Sunday, July 27, 2008

Ultimately Pay the Right Amount By Fixing Your Tax Withholding

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.

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.

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:

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* 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:

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* 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.

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.

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.

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.

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.

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.