesty and filing for an amended tax return will always pay off in the long run. This will truly avoid future problems as the IRS will eventually find out about this mistake. Also, there is also a higher possibility that the IRS will charge lesser fees to mistakes brought to their attention.
The most common errors are related to your deductions or credits, your total income, dependents and filing status. When you send a corrected tax return to the IRS, you may even be able to receive a refund. But if the error you made does not lead to you receiving more money, and in fact incurs any penalties, it is best to own up to that mistake as well.
Tax returns submitted through Forms 1040EZ, 1040A or 1040 can be amended using Form 1040x, Amended U.S. Individual Income Tax Return. Be sure to mail your requests for amendments as the IRS electronic system still doesn’t accept Forms 1040x. Essentially, pieces of information that need to be corrected as well as the reasons for such are the items that you will put in the 1040x.
The usual reasons to filing for amended tax returns include a correction in filing status. Taxpayers normally change status from single to a head of household filer. Such change entitles you to a refund as there is a considerable difference in the deductions available to those who qualify for head of household status.
If you have dutifully paid the taxes on the tax return in question, you may file for an amendment within the three year period following the return’s filing date. Otherwise, your grace period is lessened to only two years.
If you have discovered an error in the return you recently filed, it is best to wait until a refund is received and all the paperwork has been processed before you file for an amended tax return. This saves you from any mix up in your tax records or any duplication in your paperwork.
On the other side, there are circumstances when additional costs are incurred when filing for an amended tax return. No matter how tempting the choice of simply running away is, honesty and filing for an amended tax return will always pay off in the long run. This will truly avoid future problems as the IRS will eventually find out about this mistake. Also, there is also a higher possibility that the IRS will charge lesser fees to mistakes brought to their attention.
Tuesday, June 3, 2008
All You Need to Know About IRS Penalties
Feelings of anxiety when talking about IRS penalties and back taxes are normal and valid. Fortunately, guidelines and procedures aimed at providing regular taxpayers some recourse when dealing with IRS issues are available. Taxpayers can ultimately be released from back taxes and other penalties through negotiations and installment plans.
To review, cases like not filing tax returns, incorrectly filing of taxes, misleading the IRS and not paying quarterly taxes endanger taxpayers for penalties. For information on the entire list of penalties, including the processes on penalty abatement and assessment, you may refer to the Penalty Handbook. This goes to show then that aside from the taxes collected, the government also earns through the interests enforced on some delinquent taxpayers.
With the intention of ensuring that the IRS does the penalties assessment accurately, the government made several options available for all taxpayers. Recent updates to the IRS policies now make the process of dismissing penalties a relatively simpler one. While it is still rather difficult in comparison to the nearly impossible battle it once was, times have changed considerably.
Taxpayers learn about interests, levels and abatement of penalties by reading the IRS Penalties Handbook. When taxpayers are well-informed about the nature of these penalties, they will discover ways of reducing their odds of being subjected to these as well.
The IRS Penalty Policy Statement implies that penalties are technically no longer automatic. You may qualify for an IRS abatement of penalties, or a cancellation of some or all of your penalties, if you can justify your actions and prove that they were done on good faith.
You may ask how much the IRS earns from the collection of penalties alone. Approximately, the figure goes over $15 billion. Not only is this a big source of income for the IRS, conversely, it is also the cause of a great deal of frustration on the part of taxpayers.
It is the accumulation of the original tax due and the applicable penalties that makes matters worse for a lot of people. Usually, the total amount due is doubled or even tripled in a very short span of time as interests are accrued on the new, larger sum. This results to difficulty in paying off the full amount.
When you get an IRS notice indicating a possible problem resulting from some tax dues, you can actually respond and request from them a cancellation of these penalties. This response is the first stage to the penalties abatement process, which, fortunately, can be availed of by all taxpayers. If proven that you did not willfully defraud the IRS, the “good faith exception clause” in the provisions of IRS penalties can actually be used. In summary, although IRS penalties signify danger to you and your assets, their effects can always be reduced, if not altogether eliminated, by using the options available to all taxpayers.
To review, cases like not filing tax returns, incorrectly filing of taxes, misleading the IRS and not paying quarterly taxes endanger taxpayers for penalties. For information on the entire list of penalties, including the processes on penalty abatement and assessment, you may refer to the Penalty Handbook. This goes to show then that aside from the taxes collected, the government also earns through the interests enforced on some delinquent taxpayers.
With the intention of ensuring that the IRS does the penalties assessment accurately, the government made several options available for all taxpayers. Recent updates to the IRS policies now make the process of dismissing penalties a relatively simpler one. While it is still rather difficult in comparison to the nearly impossible battle it once was, times have changed considerably.
Taxpayers learn about interests, levels and abatement of penalties by reading the IRS Penalties Handbook. When taxpayers are well-informed about the nature of these penalties, they will discover ways of reducing their odds of being subjected to these as well.
The IRS Penalty Policy Statement implies that penalties are technically no longer automatic. You may qualify for an IRS abatement of penalties, or a cancellation of some or all of your penalties, if you can justify your actions and prove that they were done on good faith.
You may ask how much the IRS earns from the collection of penalties alone. Approximately, the figure goes over $15 billion. Not only is this a big source of income for the IRS, conversely, it is also the cause of a great deal of frustration on the part of taxpayers.
It is the accumulation of the original tax due and the applicable penalties that makes matters worse for a lot of people. Usually, the total amount due is doubled or even tripled in a very short span of time as interests are accrued on the new, larger sum. This results to difficulty in paying off the full amount.
When you get an IRS notice indicating a possible problem resulting from some tax dues, you can actually respond and request from them a cancellation of these penalties. This response is the first stage to the penalties abatement process, which, fortunately, can be availed of by all taxpayers. If proven that you did not willfully defraud the IRS, the “good faith exception clause” in the provisions of IRS penalties can actually be used. In summary, although IRS penalties signify danger to you and your assets, their effects can always be reduced, if not altogether eliminated, by using the options available to all taxpayers.
Friday, May 30, 2008
Normal IRS Audit Flags
Two things in life are guaranteed to make everyone cringe: root canals and IRS audit. You will be able to avoid a root canal if you take care of your teeth. Similarly, you'll be able to avoid an IRS audit by avoiding particular practices and take care of your financial well-being. The IRS may have to audit you if many red flags appear.
In an audit, the accuracy of your tax returns is determined by the IRS. You need to be able to prove particular deductions.
Remember these IRS audit flags:
* Making over $100,000.
* Considerable income changes. Proof of which is required.
* Charitable donations are too much. Donations must be proven with receipts.
* Inconsistencies in current and past returns. You should be able to prove that you had a name change, address change, etc.
* If self-employed, too much deductions.
* Inconsistent state and federal returns.
* Tax returns are unreadable or incomplete.
By truthfully filing your tax returns, you can steer clear of an audit by the IRS. Documentation need to be saved for at least three years. Follow the following tips to avoid more problems:
* Know your rights like you can conduct the audit by mail and you do not need to meet with the IRS, pay in installments, and question the audit's accuracy.
* Be prepared to show receipts by gathering documentation.
* Talk to a professional if you find the issue too complex.
* If it's an honest mistake, you have nothing to fear.
* Do not reveal more details than required.
* Do not panic because accuracy is merely checked and you are not being accused of anything.
Prevent your IRS issue from becoming a nightmare. If you cannot avoid audits, stay calm if you are flagged for one. You can always consult a lawyer for help.
In an audit, the accuracy of your tax returns is determined by the IRS. You need to be able to prove particular deductions.
Remember these IRS audit flags:
* Making over $100,000.
* Considerable income changes. Proof of which is required.
* Charitable donations are too much. Donations must be proven with receipts.
* Inconsistencies in current and past returns. You should be able to prove that you had a name change, address change, etc.
* If self-employed, too much deductions.
* Inconsistent state and federal returns.
* Tax returns are unreadable or incomplete.
By truthfully filing your tax returns, you can steer clear of an audit by the IRS. Documentation need to be saved for at least three years. Follow the following tips to avoid more problems:
* Know your rights like you can conduct the audit by mail and you do not need to meet with the IRS, pay in installments, and question the audit's accuracy.
* Be prepared to show receipts by gathering documentation.
* Talk to a professional if you find the issue too complex.
* If it's an honest mistake, you have nothing to fear.
* Do not reveal more details than required.
* Do not panic because accuracy is merely checked and you are not being accused of anything.
Prevent your IRS issue from becoming a nightmare. If you cannot avoid audits, stay calm if you are flagged for one. You can always consult a lawyer for help.
Tuesday, May 27, 2008
The Long Arm of IRS Jurisdiction
There are certain people who try to avoid paying taxes by circumventing the law because they do not know how far and wide the IRS extends. Tax "protesters" normally try to question the jurisdiction of the IRS and the constitutionality. So you do not end up suffering IRS problems in the future, you should know the laws as a taxpayer. Let's take a look at jurisdiction and the extent of the Internal Revenue Service.
A term often heard on movies, jurisdiction provides leaders the authority to enforce punishment when handling legal matters.
Since it has jurisdiction over all US taxpayers and those who make income in the US, the IRS is a bit amorphous. It's absolutely likely to suffer IRS issues if you fail to understand that you're a taxpayer, or that you have obligations to pay taxes.
Here is an excerpt from Title 26 of the Code of Federal Regulations which pertains to the IRS:
"The Internal Revenue Service is a bureau of the Department of the Treasury under the immediate direction of the Commissioner of Internal Revenue. The Commissioner has general superintendence of the assessment and collection of all taxes imposed by any law providing internal revenue. The Internal Revenue Service is the agency by which these functions are performed."
The IRS has jurisdiction over you as a taxpayer if you're a US citizen making money or living in foreign countries, a non-resident making money in the United States, or a resident of the United States. You'll encounter issues with the IRS if you fail to pay taxes on capital gains, earnings, property, etc.
There are those who do not fall under the jurisdiction of the IRS. In this paragraph from the case of Economy Plumbing and Heating Co. vs. The United States, it explains that non-taxpayers are excluded from the IRS's rules and regulations:
"The revenue laws are a code or system in regulation of tax assessment and collection. They relate to taxpayers, and not to non-taxpayers. The latter are without their scope. No procedure is prescribed for non-taxpayers, and no attempt is made to annul any of their rights and remedies in due course of law. With them [non-taxpayers] Congress does not assume to deal, and they are neither of the subject nor of the object of the revenue laws."
To avoid IRS issues, you need to find out if you are a non-taxpayer or not. You can find out from your state's tax website or the IRS website.
Tax protesters claim that the 16th Amendment that provided Congress the power to collect taxes on income wasn't officially ratified, questioning the jurisdiction of the IRS. With a majority vote, the 16th Amendment was indeed ratified.
Another frivolous argument is that the IRS has no jurisdiction because it is not a government agency. Actually, because the Secretary of Treasury has enforcement and administration power over the laws of internal revenue, the IRS was created. Arguments such as these will give people IRS problems because the IRS does have jurisdiction over taxpayers.
As a taxpayer, you're under IRS jurisdiction. Inaccurate declaration of income and failure to pay taxes will give you serious IRS problems.
A term often heard on movies, jurisdiction provides leaders the authority to enforce punishment when handling legal matters.
Since it has jurisdiction over all US taxpayers and those who make income in the US, the IRS is a bit amorphous. It's absolutely likely to suffer IRS issues if you fail to understand that you're a taxpayer, or that you have obligations to pay taxes.
Here is an excerpt from Title 26 of the Code of Federal Regulations which pertains to the IRS:
"The Internal Revenue Service is a bureau of the Department of the Treasury under the immediate direction of the Commissioner of Internal Revenue. The Commissioner has general superintendence of the assessment and collection of all taxes imposed by any law providing internal revenue. The Internal Revenue Service is the agency by which these functions are performed."
The IRS has jurisdiction over you as a taxpayer if you're a US citizen making money or living in foreign countries, a non-resident making money in the United States, or a resident of the United States. You'll encounter issues with the IRS if you fail to pay taxes on capital gains, earnings, property, etc.
There are those who do not fall under the jurisdiction of the IRS. In this paragraph from the case of Economy Plumbing and Heating Co. vs. The United States, it explains that non-taxpayers are excluded from the IRS's rules and regulations:
"The revenue laws are a code or system in regulation of tax assessment and collection. They relate to taxpayers, and not to non-taxpayers. The latter are without their scope. No procedure is prescribed for non-taxpayers, and no attempt is made to annul any of their rights and remedies in due course of law. With them [non-taxpayers] Congress does not assume to deal, and they are neither of the subject nor of the object of the revenue laws."
To avoid IRS issues, you need to find out if you are a non-taxpayer or not. You can find out from your state's tax website or the IRS website.
Tax protesters claim that the 16th Amendment that provided Congress the power to collect taxes on income wasn't officially ratified, questioning the jurisdiction of the IRS. With a majority vote, the 16th Amendment was indeed ratified.
Another frivolous argument is that the IRS has no jurisdiction because it is not a government agency. Actually, because the Secretary of Treasury has enforcement and administration power over the laws of internal revenue, the IRS was created. Arguments such as these will give people IRS problems because the IRS does have jurisdiction over taxpayers.
As a taxpayer, you're under IRS jurisdiction. Inaccurate declaration of income and failure to pay taxes will give you serious IRS problems.
Saturday, May 24, 2008
What a Tax Lawyer Can Do For You
If you find yourself overwhelmed by the complex loopholes of tax laws, there are qualified experts to help you. So you can understand the different forms to fill out and the deductions better, there are Tampa tax attorneys to assist you.
The following cases will need the assistance of a Tampa Tax lawyer:
* You have a new business. Even if you handle your personal taxes, business tax laws are a whole other matter.
* The IRS is investigating you.
* You have audits and back tax problems.
* Assistance in real estate or property taxes.
* If your wages have been garnished or bank accounts levied.
So, should you hire a tax lawyer? Advantages are plenty. First, they have experience handling these kinds of cases. Tax attorneys from Tampa have the experience, ability, and knowledge to handle the IRS. Tax attorneys understand the tax laws that may be complicated to you if you represent yourself.
Your rights will be protected. A tax attorney from Tampa will ensure that the IRS only receives the details they require. Your rights to privacy will be protected. Also, they're in a better position to negotiate details because they're more deeply familiar with the tax laws.
A Tampa tax lawyer will take the stress off your shoulders. The proceeding becomes a negotiation between professionals so it is no longer an emotional crisis for you.
Thinking that the IRS will perceive you as guilty if you have a tax attorney is not true. This is not the case. It just means you chose to get a tax attorney from Tampa speak for you because you're aware of your rights. Also, because there are no emotional outbursts to deal with, the IRS would choose to deal with a tax professional. Solutions can be easily negotiated.
In court or in negotiations, you have a valuable counsel in a tax lawyer who's experienced in the tax system. Your attorney will examine your case and advise you of the best possible action. You will also enjoy attorney-client privileges.
What should you look for in a tax lawyer? First, they need to be licensed in your state to practice law. They have to also possess advanced training in tax law, such as a Master's of Law degree in taxation or experience in accounting. Many tax lawyers are also CPAs (Certified Public Accountants). Employ a tax lawyer from Tampa who has relevant experience. Ask directly and also Google him/her.
Let a Tampa tax lawyer deal with your IRS problems to lessen stress.
The following cases will need the assistance of a Tampa Tax lawyer:
* You have a new business. Even if you handle your personal taxes, business tax laws are a whole other matter.
* The IRS is investigating you.
* You have audits and back tax problems.
* Assistance in real estate or property taxes.
* If your wages have been garnished or bank accounts levied.
So, should you hire a tax lawyer? Advantages are plenty. First, they have experience handling these kinds of cases. Tax attorneys from Tampa have the experience, ability, and knowledge to handle the IRS. Tax attorneys understand the tax laws that may be complicated to you if you represent yourself.
Your rights will be protected. A tax attorney from Tampa will ensure that the IRS only receives the details they require. Your rights to privacy will be protected. Also, they're in a better position to negotiate details because they're more deeply familiar with the tax laws.
A Tampa tax lawyer will take the stress off your shoulders. The proceeding becomes a negotiation between professionals so it is no longer an emotional crisis for you.
Thinking that the IRS will perceive you as guilty if you have a tax attorney is not true. This is not the case. It just means you chose to get a tax attorney from Tampa speak for you because you're aware of your rights. Also, because there are no emotional outbursts to deal with, the IRS would choose to deal with a tax professional. Solutions can be easily negotiated.
In court or in negotiations, you have a valuable counsel in a tax lawyer who's experienced in the tax system. Your attorney will examine your case and advise you of the best possible action. You will also enjoy attorney-client privileges.
What should you look for in a tax lawyer? First, they need to be licensed in your state to practice law. They have to also possess advanced training in tax law, such as a Master's of Law degree in taxation or experience in accounting. Many tax lawyers are also CPAs (Certified Public Accountants). Employ a tax lawyer from Tampa who has relevant experience. Ask directly and also Google him/her.
Let a Tampa tax lawyer deal with your IRS problems to lessen stress.
Wednesday, May 21, 2008
What Are the Consequences for Not Filing Your Taxes?
You may think that what you do will be unnoticed by the IRS because of the millions of other taxpayers. What difference does it make if you don't settle your taxes? It makes a big difference, and worse, the IRS will learn. What are the consequences for not filing your taxes? Where can you go for help - can the IRS help?
You will probably think that not filing for your taxes is a small thing but the government sees this as stealing and considers it an offense. There are different levels of penalties depending on your tax status:
* Filing for taxes late
* Penalties for not filing your taxes at all
* Not paying taxes
Aside from being called a delinquent tax payer, a number of serious consequences await you as a result of your actions. Let us delve deeper into the penalties mentioned above.
Late filing gives the least overdue fees. Only a 5% monthly interest is added to your total tax due. However,the maximum charge is 25%. Let us take a look at one example. Filing for your tax in June when the deadline is on April 15 gives you an approximation of 15% fine.
What should you do if April 15 is almost near, and you still did not file your tax return?
This is where the IRS can help you: request for an extension. You just have to accomplish Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return.You then have up to August 15 to file. For more time, you can use form 2688.If no request is forwarded to the IRS, the 5% penalty starts accruing.
You do not buy time to pay for your taxes when you request for an extension. The IRS laws state that you settle at least 90% of the total taxable amount by April 15 or you will be burdened with a 0.5% monthly penalty. With this, we are now ready to tackle the next type of penalty.
For sure, not paying the whole amount is better than not filing at all. Again, let us illustrate this by saying that you owe $5000. Just paying $1000 gives you a penalty of only 0.5% on $4000, which is a mere $20 monthly. This demonstrates then that you need to file and pay in whatever way you can.
Not paying for your taxes after a number of consecutive months may implore the IRS to resort to more serious action. First, the penalty gets larger by 1% monthly. Then, the IRS may urge you to mortgage assets or file for a loan. Last but not the least, they can employ more rigorous collection methods like wage garnishment and levying bank accounts.
Before situations get overwhelming, refer to the IRS for assistance. They are not the Big Bad Wolf they are often made out to be. You may request them for 30-120 days extension. You may also be able to come up with a payment plan. Other forms of IRS help include installment plans, temporary delays and Offer in Compromise, among others. To know more about these alternatives, you can visit the IRS website.
The most serious penalties are given to those who do not even bother to file for their taxes. Apart from making it hard to get IRS assistance this situation involves huge amount of interests. 5% - 25% of the total taxable amount is charged to you on a monthly basis. Consider the case of a person owing $5000 and is 5 months late for filing. You can compute the penalty using the formula: 5% X 5 X $5000. This costs you another $1250, more than one-fifth of the amount you originally owe.
The IRS may fill out a return and mail the bills and fees to a tax payer who, after a while, refuses to file. The IRS-completed return will not offer the taxpayer deductions he would otherwise be entitled to.The IRS may press for criminal or civil charges should the above move prove to be futile. To avoid arriving at these sorry situations, ask for the assistance of the IRS. Surely, you can arrive at options that will not result to serious consequences.
You will probably think that not filing for your taxes is a small thing but the government sees this as stealing and considers it an offense. There are different levels of penalties depending on your tax status:
* Filing for taxes late
* Penalties for not filing your taxes at all
* Not paying taxes
Aside from being called a delinquent tax payer, a number of serious consequences await you as a result of your actions. Let us delve deeper into the penalties mentioned above.
Late filing gives the least overdue fees. Only a 5% monthly interest is added to your total tax due. However,the maximum charge is 25%. Let us take a look at one example. Filing for your tax in June when the deadline is on April 15 gives you an approximation of 15% fine.
What should you do if April 15 is almost near, and you still did not file your tax return?
This is where the IRS can help you: request for an extension. You just have to accomplish Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return.You then have up to August 15 to file. For more time, you can use form 2688.If no request is forwarded to the IRS, the 5% penalty starts accruing.
You do not buy time to pay for your taxes when you request for an extension. The IRS laws state that you settle at least 90% of the total taxable amount by April 15 or you will be burdened with a 0.5% monthly penalty. With this, we are now ready to tackle the next type of penalty.
For sure, not paying the whole amount is better than not filing at all. Again, let us illustrate this by saying that you owe $5000. Just paying $1000 gives you a penalty of only 0.5% on $4000, which is a mere $20 monthly. This demonstrates then that you need to file and pay in whatever way you can.
Not paying for your taxes after a number of consecutive months may implore the IRS to resort to more serious action. First, the penalty gets larger by 1% monthly. Then, the IRS may urge you to mortgage assets or file for a loan. Last but not the least, they can employ more rigorous collection methods like wage garnishment and levying bank accounts.
Before situations get overwhelming, refer to the IRS for assistance. They are not the Big Bad Wolf they are often made out to be. You may request them for 30-120 days extension. You may also be able to come up with a payment plan. Other forms of IRS help include installment plans, temporary delays and Offer in Compromise, among others. To know more about these alternatives, you can visit the IRS website.
The most serious penalties are given to those who do not even bother to file for their taxes. Apart from making it hard to get IRS assistance this situation involves huge amount of interests. 5% - 25% of the total taxable amount is charged to you on a monthly basis. Consider the case of a person owing $5000 and is 5 months late for filing. You can compute the penalty using the formula: 5% X 5 X $5000. This costs you another $1250, more than one-fifth of the amount you originally owe.
The IRS may fill out a return and mail the bills and fees to a tax payer who, after a while, refuses to file. The IRS-completed return will not offer the taxpayer deductions he would otherwise be entitled to.The IRS may press for criminal or civil charges should the above move prove to be futile. To avoid arriving at these sorry situations, ask for the assistance of the IRS. Surely, you can arrive at options that will not result to serious consequences.
Sunday, May 18, 2008
Rightful Ways of Reducing Your Taxes
Tax time can be a difficult time for many, especially the non-accountants and non-tax lawyers. Should you go for the standard deduction or itemize? If you itemize, what can you claim? This article is a short discussion of what tax deductions are, what are the common types to avail of, how to know if you qualify and how to take advantage of them. For additional specific IRS assistance, it is best to consult an accountant.
To explain, tax deductions are those expenses that a taxpayer incurs as a result of a number of reasons and purposes. This deduction is taken from the gross income. This causes the taxable income to decrease, which further means less taxes. Let us take a gross income of $100,000 as an example. The deductions mean less tax because your taxable income is substantially reduced.
There are two types of deductions: the standard deduction and the itemized deduction. A standard deduction is a single dollar amount that is taken from your gross income to determine your taxable income. Different amounts are set for married couples, singles and heads of households. On the other hand, itemized deductions are the corresponding amounts of pre-determined expenses that taxpayers qualify for. IRS and private assistance are always available if you are unsure of which deductions you are entitled to.
Tax credits, which are not the same as deductions are also available. Certain expenses like having children, adopting children, paying college tuition, and energy efficiency, among others, entitle you to a tax credit. The IRS online system and tax forms can give you the criteria for checking your qualifications for certain tax credits. Credits are different from deductions in the sense that the former are deducted from the total taxable income, not the gross income.
Here are a few of the most common tax deductions that we can avail of:
* Fees for professional and business-related associations
* Job-hunting costs
* Job agency fees
* Fees for professional references and magazines
* Union dues
* Work clothes or uniforms
* Expenses for the house and office
* Legal fees to collect taxable income, such as alimony
* Tax advice and tax preparation fees
* Costs Incurred from moving to a new job
* Fees for IRS set-up and administration
* Some legal fees
* Charitable donations
* Business liability costs and insurance premiums
* Tuition fees for job-related classes
When calculating for your taxes, always seek IRS assistance so you don't overpay. The IRS booklet, online information and the online tax preparation service, however, are useful references for itemization if you choose to do this on your own.
A number of ways are available in knowing if you qualify for these deductions. Among these methods is using the instruction booklet. In addition, the online tax preparation service guides you as you go through the process. Obviously, an expert would prove to be of utmost assistance in your claims.
Increasing the amount for refund or decreasing the amount of taxes due are lawfully addressed through tax deductions. Be sure to employ professional assistance to be certain that you claimed what is due - or that you have not wrongfully benefited from some benefits. If you're on your own, make sure you go over instructions very carefully. Many taxpayers in reality, pay too much, so be sure you know what you can and can't use as deductions.
To explain, tax deductions are those expenses that a taxpayer incurs as a result of a number of reasons and purposes. This deduction is taken from the gross income. This causes the taxable income to decrease, which further means less taxes. Let us take a gross income of $100,000 as an example. The deductions mean less tax because your taxable income is substantially reduced.
There are two types of deductions: the standard deduction and the itemized deduction. A standard deduction is a single dollar amount that is taken from your gross income to determine your taxable income. Different amounts are set for married couples, singles and heads of households. On the other hand, itemized deductions are the corresponding amounts of pre-determined expenses that taxpayers qualify for. IRS and private assistance are always available if you are unsure of which deductions you are entitled to.
Tax credits, which are not the same as deductions are also available. Certain expenses like having children, adopting children, paying college tuition, and energy efficiency, among others, entitle you to a tax credit. The IRS online system and tax forms can give you the criteria for checking your qualifications for certain tax credits. Credits are different from deductions in the sense that the former are deducted from the total taxable income, not the gross income.
Here are a few of the most common tax deductions that we can avail of:
* Fees for professional and business-related associations
* Job-hunting costs
* Job agency fees
* Fees for professional references and magazines
* Union dues
* Work clothes or uniforms
* Expenses for the house and office
* Legal fees to collect taxable income, such as alimony
* Tax advice and tax preparation fees
* Costs Incurred from moving to a new job
* Fees for IRS set-up and administration
* Some legal fees
* Charitable donations
* Business liability costs and insurance premiums
* Tuition fees for job-related classes
When calculating for your taxes, always seek IRS assistance so you don't overpay. The IRS booklet, online information and the online tax preparation service, however, are useful references for itemization if you choose to do this on your own.
A number of ways are available in knowing if you qualify for these deductions. Among these methods is using the instruction booklet. In addition, the online tax preparation service guides you as you go through the process. Obviously, an expert would prove to be of utmost assistance in your claims.
Increasing the amount for refund or decreasing the amount of taxes due are lawfully addressed through tax deductions. Be sure to employ professional assistance to be certain that you claimed what is due - or that you have not wrongfully benefited from some benefits. If you're on your own, make sure you go over instructions very carefully. Many taxpayers in reality, pay too much, so be sure you know what you can and can't use as deductions.
Wednesday, May 14, 2008
What Deductions Are Allowed By The IRS?
People find their creative genius when tax time comes. For instance, for fear of a nuclear war, a gentleman made a fallout shelter. He attempted to deduct the costs as a "preventative medical expense." Saying she needed a $5000 mink coat to meet clients, a woman tried to declare it as a business expense. The best is a businessman who hired an arsonist to torch his store. From his taxes, he tried to deduct an arsonist fee of $10,000. The IRS denied that claim, of course.
The common IRS deductions you can take are worthy of a look. To know which deductions the IRS take, talk to a Tampa tax lawyer.
First, let's take a look at common business expenses that are deductible under the IRS laws:
* Business tools (One "adult performer" successfully deducted the cost of breast implants as they were vital to her job. For the rest of us, things such as work clothes and boots are deductible.)
* Union fees or membership fees for professional organizations or associations.
* Training relating to your job.
* Expenses spent during job search.
* Expenses incurred on business trips that are not reimbursed by your company.
* Dry cleaning of work clothes for nurses, police officers, and security guards, like lab coats is deductible.
* Home office.
There are several deductible work expenses. To make sure you take advantage of right ones, contact a Tampa tax lawyer or tax professional for more information. Here are some other common deductibles:
* Mortgage interest of your main or second home's secured loan.
* Premiums for health insurance are often deductible. Ask a tax lawyer from Tampa because there are varying rules. Typically, if your premiums make up 7.5% or more of your income, you may be able to deduct them.
* Student loan interests.
* Fuel-efficient vehicles.
A few deductions that are not-so-common are legitimate. Consult with a tax professional so you do not miss out on these legal deductions.
* Natural disaster tax deductions.
* Your first job's moving expenses.
* Non-cash charitable donations like ingredients for a charity bake sale.
* Up to $250 for expenses spent by teachers that are not reimbursed by the employers.
* Snacks for your employees as long as these aren't considered compensation or salary for work.
* Up to $4000 in college tuition every year.
How do you know which deductions you are entitled to? If you do your taxes with a tax preparation service online, searching online is particularly convenient. To see if you are right for it, the service will walk you through deductions. Check with a tax lawyer from Tampa or an accountant if you would prefer a little more help.
Being aware of which deductions you're entitled to is vital. A dairy farmer's African safari was successfully allowed on the basis that he had to study about wild animals. On the grounds that he needed to look great every, a male model's attempt at deducting his entire designer wardrobe was rejected. Talk to a tax lawyer from Tampa if you're unsure. You wish to get the tax deductions you require, but you need to be cautious.
The common IRS deductions you can take are worthy of a look. To know which deductions the IRS take, talk to a Tampa tax lawyer.
First, let's take a look at common business expenses that are deductible under the IRS laws:
* Business tools (One "adult performer" successfully deducted the cost of breast implants as they were vital to her job. For the rest of us, things such as work clothes and boots are deductible.)
* Union fees or membership fees for professional organizations or associations.
* Training relating to your job.
* Expenses spent during job search.
* Expenses incurred on business trips that are not reimbursed by your company.
* Dry cleaning of work clothes for nurses, police officers, and security guards, like lab coats is deductible.
* Home office.
There are several deductible work expenses. To make sure you take advantage of right ones, contact a Tampa tax lawyer or tax professional for more information. Here are some other common deductibles:
* Mortgage interest of your main or second home's secured loan.
* Premiums for health insurance are often deductible. Ask a tax lawyer from Tampa because there are varying rules. Typically, if your premiums make up 7.5% or more of your income, you may be able to deduct them.
* Student loan interests.
* Fuel-efficient vehicles.
A few deductions that are not-so-common are legitimate. Consult with a tax professional so you do not miss out on these legal deductions.
* Natural disaster tax deductions.
* Your first job's moving expenses.
* Non-cash charitable donations like ingredients for a charity bake sale.
* Up to $250 for expenses spent by teachers that are not reimbursed by the employers.
* Snacks for your employees as long as these aren't considered compensation or salary for work.
* Up to $4000 in college tuition every year.
How do you know which deductions you are entitled to? If you do your taxes with a tax preparation service online, searching online is particularly convenient. To see if you are right for it, the service will walk you through deductions. Check with a tax lawyer from Tampa or an accountant if you would prefer a little more help.
Being aware of which deductions you're entitled to is vital. A dairy farmer's African safari was successfully allowed on the basis that he had to study about wild animals. On the grounds that he needed to look great every, a male model's attempt at deducting his entire designer wardrobe was rejected. Talk to a tax lawyer from Tampa if you're unsure. You wish to get the tax deductions you require, but you need to be cautious.
Friday, February 29, 2008
Your IRS Problems Can Be Fixed With These Audit Tips
If you have IRS issues, one piece of mail you do not want to receive is a notice from the IRS saying that you're being audited. Don't be alarmed if you receive one. You can breeze through your audit and leave your problems behind with these tips:
- Dismissing the notice will not make it go away! The notice will ask you for a response in a specific amount of time (often thirty days). If you do not respond promptly, the next notice from the IRS might be a bill.
- Read the notice carefully and follow directions, as the items you need to take to the audit are on it.
- Save both you and the auditor time by organizing the documents needed for the audit beforehand.
- Records missing? Request duplicates for the required records you're missing. The audit process will be delayed by missing documents. You have to support your case with records. Don't expect the auditor to request the records for you. This is your responsibility.
- Bring the necessary documents to the audit. Don't bring any extra documentation to the audit. If a query arises about information that wasn't requested, just tell them the information is at home. The issue will be dropped.
- Leave your attitude at home.It will not help if you attend the audit angry. If you're courteous and polite, the audit is a piece of cake and the auditor will see things your way.
- Make duplicates of the required documentation to present to the auditor. If you give the auditor the originals, you won't get them back if they get lost. If you do not have the opportunity to have copies made, ask the auditor to make duplicates for you. Take the originals with you after the audit.
- Keep what you say at a bare minimum. "Yes" and "no" are safe answers. Supplying the auditor with more information than is necessary will provide him a reason to require even more documentation. For example, you'll be indicating an increase on your income if you tell him that you have purchased a new car or home. This is a red flag to the auditor for the need to investigate you more.
- As a taxpayer, you have rights. The best option would be to settle at the audit but when needed, know that the right to an appeal is yours.
Thursday, February 14, 2008
Interest Charges
You give yourself IRS problems if you pay your taxes late or don't settle at all. Unpaid tax is considered as borrowed money and the U.S. Congress requires the IRS to charge interest on unpaid taxes. Furthermore, you're also subjected to penalties for late payment.
You'll know you're being punished by the IRS with the interest and penalties on your late/unpaid taxes. The tax bill will double or triple up before you know it. It's because interest is computed against the entire balance, starting on the date the tax was due, and penalties are assessed and compounded on a daily basis.
You will be charged interest, notwithstanding why you have late/unpaid taxes, even if it's just a mathematical error. Compounded on a daily basis and posted every 3 months, interest can go from 4% to 10%, and won't cease to grow until payment is made.
One of the first steps you have to do is ask for a detailed penalty and interest printout. This explanation will show: 1) lists of all your tax penalties and interest computations; 2) dates, interest rates, penalties assessed, and credits for payments or refunds; 3) interest and penalty charges on tax amounts; 4) penalties that were already applied; 5) an account summary reflecting amount due, including updated penalty and interest figures.
Interest may be reduced or cancelled if you are eligible for an Offer in Compromise. Due to IRS delays or if applied in error can only be instances when interest is abated or cancelled. You can determine if the interest and penalties charged to you are truly correct with the help of our office.
You'll know you're being punished by the IRS with the interest and penalties on your late/unpaid taxes. The tax bill will double or triple up before you know it. It's because interest is computed against the entire balance, starting on the date the tax was due, and penalties are assessed and compounded on a daily basis.
You will be charged interest, notwithstanding why you have late/unpaid taxes, even if it's just a mathematical error. Compounded on a daily basis and posted every 3 months, interest can go from 4% to 10%, and won't cease to grow until payment is made.
One of the first steps you have to do is ask for a detailed penalty and interest printout. This explanation will show: 1) lists of all your tax penalties and interest computations; 2) dates, interest rates, penalties assessed, and credits for payments or refunds; 3) interest and penalty charges on tax amounts; 4) penalties that were already applied; 5) an account summary reflecting amount due, including updated penalty and interest figures.
Interest may be reduced or cancelled if you are eligible for an Offer in Compromise. Due to IRS delays or if applied in error can only be instances when interest is abated or cancelled. You can determine if the interest and penalties charged to you are truly correct with the help of our office.
Monday, February 11, 2008
What is Tax Evasion
Tax evasion can be any of 2 things: a taxpayer willfully and knowingly attempted to evade taxes, or a taxpayer owes more tax in addition to what's declared in his tax return.
Tax evasion is a federal offense because the person tries to evade settling federal income taxes. This crime could put you in prison with a maximum sentence of five years and a fine of $100.000.
It doesn't matter how much tax is owed, it only has to be proven that the taxpayer willfully and knowingly evaded taxes.
Penalties for Tax Evasion
Possible criminal prosecution and penalties await tax evaders. Here's a partial roster of civil and criminal penalties:
Civil penalties:
Criminal penalties:
These are criminal penalties and you can be brought to trial.
Tax evasion is a federal offense because the person tries to evade settling federal income taxes. This crime could put you in prison with a maximum sentence of five years and a fine of $100.000.
It doesn't matter how much tax is owed, it only has to be proven that the taxpayer willfully and knowingly evaded taxes.
Penalties for Tax Evasion
Possible criminal prosecution and penalties await tax evaders. Here's a partial roster of civil and criminal penalties:
Civil penalties:
- Failure-to-file penalty can't be more than twenty-five per cent of your tax not paid, five per cent of your tax not paid every month or a fraction thereof.
- Failure-to-pay penalty is half of one percent of your unpaid taxes each month or a part thereof, but not above twenty-five per cent.
- Tax penalty for frivolous return for when you file a return that does not have sufficient information to determine the correct tax or a return that shows an incorrect amount is $500.
- Accuracy-related penalty is 20% for understatement of income tax, or underpayment due to disregard of rules and negligence.
- Information reporting penalties: From $15 to $50, depending on how late the information return is filed.
Criminal penalties:
- Evading taxes
- Fraud and false statements
- Filing fraudulent returns
- Willful failure to file a return
- Supply information
- Pay any tax liability
These are criminal penalties and you can be brought to trial.
Friday, February 8, 2008
Offer in Compromise: File It Right
If you're experiencing IRS issues, a resolution would be an Offer in Compromise or OIC. The IRS will make deals with taxpayers. Your tax liability can be resolved by an OIC. The IRS has the authority to accept less than full payment under some circumstances.
Examine the IRS Form 656 literature before filing an OIC. You will determine if you qualify for an OIC.
There are some conditions that should be satisfied to be eligible for an OIC and these are:
The amount of the OIC is calculated by your assets' realization value and the money that the IRS could collect from your future income.
The realization value of your assets is calculate by the IRS utilizing a "quick sale value" (twenty per cent less than fair market value). Debts on the asset aren't included.
When coming up with this amount, you can exclude most of your household assets and personal effects. You will have to include luxury items such as fur coats and antiques.
The balances of your retirement plans also must be included, minus the taxes and penalties connected with cashing them in, and an explanation of how you came to the figure you supplied.
The IRS Collection Process (IRS Publication 594) has a score of items that you can exclude from your asset calculation.
You deduct your essential living expenses from your total monthly income to establish your future income. This is considered your disposable income. The number associated with the payment plan you propose to use is then multiplied with this amount.
Payment Plans
Examine the IRS Form 656 literature before filing an OIC. You will determine if you qualify for an OIC.
There are some conditions that should be satisfied to be eligible for an OIC and these are:
- Doubt as to collectibility - This is uncertainty on the IRS's part that it'll be able to collect your liability from you now or in the future.
- Doubt as to liability, meaning there is doubt on the accuracy of the assessed taxes or that you even owe the tax bill.
- Effective tax administration by proving that paying the tax bill is unjust as it'll cause you extreme economic crisis.
The amount of the OIC is calculated by your assets' realization value and the money that the IRS could collect from your future income.
The realization value of your assets is calculate by the IRS utilizing a "quick sale value" (twenty per cent less than fair market value). Debts on the asset aren't included.
When coming up with this amount, you can exclude most of your household assets and personal effects. You will have to include luxury items such as fur coats and antiques.
The balances of your retirement plans also must be included, minus the taxes and penalties connected with cashing them in, and an explanation of how you came to the figure you supplied.
The IRS Collection Process (IRS Publication 594) has a score of items that you can exclude from your asset calculation.
You deduct your essential living expenses from your total monthly income to establish your future income. This is considered your disposable income. The number associated with the payment plan you propose to use is then multiplied with this amount.
Payment Plans
- Deferred offer - your future income multiplied by the months left on the statute of limitations.
- Short-term deferred offer - settlement after 91 days but within 2 years after the IRS acceptance notification (future income x 60).
- Cash Offer � You will pay in full within five months of IRS notification that the OIC has been accepted. Multiply your future income by 48.
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