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.
Monday, June 30, 2008
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.
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