At tax time, you don't wish to end up paying the IRS too much or too little. Filling out your W-4 worksheet can be difficult, but if you adjust your tax withholding right, you will be maximizing your efficiency in paying taxes.
You might believe that a large tax refund is a good situation, but it's not. You're basically loaning the government funds less interest when you could be placing that money in a savings account that earns interest. Adding up the portions taken out of your paycheck per month becomes a considerable amount.
What you wish to accomplish when deciding on how much tax withholding you should have is to just pay exactly what you owe in taxes. Obviously, there are plenty of aspects of your tax profile that may change within the year, so it's a good idea to review and check your chosen exemptions at least once a year to ensure that your current level of tax withholding is right. A great time to do this is in the first weeks of November, so that you'll still have enough time to make any alterations prior to the end of the year. If it looks like your paycheck hasn't been withheld with ample money, this is especially important. Also, to steer clear of an IRS problem, 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 some events when you must review your withholding. After any of these events, you need to seriously review your tax withholding amounts to make sure you are not overpaying or underpaying the IRS which would lead to a huge IRS issue.
You can easily steer clear of having to pay the IRS a considerable sum of money by properly filling out your W-4 worksheet. If you take the time to properly accomplish the withholding amount, it is must easier than it looks at first.
Depending on your situation, it's always best to consult with a tax professional to avoid IRS issues. You always need to review and update your W-4 form, especially if you switch to a lower or higher paying job. This will keep you on track.
Sunday, July 27, 2008
Thursday, July 24, 2008
IRS Wage Garnishment Advice
If the Internal Revenue Service serves a notification to your employer that you're under wage garnishment, the company has no choice but to take a considerable portion of your paycheck to give directly to the IRS. You will never see that money, making it as bad as it sounds.
The IRS drastically deducts a considerable 80-85% of your net pay in a wage levy. This means that you will only be taking home $200 out of $1000.
Depending on your particular situation, you may be able to get the IRS wage garnishment released. It's better to work with a tax attorney or other tax professionals who are experts in these situations and can provide quality advice.
Like with all areas of the IRS, there are very particular rules and guidelines relevant to an IRS levy being released and your wage garnishments being stopped. IRS officers who don't adhere to these guidelines face job consequences that are severe. Whether the IRS is telling you the truth that no other options are available or simply giving you the runaround can be determined by a tax professional who is experienced. Oftentimes, the IRS just does not wish to help taxpayers.
When the IRS garnishes your wages, they want to be able to collect and take from you as much money as possible and in the shortest period of time. This is each IRS officer's task. Though numerous people who work in the IRS are quite nice and polite, they all have that underlying and fundamental job characteristics which can eventually ruin your life.
There are certain things to search for in the tax attorney or tax professional who will help you with your wage garnishment situation. First, you must check their success record. Were they successful in dealing with the IRS about wage garnishments in the past? Are they familiar with the guidelines of the IRS? Your tax professional can make sure that the IRS sticks to their own guidelines and goes through the proper channels by knowing the guidelines and rules.
Lastly, do you work well with your tax attorney? You should make sure that you pick somebody you can work with comfortably. Most proceedings take time. You really want someone who you can work with comfortably, or else you will simply make things worse by having employed a tax professional who is hard to work with.
The IRS drastically deducts a considerable 80-85% of your net pay in a wage levy. This means that you will only be taking home $200 out of $1000.
Depending on your particular situation, you may be able to get the IRS wage garnishment released. It's better to work with a tax attorney or other tax professionals who are experts in these situations and can provide quality advice.
Like with all areas of the IRS, there are very particular rules and guidelines relevant to an IRS levy being released and your wage garnishments being stopped. IRS officers who don't adhere to these guidelines face job consequences that are severe. Whether the IRS is telling you the truth that no other options are available or simply giving you the runaround can be determined by a tax professional who is experienced. Oftentimes, the IRS just does not wish to help taxpayers.
When the IRS garnishes your wages, they want to be able to collect and take from you as much money as possible and in the shortest period of time. This is each IRS officer's task. Though numerous people who work in the IRS are quite nice and polite, they all have that underlying and fundamental job characteristics which can eventually ruin your life.
There are certain things to search for in the tax attorney or tax professional who will help you with your wage garnishment situation. First, you must check their success record. Were they successful in dealing with the IRS about wage garnishments in the past? Are they familiar with the guidelines of the IRS? Your tax professional can make sure that the IRS sticks to their own guidelines and goes through the proper channels by knowing the guidelines and rules.
Lastly, do you work well with your tax attorney? You should make sure that you pick somebody you can work with comfortably. Most proceedings take time. You really want someone who you can work with comfortably, or else you will simply make things worse by having employed a tax professional who is hard to work with.
Monday, July 21, 2008
Garnishment of 1099s and Wages
Because creditors take payments direct from paychecks, salary garnishment is a tough situation for people in debt. For a number of reasons, people can have their salary garnished.
When a judgment has been made the defendant, salary garnishment occurs. As a result, the defendant's paycheck is garnished. This means that to pay the plaintiff or creditor, money is directly collected from the paycheck or other income sources. Wages are garnished by these typical reasons:
*
* Debt to credit card companies.
* Child support is owed.
* Unpaid court fines.
* Unpaid taxes.
* Unpaid student loans.
* Other monetary responsibilities.
Differing from state to state, federal law maintains garnishment at twenty-five percent. Few 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 fixed heirarchy for garnishments to be taken: federal, then state, and lastly, credit cards.
When garnishing salary, the IRS has a procedure that has to be followed:
*
* Serve a Notice or Demand for Payment.
* Serve a Final Notice no more than 30 days prior to garnishment. These don't need to be served personally, so a lot of people don't get it and aren't aware that their salary is about to be garnished.
* Unless other settlement arrangements are decided, wages are garnished until debt is paid fully. Garnishment can't be declined.
1099 is the form that is given to freelancers, like writers, actors, and artists who are not employees of particular companies. If a company pays a freelancer $600 or more in a year, they must file a 1099 form. These go to the IRS and report income. 1099 freelancers compute taxes themselves.
If an employee has his wage garnished, the employer has the responsibility to take the settlement out of the paycheck. If the employee resigns and becomes a independent contractor or a 1099 freelancer, then the employer is obviously released from that obligation. Instead of garnishing salary from an employer, the credit can levy the contractor's accounts receivable. This means that the bank account can be levied when an independent contractor gets a check from a company.
The IRS and other creditors can freeze and seize money when a bank account is levied. Until the dues are settled, this can be done.
Having your bank account levied or your salary garnished is serious. To assist you with IRS issues, talk to seasoned lawyers such as Darrin T. Mish.
When a judgment has been made the defendant, salary garnishment occurs. As a result, the defendant's paycheck is garnished. This means that to pay the plaintiff or creditor, money is directly collected from the paycheck or other income sources. Wages are garnished by these typical reasons:
*
* Debt to credit card companies.
* Child support is owed.
* Unpaid court fines.
* Unpaid taxes.
* Unpaid student loans.
* Other monetary responsibilities.
Differing from state to state, federal law maintains garnishment at twenty-five percent. Few 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 fixed heirarchy for garnishments to be taken: federal, then state, and lastly, credit cards.
When garnishing salary, the IRS has a procedure that has to be followed:
*
* Serve a Notice or Demand for Payment.
* Serve a Final Notice no more than 30 days prior to garnishment. These don't need to be served personally, so a lot of people don't get it and aren't aware that their salary is about to be garnished.
* Unless other settlement arrangements are decided, wages are garnished until debt is paid fully. Garnishment can't be declined.
1099 is the form that is given to freelancers, like writers, actors, and artists who are not employees of particular companies. If a company pays a freelancer $600 or more in a year, they must file a 1099 form. These go to the IRS and report income. 1099 freelancers compute taxes themselves.
If an employee has his wage garnished, the employer has the responsibility to take the settlement out of the paycheck. If the employee resigns and becomes a independent contractor or a 1099 freelancer, then the employer is obviously released from that obligation. Instead of garnishing salary from an employer, the credit can levy the contractor's accounts receivable. This means that the bank account can be levied when an independent contractor gets a check from a company.
The IRS and other creditors can freeze and seize money when a bank account is levied. Until the dues are settled, this can be done.
Having your bank account levied or your salary garnished is serious. To assist you with IRS issues, talk to seasoned lawyers such as Darrin T. Mish.
Friday, July 18, 2008
The IRS Levy
An IRS levy is a serious consequence to many common IRS issues such as late payment of taxes. To be able to pay a taxpayer's unpaid penalty or debt, the IRS may empty bank accounts, seize property, or garnish wages with a levy. Your house, your car, retirement accounts, and even rental income may all be levied by the IRS. Upon receipt of a Levy Notice, you have to act fast to stop these financially crippling and drastic methods.
Before a Levy Notice is served, a Demand for Payment will be received. To get assistance in avoiding a levy, ask a tax lawyer and show documentation why the penalties and taxes asked from you weren't paid.
The IRS Levy Notice gives you 30 days to request a Collection Due Process hearing with the local IRS Office of Appeals. You need to prepare for the hearing if advised to do so by your tax attorney. If your taxes were paid and the IRS made a mistake by levying you, you must provide proof in the hearing. When citizens ignore the IRS Levy Notice, they become victims of unfair levies of property and wages.
The IRS is stopped from pursuing a levy by several situations. Making the IRS Office of Appeals aware of these cases is your responsibility. The IRS can't subject you to a levy if you have filed for bankruptcy. You also shouldn't be levied if you've paid the unpaid debt before or quickly following you got the Levy Notice. The statute of limitations is one loophole to stop a levy that many people do not know of. The IRS is stopped from collecting taxes assessed over ten years ago by the statute of limitations. If the tax collection period expired before the IRS served your Levy Notice, you're exempt from the levy and from settling the taxes and penalties.
The Collection Due Process hearing is also a chance to work out an installment plan for paying outstanding taxes. You'll have to work out a payment option with the Office of Appeals if you are not able to pay the entire amount of what you owe the IRS. While not the perfect choice, the installment option will be less of a financial burden than having your wages garnished or your bank account levied.
An IRS levy will go on unless it's officially released, your debt is settled, or you meet the statute of limitations and the IRS can no longer collect those taxes. If your bank account was erroneously levied as an outcome of an IRS error, the IRS will reimburse your bank fees. You should file for refund within 30 days or you will not qualify.
Your IRS issues will only worsen if you ignore a Levy Notice. To protect your assets, it is better to get quick help.
Before a Levy Notice is served, a Demand for Payment will be received. To get assistance in avoiding a levy, ask a tax lawyer and show documentation why the penalties and taxes asked from you weren't paid.
The IRS Levy Notice gives you 30 days to request a Collection Due Process hearing with the local IRS Office of Appeals. You need to prepare for the hearing if advised to do so by your tax attorney. If your taxes were paid and the IRS made a mistake by levying you, you must provide proof in the hearing. When citizens ignore the IRS Levy Notice, they become victims of unfair levies of property and wages.
The IRS is stopped from pursuing a levy by several situations. Making the IRS Office of Appeals aware of these cases is your responsibility. The IRS can't subject you to a levy if you have filed for bankruptcy. You also shouldn't be levied if you've paid the unpaid debt before or quickly following you got the Levy Notice. The statute of limitations is one loophole to stop a levy that many people do not know of. The IRS is stopped from collecting taxes assessed over ten years ago by the statute of limitations. If the tax collection period expired before the IRS served your Levy Notice, you're exempt from the levy and from settling the taxes and penalties.
The Collection Due Process hearing is also a chance to work out an installment plan for paying outstanding taxes. You'll have to work out a payment option with the Office of Appeals if you are not able to pay the entire amount of what you owe the IRS. While not the perfect choice, the installment option will be less of a financial burden than having your wages garnished or your bank account levied.
An IRS levy will go on unless it's officially released, your debt is settled, or you meet the statute of limitations and the IRS can no longer collect those taxes. If your bank account was erroneously levied as an outcome of an IRS error, the IRS will reimburse your bank fees. You should file for refund within 30 days or you will not qualify.
Your IRS issues will only worsen if you ignore a Levy Notice. To protect your assets, it is better to get quick help.
Tuesday, July 15, 2008
IRS Tax Problems and How To Address Them
The IRS wants your money as tax time draws nearer. You will find yourself overwhelmed by complex IRS issues such as tax debt and penalties. You can prevent these by consulting a Tax Specialist and using your basic knowledge on taxes.
Thousands of Americans face IRS issues every year, so you're not alone. It's often the IRS's mistaken. That's why you must be aware of your rights and your choices so you can pursue the best course of action.
Among the most common tax problems people meet is being unable to settle the amount owed in time. Documenting why you can't pay the taxes and filing an extension through the Form 4868 is the simplest fix to this issue. When taxes are not paid, heavy interest and penalties occur. If you are experiencing a financial crisis, an extension normally won't be of benefit. In this case, you have to negotiate an Installment Agreement with the IRS by filing Form 9465. The IRS is prevented from enforcing actions through property seizure or wage garnishment and you can choose the amount you can spare to pay each month if you request for an Installment Agreement.
Another common issue faced by those dealing with IRS tax issues is incurring penalties added to your tax debt. There are over 140 penalties the IRS can charge you with at will, and penalties can even be added to taxes already paid. Penalties can range anywhere from 10% to 100% of the amount owed. The IRS assesses penalties for a multitude of reasons, including mistakes on tax returns, filing late, and paying late. Fortunately, you can avoid penalty fees with several options.
The best way to deal with IRS tax issues is to employ a Tax Specialist. This specialist must be familiar with the many complex loopholes of the tax law like a lawyer, an accountant, or an ex-IRS employee. A local Tax Specialist with excellent experience and a good experience is advised.
Dealing with IRS tax problems becomes considerably easier when you know your options. You can often request a Penalty Abatement for tax penalties. Abatements are usually simpler to qualify for with the assistance of a professional Tax Specialist. But it is possible to prepare a successful Penalty Abatement Request on your own if you do your homework first. Abatements are offered for issues such as filing taxes late, paying taxes late, or not reporting income. Documented circumstances that would hinder a taxpayer like a natural disaster, a death in the family, or being hospitalized are accepted reasons. You must address a letter to the Penalty Abatement Coordinator at your local IRS Service Center to file a Penalty Abatement Request. Give proof of your excuse in the form of insurance statement, a death certificate, or a doctor's letter. You have to also attach a copy of the IRS notice informing you of the penalty.
Thousands of Americans face IRS issues every year, so you're not alone. It's often the IRS's mistaken. That's why you must be aware of your rights and your choices so you can pursue the best course of action.
Among the most common tax problems people meet is being unable to settle the amount owed in time. Documenting why you can't pay the taxes and filing an extension through the Form 4868 is the simplest fix to this issue. When taxes are not paid, heavy interest and penalties occur. If you are experiencing a financial crisis, an extension normally won't be of benefit. In this case, you have to negotiate an Installment Agreement with the IRS by filing Form 9465. The IRS is prevented from enforcing actions through property seizure or wage garnishment and you can choose the amount you can spare to pay each month if you request for an Installment Agreement.
Another common issue faced by those dealing with IRS tax issues is incurring penalties added to your tax debt. There are over 140 penalties the IRS can charge you with at will, and penalties can even be added to taxes already paid. Penalties can range anywhere from 10% to 100% of the amount owed. The IRS assesses penalties for a multitude of reasons, including mistakes on tax returns, filing late, and paying late. Fortunately, you can avoid penalty fees with several options.
The best way to deal with IRS tax issues is to employ a Tax Specialist. This specialist must be familiar with the many complex loopholes of the tax law like a lawyer, an accountant, or an ex-IRS employee. A local Tax Specialist with excellent experience and a good experience is advised.
Dealing with IRS tax problems becomes considerably easier when you know your options. You can often request a Penalty Abatement for tax penalties. Abatements are usually simpler to qualify for with the assistance of a professional Tax Specialist. But it is possible to prepare a successful Penalty Abatement Request on your own if you do your homework first. Abatements are offered for issues such as filing taxes late, paying taxes late, or not reporting income. Documented circumstances that would hinder a taxpayer like a natural disaster, a death in the family, or being hospitalized are accepted reasons. You must address a letter to the Penalty Abatement Coordinator at your local IRS Service Center to file a Penalty Abatement Request. Give proof of your excuse in the form of insurance statement, a death certificate, or a doctor's letter. You have to also attach a copy of the IRS notice informing you of the penalty.
Saturday, July 12, 2008
The IRS Cannot Tax These Types of Income
To avoid IRS problems like a smart taxpayer, you understand you shouldn't be paying less or more of what you owe the IRS in taxes. The government can't legally collect taxes on particular income types, and not many taxpayers realize this.
Since tax law does not allow it, the IRS can't tax particular types of income. Being aware of what the IRS can't tax can help you keep your money, but you should do it correctly to avoid tax issues.
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 that 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 essentially increases when your marginal tax rate goes up. Basically, if your overall income goes up, the value of the bonds increases in parallel.
Making money from a car pool is another income that can't be taxed. You can exclude your car pool profits without IRS issues.
Another source of income that is excluded from taxes is selling your home. If you sell your home, you can exclude up to $250,000 in profits, $500,000 if you file a joint return with your spouse. This exclusion can be claimed every two years. If you sell your home after less than two years, you can also claim a partial exclusion. There are various restrictions, so it is best to consult a tax professional to make sure that you're doing this correctly.
Having an increased paycheck amount is not the only way of getting a raise. Your employer can cover the cost of a higher healthcare policy or a better insurance option instead, if you prefer. You won't need to deal with possible IRS issues because the IRS will not be able to tax your raise.
Since tax law does not allow it, the IRS can't tax particular types of income. Being aware of what the IRS can't tax can help you keep your money, but you should do it correctly to avoid tax issues.
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 that 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 essentially increases when your marginal tax rate goes up. Basically, if your overall income goes up, the value of the bonds increases in parallel.
Making money from a car pool is another income that can't be taxed. You can exclude your car pool profits without IRS issues.
Another source of income that is excluded from taxes is selling your home. If you sell your home, you can exclude up to $250,000 in profits, $500,000 if you file a joint return with your spouse. This exclusion can be claimed every two years. If you sell your home after less than two years, you can also claim a partial exclusion. There are various restrictions, so it is best to consult a tax professional to make sure that you're doing this correctly.
Having an increased paycheck amount is not the only way of getting a raise. Your employer can cover the cost of a higher healthcare policy or a better insurance option instead, if you prefer. You won't need to deal with possible IRS issues because the IRS will not be able to tax your raise.
Wednesday, July 9, 2008
If You Make Over 100K, How Can You Keep Your Money?
You hear the argument each time. The IRS and the government tax everybody else and collect more money from the poor than they do from the rich. So that they do not need to settle any taxes, the rich are always utilizing tax loopholes. They are getting away with criminal activities!
Sometimes this is true. Tax professionals can determine tax loopholes to keep their clients' money out of the IRS's hands, and most people who earn more than $100,000 yearly can avail of their counsel. Over the years, there have really been numerous abuse. But currently, the IRS has made a move to seriously crack down on the obvious abuses of loopholes in the tax code. There's a difference between acting illegally and acting on a tax loophole if you wish to pay less to the government by decreasing tax liability. You will also end up in prison if you move illegally. For the IRS to stay away, there are some steps you must avoid and various steps you can do to safeguard yourself.
People who make over $100,000 every year pay nearly 60% of all taxes. The people within this ranger have a higher danger of being audited because the IRS focuses their effort on them. In case there's an IRS problem or audit, always keep important records to use as reference and keep your exposure to a minimum.
How they're cheating the IRS of taxes through offshore accounts are what most people like to show off about. These people usually get caught. This is because the IRS has a fraud hotline where anyone who turns in such offenders are rewarded up to 10% of the amount collected. Such offenders can get what they deserve if you keep your ears alert.
Have you ever heard of a 'secret' way to avoid paying all of your taxes, or any other such strategy which can let you not pay the IRS anything at all? The tax code is available to anyone who wishes to study it. Do you truly think there are various secrets out there? These 'secret' ways sold to people have been rejected by the IRS and in court. Not only will you face rejection, you can be penalized up to $25,000 for obviously wasting the government's effort with a frivolous tax return.
A loophole that business owners typically abuse is the deduction of business expenses. They commonly attempt to deduct personal expenses as business expenses, prompting the IRS to audit them. It is best to distinguish between business and personal expenses if you do not want IRS problems on your hands.
Sometimes this is true. Tax professionals can determine tax loopholes to keep their clients' money out of the IRS's hands, and most people who earn more than $100,000 yearly can avail of their counsel. Over the years, there have really been numerous abuse. But currently, the IRS has made a move to seriously crack down on the obvious abuses of loopholes in the tax code. There's a difference between acting illegally and acting on a tax loophole if you wish to pay less to the government by decreasing tax liability. You will also end up in prison if you move illegally. For the IRS to stay away, there are some steps you must avoid and various steps you can do to safeguard yourself.
People who make over $100,000 every year pay nearly 60% of all taxes. The people within this ranger have a higher danger of being audited because the IRS focuses their effort on them. In case there's an IRS problem or audit, always keep important records to use as reference and keep your exposure to a minimum.
How they're cheating the IRS of taxes through offshore accounts are what most people like to show off about. These people usually get caught. This is because the IRS has a fraud hotline where anyone who turns in such offenders are rewarded up to 10% of the amount collected. Such offenders can get what they deserve if you keep your ears alert.
Have you ever heard of a 'secret' way to avoid paying all of your taxes, or any other such strategy which can let you not pay the IRS anything at all? The tax code is available to anyone who wishes to study it. Do you truly think there are various secrets out there? These 'secret' ways sold to people have been rejected by the IRS and in court. Not only will you face rejection, you can be penalized up to $25,000 for obviously wasting the government's effort with a frivolous tax return.
A loophole that business owners typically abuse is the deduction of business expenses. They commonly attempt to deduct personal expenses as business expenses, prompting the IRS to audit them. It is best to distinguish between business and personal expenses if you do not want IRS problems on your hands.
Sunday, July 6, 2008
The Efficiency of the IRS's Automated Collection System
The computerized network that the IRS uses to communicate with delinquent taxpayers through the IDRS, or Integrated Data Retrieval System, is called the ACS, or Automated Collection System.
To handle the collection of taxes and to let IRS officers to communicate with taxpayers to fight the delinquent taxes IRS issue, the ACS was made in the 1980s. In order to fix the tax debt, notices, liens, or levies are provided and certain cases are scrutinized by tax examiners through this system. The system has important data on audit information and taxpayer information.
Every piece of information that is stored in the ACS is supported by other methods, like bank statements, corporate files, court records, and by contacting creditors. The system is integrated with reviews for consistency and validity.
The question remains if the ACS is an effective method to collect taxes. A recent hearing was held by congress to decide if the ACS was better than private means.
ACS is much less expensive, as emphasized by consumer tax advocates opposed to privatization. Nina Olsen, the IRS's National Taxpayer Advocate, compared the expenses of running private outsourced collections vs. ACS. Including commissions of up to 24% per amount collected, the expense of the private collection program is $12 million per year. These collectors are projected to bring in a measly $23 million in 2008, resulting in net revenues of just $11 million.
By comparison, if $7 million were invested into the Automated Collection System, then the revenues could total from $91.8 million to $145 million with no costly commissions. Olsen projects that the privatization of collection is costing the government about $81 million each year.
On the other hand, the IRS says that it has resorted to outsourcing because it cannot afford to hire more revenue officers to address the IRS issue of debt collection. The IRS is currently testing the efficacy of the private debt collection method by regaining control over certain cases that were turned over to debt collection firms and addressing them in-house. They are planning to compare the results to decide which method is more effective.
The president of the National Treasury Employees Union, or NTEU, Colleen Kelley, expressed her opinion that private debt collectors are more expensive than hiring revenue employees and puts taxpayers' details in danger.
Kelley also points to the fact that IRS employees are some of the most effective tax collectors in the United States in her opposition to the private collection of federal taxes. For instance, a debt of $100 collected by IRS officers only costs 40 cents. This was a two cent decline from 2007, in spite of a big decline in the number of IRS employees. Ms. Kelley states, "The IRS runs one of the most cost-efficient tax collection systems in the world, yet this administration insists on forging ahead with its expensive privatization scheme in spite of dismal financial results and ever-growing opposition."
As opposed to private debt collection, utilizing the ACS is more cost efficient. The government will have the chance to recoup revenues through the work of IRS employees.
To handle the collection of taxes and to let IRS officers to communicate with taxpayers to fight the delinquent taxes IRS issue, the ACS was made in the 1980s. In order to fix the tax debt, notices, liens, or levies are provided and certain cases are scrutinized by tax examiners through this system. The system has important data on audit information and taxpayer information.
Every piece of information that is stored in the ACS is supported by other methods, like bank statements, corporate files, court records, and by contacting creditors. The system is integrated with reviews for consistency and validity.
The question remains if the ACS is an effective method to collect taxes. A recent hearing was held by congress to decide if the ACS was better than private means.
ACS is much less expensive, as emphasized by consumer tax advocates opposed to privatization. Nina Olsen, the IRS's National Taxpayer Advocate, compared the expenses of running private outsourced collections vs. ACS. Including commissions of up to 24% per amount collected, the expense of the private collection program is $12 million per year. These collectors are projected to bring in a measly $23 million in 2008, resulting in net revenues of just $11 million.
By comparison, if $7 million were invested into the Automated Collection System, then the revenues could total from $91.8 million to $145 million with no costly commissions. Olsen projects that the privatization of collection is costing the government about $81 million each year.
On the other hand, the IRS says that it has resorted to outsourcing because it cannot afford to hire more revenue officers to address the IRS issue of debt collection. The IRS is currently testing the efficacy of the private debt collection method by regaining control over certain cases that were turned over to debt collection firms and addressing them in-house. They are planning to compare the results to decide which method is more effective.
The president of the National Treasury Employees Union, or NTEU, Colleen Kelley, expressed her opinion that private debt collectors are more expensive than hiring revenue employees and puts taxpayers' details in danger.
Kelley also points to the fact that IRS employees are some of the most effective tax collectors in the United States in her opposition to the private collection of federal taxes. For instance, a debt of $100 collected by IRS officers only costs 40 cents. This was a two cent decline from 2007, in spite of a big decline in the number of IRS employees. Ms. Kelley states, "The IRS runs one of the most cost-efficient tax collection systems in the world, yet this administration insists on forging ahead with its expensive privatization scheme in spite of dismal financial results and ever-growing opposition."
As opposed to private debt collection, utilizing the ACS is more cost efficient. The government will have the chance to recoup revenues through the work of IRS employees.
Thursday, July 3, 2008
Filing and IRS Bankruptcy Procedures
Bankruptcy is a scary term, and with new developments in the law, it is now also a mind-boggling construct. Sadly, it is the only choice for a lot of people. Getting a good grasp of what bankruptcy is, what the filing requisites and procedures are, and the nitty-gritty of the process is vital if you feel this is your last option out of financial mishap. Also, it is a wonderful insight to consult a Tampa tax lawyer if you plan to go on with bankruptcy filings.
First, what is bankruptcy? It is when a person or business is deemed unable to pay debts. There are three different kinds, or more legally referred to as Chapters, of bankruptcy for individuals, married or domestic partners. Let’s gloss over each Chapter.
• Chapter 7 is mostly filed by individuals or couples. Debtors have a grace period to liquidate assets to settle debts. They are allowed to keep enough to make a fresh start financially (meaning they do not have to sell everything)
• Chapter 12 is tailored-fit for family farmers or fishermen
• Chapter 13 is also referred to as “debt reorganization.” This is for people who have the ability to pay some or all of their debts. Usually, debtors are given three to five years to pay off their debts.
Small-Medium Enterprises can employ the use of Chapters 7, 11 or 15. In the first chapter, businesses are terminated as a consequence of bankruptcy. The 2nd option allows businesses to stay open while re-organizing their debts. Chapter 15 specializes on foreign debt management. Again, the importance of referring to a Tampa tax lawyer should not be taken for granted.
What is covered under bankruptcy relief? Credit card debt, professional fees, and unsecured loans are examples of debt that can be covered. Child or spousal support and some tax debts do not qualify for coverage.
Your Tampa tax lawyer can very much help you in your filing requisites especially since bankruptcy legislations were amended in 2005. The method is now more intricate. Let me to illustrate this fact through a few cases:
• A pile of documents detailing your earnings as well as expenses is required to support your filed bankruptcy.
• Debt counseling from accredited counseling agencies is needed six months before filing.
• You have to meet income requisites, which should fall along your state’s median income. Incidentally, this changes from county to county.
To check if you qualify for the requirements for Chapter 7, you can refer to the US Trustee Program of the Department of Justice or ask a qualified Tampa tax lawyer.
How do you file for bankruptcy? It is possible to do it on your own, but don’t’ forget that it is a legal process with far-reaching consequences. You may need to consult an expert who is experienced in bankruptcy laws. You decide whether you are filing for Chapter 7 or 13 and then file with the bankruptcy court. You are then provided with a trustee who is in-charge of making sure that you collect all the necessary pieces of information. Next, you advise your creditors of your decision to file for bankruptcy. They will have to discontinue their efforts of collecting money from you. As the course continues, you are required to discuss with creditors. Filing for bankruptcy is a long-and-winding process, so be willing to see it through.
Finally, what is the result of a bankruptcy claim to your income taxes or IRS standing? It depends. First, a forgiven debt is treated as a taxable income, except in the case of bankruptcy. Second, filing for one reduces the other tax benefits entitled to a debtor. Third, it creates a bankruptcy estate, which has all your assets and is considered another taxable entity when the claim is filed under Chapter 7 or 11. Consequently you have to pay taxes for this other entity.
The regulations and guidelines of bankruptcy can be very confusing. For additional 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 huge life decision: make sure you are equipped with all the support and documentations you require to make an intelligent choice.
First, what is bankruptcy? It is when a person or business is deemed unable to pay debts. There are three different kinds, or more legally referred to as Chapters, of bankruptcy for individuals, married or domestic partners. Let’s gloss over each Chapter.
• Chapter 7 is mostly filed by individuals or couples. Debtors have a grace period to liquidate assets to settle debts. They are allowed to keep enough to make a fresh start financially (meaning they do not have to sell everything)
• Chapter 12 is tailored-fit for family farmers or fishermen
• Chapter 13 is also referred to as “debt reorganization.” This is for people who have the ability to pay some or all of their debts. Usually, debtors are given three to five years to pay off their debts.
Small-Medium Enterprises can employ the use of Chapters 7, 11 or 15. In the first chapter, businesses are terminated as a consequence of bankruptcy. The 2nd option allows businesses to stay open while re-organizing their debts. Chapter 15 specializes on foreign debt management. Again, the importance of referring to a Tampa tax lawyer should not be taken for granted.
What is covered under bankruptcy relief? Credit card debt, professional fees, and unsecured loans are examples of debt that can be covered. Child or spousal support and some tax debts do not qualify for coverage.
Your Tampa tax lawyer can very much help you in your filing requisites especially since bankruptcy legislations were amended in 2005. The method is now more intricate. Let me to illustrate this fact through a few cases:
• A pile of documents detailing your earnings as well as expenses is required to support your filed bankruptcy.
• Debt counseling from accredited counseling agencies is needed six months before filing.
• You have to meet income requisites, which should fall along your state’s median income. Incidentally, this changes from county to county.
To check if you qualify for the requirements for Chapter 7, you can refer to the US Trustee Program of the Department of Justice or ask a qualified Tampa tax lawyer.
How do you file for bankruptcy? It is possible to do it on your own, but don’t’ forget that it is a legal process with far-reaching consequences. You may need to consult an expert who is experienced in bankruptcy laws. You decide whether you are filing for Chapter 7 or 13 and then file with the bankruptcy court. You are then provided with a trustee who is in-charge of making sure that you collect all the necessary pieces of information. Next, you advise your creditors of your decision to file for bankruptcy. They will have to discontinue their efforts of collecting money from you. As the course continues, you are required to discuss with creditors. Filing for bankruptcy is a long-and-winding process, so be willing to see it through.
Finally, what is the result of a bankruptcy claim to your income taxes or IRS standing? It depends. First, a forgiven debt is treated as a taxable income, except in the case of bankruptcy. Second, filing for one reduces the other tax benefits entitled to a debtor. Third, it creates a bankruptcy estate, which has all your assets and is considered another taxable entity when the claim is filed under Chapter 7 or 11. Consequently you have to pay taxes for this other entity.
The regulations and guidelines of bankruptcy can be very confusing. For additional 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 huge life decision: make sure you are equipped with all the support and documentations you require to make an intelligent choice.
Monday, June 30, 2008
A Checklist for Filing Taxes
You can make sure that you have everything you need at tax time with a checklist. The whole process will be made much simpler and not quite as stressful.
You need to make sure that you get serious about the entire thing when you feel that you're ready to do your taxes to mail everything out. You should pay attention and stay focused. If you're not focused and are getting distracted by other thigs, then you will likely commit a mistake which could lead to a huge IRS issue. Even if you're not going to sit down and finish your taxes in one go, you can do other things like plot specific times when you know that you have to focus on so you can prepare accordingly.
You must actually begin doing it once you know what task is at hand. It's so simple to procrastinate once you have everything ready. The best thing to do is begin doing your taxes and you'll be running through those forms in no time at all.
If you don't have too many assets or income sources, you are fortunate because your taxes will be quite easy. You are all good because all you have to do is fill out a W-2 form and a 1040EZ. You seriously should get organized if your finances are a bit more complicated. Not only will filing your taxes be easier, you can also represent yourself in an audit without showing up with a box full of receipts.
Since the tax code is ammended yearly along with characteristics of your own personal circumstance, it is sometimes plenty of work to stay informed on the various ammendments that will affect how you should file your taxes. However, if you take the time to update yourself on the current guidelines to take advantage of as much deductions as possible, you can potentially decrease how much you must pay the IRS. You can read the brief, free IRS Publication 17 which is 298 pages, or you can do searches online and at the library and just read up on the recent and most essential changes to the tax code. If you really want to maximize your deductions, employ a tax professional. They can let you avoid handling IRS problems and maximize your deductions.
You need to make sure that you get serious about the entire thing when you feel that you're ready to do your taxes to mail everything out. You should pay attention and stay focused. If you're not focused and are getting distracted by other thigs, then you will likely commit a mistake which could lead to a huge IRS issue. Even if you're not going to sit down and finish your taxes in one go, you can do other things like plot specific times when you know that you have to focus on so you can prepare accordingly.
You must actually begin doing it once you know what task is at hand. It's so simple to procrastinate once you have everything ready. The best thing to do is begin doing your taxes and you'll be running through those forms in no time at all.
If you don't have too many assets or income sources, you are fortunate because your taxes will be quite easy. You are all good because all you have to do is fill out a W-2 form and a 1040EZ. You seriously should get organized if your finances are a bit more complicated. Not only will filing your taxes be easier, you can also represent yourself in an audit without showing up with a box full of receipts.
Since the tax code is ammended yearly along with characteristics of your own personal circumstance, it is sometimes plenty of work to stay informed on the various ammendments that will affect how you should file your taxes. However, if you take the time to update yourself on the current guidelines to take advantage of as much deductions as possible, you can potentially decrease how much you must pay the IRS. You can read the brief, free IRS Publication 17 which is 298 pages, or you can do searches online and at the library and just read up on the recent and most essential changes to the tax code. If you really want to maximize your deductions, employ a tax professional. They can let you avoid handling IRS problems and maximize your deductions.
Friday, June 27, 2008
How IRS Collectors Can Be Ceased By Bankruptcy
Numerous people fall on financial hard times, regardless of the reasons. The IRS may feel that they also should be paid for tax debts, increasing the amount owed to creditors. And unlike other bill collectors, the IRS can be quite ruthless in their efforts. The IRS can definitely ruin a taxpayer's life if they wish to continue certain collection actions. Making available a bit of protection against the IRS's worst debt collection techniques is filing for bankruptcy.
Bankruptcy isn't an easy way out of debts, contrary to common belief. It's a method to let people seek relief from debts legally, including tax debts. Filing for Chapter 7 bankruptcy makes it possible for all debts, including tax debts (though without guarantee), to be cancelled. Filing for Chapter 11, 12, or 13 bankruptcy provides people an opportunity to settle their IRS problems by agreeing into an installment deal.
Filing for bankruptcy legally protects you from all actions made by the IRS and other creditors against you with an 'automatic stay'. The only way for the automatic stay to be lifted is when creditors appeal to the bankruptcy court. But this happens very rarely. For an automatic stay to be lifted, the IRS and other creditors should be able to give proof of fraud in the bankruptcy claim. A more serious IRS problem is likely if fraud is uncovered.
Tax debts are simply frozen until the bankruptcy claim is dismissed or discharged. The statute of limitations continues when bankruptcy is dismissed, definitely prolonging it.
A Chapter 7 bankruptcy has the potential to clear all tax debts definitely when specific requirements such as the 3-year rule are satisfied. The three-year rule basically says that all tax debts considered are at least three years old from April 15 of the year it was filed. Also included in the rule are extensions.
The 2-year rule is the second rule. The tax return must have been filed 2 years before the bankruptcy. Another rule is the 240-day rule. The IRS have to assess the taxes at least 240 days before filing for bankruptcy in this one.
However, even if a Chapter 7 bankruptcy is filed, loopholes still enable the IRS to collect. If the IRS filed a tax lien before the bankruptcy was filed, then, even after filing, the IRS still has first right to any property that the taxpayer held at the time of filing for bankruptcy. The main advantage of Chapter 11, 12, and 13 bankruptcies being re-organization bankruptcies is to allow the taxpayer to buy time to settle their IRS problem.
Bankruptcy isn't an easy way out of debts, contrary to common belief. It's a method to let people seek relief from debts legally, including tax debts. Filing for Chapter 7 bankruptcy makes it possible for all debts, including tax debts (though without guarantee), to be cancelled. Filing for Chapter 11, 12, or 13 bankruptcy provides people an opportunity to settle their IRS problems by agreeing into an installment deal.
Filing for bankruptcy legally protects you from all actions made by the IRS and other creditors against you with an 'automatic stay'. The only way for the automatic stay to be lifted is when creditors appeal to the bankruptcy court. But this happens very rarely. For an automatic stay to be lifted, the IRS and other creditors should be able to give proof of fraud in the bankruptcy claim. A more serious IRS problem is likely if fraud is uncovered.
Tax debts are simply frozen until the bankruptcy claim is dismissed or discharged. The statute of limitations continues when bankruptcy is dismissed, definitely prolonging it.
A Chapter 7 bankruptcy has the potential to clear all tax debts definitely when specific requirements such as the 3-year rule are satisfied. The three-year rule basically says that all tax debts considered are at least three years old from April 15 of the year it was filed. Also included in the rule are extensions.
The 2-year rule is the second rule. The tax return must have been filed 2 years before the bankruptcy. Another rule is the 240-day rule. The IRS have to assess the taxes at least 240 days before filing for bankruptcy in this one.
However, even if a Chapter 7 bankruptcy is filed, loopholes still enable the IRS to collect. If the IRS filed a tax lien before the bankruptcy was filed, then, even after filing, the IRS still has first right to any property that the taxpayer held at the time of filing for bankruptcy. The main advantage of Chapter 11, 12, and 13 bankruptcies being re-organization bankruptcies is to allow the taxpayer to buy time to settle their IRS problem.
Tuesday, June 24, 2008
The Fundamentals of Back Taxes Filing
There are many reasons why people don’t file their taxes, and while most of them are valid, the fact of the matter is that even late or back taxes eventually need to be filed. Filing back taxes will actually lessen or altogether avoid future problems with the IRS. Whether you have only missed filing for a single year or you have not done so since the mid 1980’s, the IRS still requires that you file your taxes. This will certainly lessen your risk of being prosecuted by the IRS and having enforced tax collection methods thrust upon you.
It is best to have all tax records compiled but this may not be the case for some people. Phenomena like fires, floods and other disasters may destroy all of a person’s belongings, including relevant documents. Nevertheless, one of the key measures to filing back taxes is finding a great tax attorney and accountant who will be able to aid in the reconstruction or retracing of a client’s tax records. At best, they can prepare and recreate relatively precise and complete tax records dating back to 15 to 20 years ago.
In certain circumstances, people simply do not have enough funds to pay the amount due on their returns. But options for filing a missing tax return or back taxes are always available. Among the major benefits of this move is avoiding a substantial penalty of 25%, which is the charge for late tax returns. In some states, failing to file your income tax return can result to a large penalty even if you do not owe the government any money.
You will definitely conserve a great deal of time if you were able to gather all your tax information from previous years. 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 problems. Not knowing whether or not you owe back taxes, or knowing that you haven’t paid these can be a burden. This is why some clients feel that merely setting up a meeting with a tax professional to help them through the maze of forms and procedures is utterly comforting already.
People must, on the other hand, understand that they cannot file back taxes through e-file or other electronic filing systems. These must be submitted through hand delivery or mail. When they are mailed, they must be sent using certified mail in order to have proof that the IRS received your tax returns.
Those who are aware that they owe the IRS any amount of money will be required to pay the applicable interest and fees. If you happen to be one of these people, you can always request help from the IRS for the setting up of payment plans.
Filing for back taxes can actually be a relatively quick and easy procedure. What would make matters difficult is if you will refuse to immediately deal with the issue and file or pay back taxes. At worst, these IRS issues may cause you to owe substantial amounts of money and face more serious consequences.
It is best to have all tax records compiled but this may not be the case for some people. Phenomena like fires, floods and other disasters may destroy all of a person’s belongings, including relevant documents. Nevertheless, one of the key measures to filing back taxes is finding a great tax attorney and accountant who will be able to aid in the reconstruction or retracing of a client’s tax records. At best, they can prepare and recreate relatively precise and complete tax records dating back to 15 to 20 years ago.
In certain circumstances, people simply do not have enough funds to pay the amount due on their returns. But options for filing a missing tax return or back taxes are always available. Among the major benefits of this move is avoiding a substantial penalty of 25%, which is the charge for late tax returns. In some states, failing to file your income tax return can result to a large penalty even if you do not owe the government any money.
You will definitely conserve a great deal of time if you were able to gather all your tax information from previous years. 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 problems. Not knowing whether or not you owe back taxes, or knowing that you haven’t paid these can be a burden. This is why some clients feel that merely setting up a meeting with a tax professional to help them through the maze of forms and procedures is utterly comforting already.
People must, on the other hand, understand that they cannot file back taxes through e-file or other electronic filing systems. These must be submitted through hand delivery or mail. When they are mailed, they must be sent using certified mail in order to have proof that the IRS received your tax returns.
Those who are aware that they owe the IRS any amount of money will be required to pay the applicable interest and fees. If you happen to be one of these people, you can always request help from the IRS for the setting up of payment plans.
Filing for back taxes can actually be a relatively quick and easy procedure. What would make matters difficult is if you will refuse to immediately deal with the issue and file or pay 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 Means of Decreasing Your Withholding Tax
Wherever life may lead you, the IRS will continuously be at your back. If you get married, there are tax implications. When you get divorced, still there are tax implications. When you have a baby, get a new job, buy a home, or purchase an energy efficient car – all of these can affect your taxes. This article will examine how alimony can affect your withholding tax, as well as how you can get IRS assistance with any questions that you may have.
Paying federal income taxes can be done using any of the two: estimated tax or withholding tax. The self-employed usually utilize the estimated tax. “Estimated tax is used to pay not only income tax, but self-employment tax and alternative minimum tax as well,” describes the IRS. Employees, however, pay their taxes by withholding, meaning their employers withhold income tax from their monthly salaries. 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) determine the amount that will be withheld from your pay. Making use of the IRS’ Withholding Calculator will make the calculation of your taxes less tedious.
Alimony adjustment, among others, is one way of changing your withholdings. How do you do this? You can simply accomplish a new W-4 and submit it to your employer to claim for adjustments in your withholding taxes.
Alimony payments are among those categorized as taxable income. Hence, you must accomplish a new W-4 if you are receiving these so this will be reflected as an increase in your income. Otherwise, you may end up owing more taxes at the end of the year.
On the contrary, being the one to pay for the alimony entitles you for a tax deduction. However, it should be paid through the following: in cash, through a check or through money order. If you directly pay certain bills in behalf of your ex-spouse, your expenses cannot be considered alimony. A newly filled out W4 is enough to record requests for tax deductions gained from paying alimony.
Your life changes ---- and some situations change more drastically in a year’s time. When they do come your way, do not forget to adjust the amount of income you have withheld from your paycheck.
Paying federal income taxes can be done using any of the two: estimated tax or withholding tax. The self-employed usually utilize the estimated tax. “Estimated tax is used to pay not only income tax, but self-employment tax and alternative minimum tax as well,” describes the IRS. Employees, however, pay their taxes by withholding, meaning their employers withhold income tax from their monthly salaries. 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) determine the amount that will be withheld from your pay. Making use of the IRS’ Withholding Calculator will make the calculation of your taxes less tedious.
Alimony adjustment, among others, is one way of changing your withholdings. How do you do this? You can simply accomplish a new W-4 and submit it to your employer to claim for adjustments in your withholding taxes.
Alimony payments are among those categorized as taxable income. Hence, you must accomplish a new W-4 if you are receiving these so this will be reflected as an increase in your income. Otherwise, you may end up owing more taxes at the end of the year.
On the contrary, being the one to pay for the alimony entitles you for a tax deduction. However, it should be paid through the following: in cash, through a check or through money order. If you directly pay certain bills in behalf of your ex-spouse, your expenses cannot be considered alimony. A newly filled out W4 is enough to record requests for tax deductions gained from paying alimony.
Your life changes ---- and some situations change more drastically in a year’s time. When they do come your way, do not forget to adjust the amount of income you have withheld from your paycheck.
Wednesday, June 18, 2008
Dealing with IRS Collections Procedures
The IRS collections process starts when you submit to the IRS your tax return, without the amount due yet. The IRS will be the one to identify how much you owe them by sending you a bill. Explanations on the amount due and request for a full payment are among the information reflected in this first bill. Other notices, this time including applicable penalties and carrying more threatening tones, will be sent should you choose to ignore their mails. The good side though, is all these follow a specific order and format therefore, you can refer to the IRS for more information regarding each. In general, getting a number of notices means that you have IRS problems that need to be dealt with.
You can send a letter to or contact the IRS if you think that there were erroneous entries in your payables. They can accommodate discussions with you to straighten the issues and possibly, make the needed adjustments. Should you continue to get notices even after paying your dues, you may forward a photocopy of your proofs of payment to the IRS. Just remember that you should keep the original documents for future reference.
If the bill reflects the correct tax due and you are required to pay the full amount, several payment options can be used. If you cannot afford to completely pay for the tax due, you may request to have a payment plan arranged for you. This agreement, however, implies that you have to pay for the debt over a time, you have to be charged with the applicable interests and may be penalized until you are able to pay the full amount.
Alternatives are also available in cases when you really can’t afford to partially pay for your taxes. You may request the IRS to defer their collection attempts for a certain period – this is when you will be considered currently not collective. The negative part of this option though is you still incur interests that will most likely accumulate, ultimately making your IRS problems compound.
An often sought after solution is an OIC, or Offer In Compromise. When given, this allows you to pay only a percentage of the total amount due and the rest of the debt is forgiven. Although statistics imply that you are likely to be denied in your application for Offer In Compromise, submitting such request will be worth the risk as this would effectively end your IRS problem, at least until the next year.
In a number of occasions, all you really need to do is simply contact your local IRS office to settle your IRS tax issues. There is also a significant number of situations when it is wise to consult a professional tax attorney or accountant for advice on dealing with any IRS collections method. Even though you are indebted, the fact still remains that you need to be treated fairly and justly. 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 get in the mail.
You can send a letter to or contact the IRS if you think that there were erroneous entries in your payables. They can accommodate discussions with you to straighten the issues and possibly, make the needed adjustments. Should you continue to get notices even after paying your dues, you may forward a photocopy of your proofs of payment to the IRS. Just remember that you should keep the original documents for future reference.
If the bill reflects the correct tax due and you are required to pay the full amount, several payment options can be used. If you cannot afford to completely pay for the tax due, you may request to have a payment plan arranged for you. This agreement, however, implies that you have to pay for the debt over a time, you have to be charged with the applicable interests and may be penalized until you are able to pay the full amount.
Alternatives are also available in cases when you really can’t afford to partially pay for your taxes. You may request the IRS to defer their collection attempts for a certain period – this is when you will be considered currently not collective. The negative part of this option though is you still incur interests that will most likely accumulate, ultimately making your IRS problems compound.
An often sought after solution is an OIC, or Offer In Compromise. When given, this allows you to pay only a percentage of the total amount due and the rest of the debt is forgiven. Although statistics imply that you are likely to be denied in your application for Offer In Compromise, submitting such request will be worth the risk as this would effectively end your IRS problem, at least until the next year.
In a number of occasions, all you really need to do is simply contact your local IRS office to settle your IRS tax issues. There is also a significant number of situations when it is wise to consult a professional tax attorney or accountant for advice on dealing with any IRS collections method. Even though you are indebted, the fact still remains that you need to be treated fairly and justly. 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 get 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 is although several of these stories are sound horrible and outrageous, some of them are true. Individual tax payers and business entities can be audited at any time. Statistics suggests, however, that only approximately 1.5% of all tax returns in the United States are ever made to undergo this process yearly. This is because there are several precautions that can be taken to reduce the chances of being audited.
The most important thing to remember is to report all of your income completely, regardless of where you get it from. IRS guidelines clearly state what is required to be reported on a tax return of employees, independent contractors and business entities. The simple earnings such as tips also have to be declared in your tax return to avoid IRS problems.
Another good tip in avoiding an IRS audit is making sure that you have the proper 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. Recheck as well that the numbers in your W-2 are the same as the entries on your tax return.
You also want to make certain that you review your tax return for math errors. This type of errors is easily checked and will definitely be seen by the IRS. So take the time to check the computations on your tax return. See to it that the correct entries are placed in the correct lines of the tax forms. The IRS presumes that a sloppy math computation means a sloppy filling out of the other areas in the tax return.
Most business owners and independent contractors make the mistake of thinking that their home offices are used strictly for business. Because certain guidelines regarding home offices are outlined, simply claiming your house as a home office causes problems. The guidelines include not keeping personal possessions and not conducting personal activities in the home office. Also, you must not declare more than 20% of your home as home office.
The IRS presents many methods and tips in avoiding an audit. Although at times you may feel that it is difficult to effectively battle an audit, you just need to be calm and be assured that there are certain steps you can take to protect yourself. After all, you do not want to have a major IRS problem with the IRS when the same can be settled early on.
The most important thing to remember is to report all of your income completely, regardless of where you get it from. IRS guidelines clearly state what is required to be reported on a tax return of employees, independent contractors and business entities. The simple earnings such as tips also have to be declared in your tax return to avoid IRS problems.
Another good tip in avoiding an IRS audit is making sure that you have the proper 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. Recheck as well that the numbers in your W-2 are the same as the entries on your tax return.
You also want to make certain that you review your tax return for math errors. This type of errors is easily checked and will definitely be seen by the IRS. So take the time to check the computations on your tax return. See to it that the correct entries are placed in the correct lines of the tax forms. The IRS presumes that a sloppy math computation means a sloppy filling out of the other areas in the tax return.
Most business owners and independent contractors make the mistake of thinking that their home offices are used strictly for business. Because certain guidelines regarding home offices are outlined, simply claiming your house as a home office causes problems. The guidelines include not keeping personal possessions and not conducting personal activities in the home office. Also, you must not declare more than 20% of your home as home office.
The IRS presents many methods and tips in avoiding an audit. Although at times you may feel that it is difficult to effectively battle an audit, you just need to be calm and be assured that there are certain steps you can take to protect yourself. After all, you do not want to have a major IRS problem with the IRS when the same can be settled early on.
Thursday, June 12, 2008
The Basics of Offer in Compromise
Ultimately, what you are trying to gain when you submit an Offer in Compromise (OIC) is a settlement or possibly the eradication of your tax debt to the IRS. This compromise implies that the two parties have decided that the agreement is in their best interest. The parties concerned are you, as the taxpayer and the government who is represented by the IRS.
Generally, the IRS entertains applications for OIC so that unpaid debts can be settled at a lower amount. On the other hand, this offer will only be considered if there is reliable proof that the full amount cannot be collected from you anymore. In this process, you are to notify the IRS of the amount that you feel you can afford to pay and this should be a reasonable estimation. A higher approximation is required if your likelihood of paying the full amount is greater.
If you want to file for an Offer in Compromise, be certain that you have filed your tax returns in the years applicable to the said request. The government will only accept OIC requests if you can present to them your official tax returns and an estimate of your earnings, even if they have records of these pieces of information. Filing for tax returns should be diligently done to avoid IRS problems, including imprisonment.
It is wrong to believe that the OIC is largely about how much taxes is owed from the government. In fact, an Offer in Compromise is essentially about how much the IRS believes they will be able to collect from you. Applicants of this said payment scheme should demonstrate that they will no longer be able to pay more than the figures indicated in the OIC. The likelihood of getting an approval for this request increases when the requirements are conscientiously followed.
The IRS will continue with its attempts to collect money from you even if you are still waiting for the decision on your OIC. They will resort to more serious collection methods such as wage garnishments and tax levies. Good thing that you can make use of the Collection Due Process Appeal, which gives you the chance to appeal to any of these IRS endeavors. During the time when the actual appeal is happening, you may use payment plans and your OIC as alternatives to the collection methods that the IRS has implemented on you.
In conclusion, believe that tax debts, notwithstanding its amount, will be eventually settled. 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. Let the IRS realize that a tax settlement will keep overhead costs lesser, and they will surely take this alternative as this is necessary for effective tax administration.
Generally, the IRS entertains applications for OIC so that unpaid debts can be settled at a lower amount. On the other hand, this offer will only be considered if there is reliable proof that the full amount cannot be collected from you anymore. In this process, you are to notify the IRS of the amount that you feel you can afford to pay and this should be a reasonable estimation. A higher approximation is required if your likelihood of paying the full amount is greater.
If you want to file for an Offer in Compromise, be certain that you have filed your tax returns in the years applicable to the said request. The government will only accept OIC requests if you can present to them your official tax returns and an estimate of your earnings, even if they have records of these pieces of information. Filing for tax returns should be diligently done to avoid IRS problems, including imprisonment.
It is wrong to believe that the OIC is largely about how much taxes is owed from the government. In fact, an Offer in Compromise is essentially about how much the IRS believes they will be able to collect from you. Applicants of this said payment scheme should demonstrate that they will no longer be able to pay more than the figures indicated in the OIC. The likelihood of getting an approval for this request increases when the requirements are conscientiously followed.
The IRS will continue with its attempts to collect money from you even if you are still waiting for the decision on your OIC. They will resort to more serious collection methods such as wage garnishments and tax levies. Good thing that you can make use of the Collection Due Process Appeal, which gives you the chance to appeal to any of these IRS endeavors. During the time when the actual appeal is happening, you may use payment plans and your OIC as alternatives to the collection methods that the IRS has implemented on you.
In conclusion, believe that tax debts, notwithstanding its amount, will be eventually settled. 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. Let the IRS realize that a tax settlement will keep overhead costs lesser, and they will surely take this alternative as this is necessary for effective tax administration.
Monday, June 9, 2008
What You Need to Know About Federal Tax Levy
Wage levies and bank account levies are two of the prime methods that the IRS utilizes for tax debt collection. No matter which technique the IRS chooses to implement, both points out that you have a very serious IRS problem.
The IRS has the right to levy your wages, as well as 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. All they need to do is simply send your employer a notification and the latter is then immediately required to wire a substantial 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.
In the case of independent contractors and the self-employed, the IRS can actually, in fact obligate the clients to pay a certain amount of money to them. Although the contractors will still receive a certain amount of money, this is significantly less than the normal income they get from their clients. The IRS Publication 1494 bears all the answers to any questions regarding this matter.
The second method, a bank account levy, allows the IRS to take all the money in any of your bank accounts. Because this is a government order, the banks will abide by this notice and it would be pointless to argue with them. However, only funds present in your bank account on the day the levy is received will be transferred to the IRS. For instance, a levy received on a Tuesday will not affect new funds credited on a Friday. Funds from Wednesday to Friday can only be garnished if another levy is issued.
When the IRS has a bank account levy on you, you are given 21 days to convince the IRS to discharge the levy. If for some reason you cannot 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 other bank levies permits 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 utilized by the IRS. In rare cases, 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 government will not enforce a tax levy on your income and your belongings.
The Federal tax levy is a serious issue regardless of which way you look at it. Therefore, it is highly advisable for anyone who has tax debts to settle them immediately before the government makes use of more serious collection methods like wage garnishment and bank account levies.
The IRS has the right to levy your wages, as well as 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. All they need to do is simply send your employer a notification and the latter is then immediately required to wire a substantial 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.
In the case of independent contractors and the self-employed, the IRS can actually, in fact obligate the clients to pay a certain amount of money to them. Although the contractors will still receive a certain amount of money, this is significantly less than the normal income they get from their clients. The IRS Publication 1494 bears all the answers to any questions regarding this matter.
The second method, a bank account levy, allows the IRS to take all the money in any of your bank accounts. Because this is a government order, the banks will abide by this notice and it would be pointless to argue with them. However, only funds present in your bank account on the day the levy is received will be transferred to the IRS. For instance, a levy received on a Tuesday will not affect new funds credited on a Friday. Funds from Wednesday to Friday can only be garnished if another levy is issued.
When the IRS has a bank account levy on you, you are given 21 days to convince the IRS to discharge the levy. If for some reason you cannot 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 other bank levies permits 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 utilized by the IRS. In rare cases, 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 government will not enforce a tax levy on your income and your belongings.
The Federal tax levy is a serious issue regardless of which way you look at it. Therefore, it is highly advisable for anyone who has tax debts to settle them immediately before the government makes use of more serious collection methods like wage garnishment and bank account levies.
Friday, June 6, 2008
Tips in Filing for an Amended Tax Return
You may face substantial IRS problems in the future for discrepancies detected in your tax returns. Therefore, it is always in your best interest to file an amended tax return if you discovered that you have some errors on last year’s tax return or the one you just sent through the mail. If the errors are purely mathematical in nature, the IRS simply corrects these and you don’t need to file for an amended tax return. However, certain circumstances require that you file an amended tax return as doing otherwise could give you problems.
A number of these errors are discrepancies pertaining to your deductions or credits, your total income, your dependents or your filing status. When you send a corrected tax return to the IRS, you may even be able to receive a refund. But if the mistake you made doesn’t lead to you receiving more money, and in fact incurs any penalties, it is best to own up to that mistake as well.
The form you have to use to file a corrected or amended tax return is Form 1040X, Amended U.S. Individual Income Tax Return. This, in effect, corrects the discrepancies filed under Forms 1040EZ, 1040A, or 1040 Amended tax returns should always be submitted through the mail. Electronic 1040X forms are not yet compatible to the IRS’ e-file systems. In the 1040x, you are simply asked to identify the data that need to be amended and the reasons for the requested adjustments.
The usual reasons to filing for amended tax returns include a correction in filing status. Usually, taxpayers need to change from a single filer to a head of household filer. Such change entitles you to a refund as there is a substantial difference in the deductions available to those who are eligible to head of household status.
If you have diligently 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 reduced to only two years.
If you’ve just filed and you have discovered an error, you may want to wait until you receive your refund and all of the paperwork for that tax return has been processed before filing an amended tax return. This eliminates the possibilities of confusion regarding tax records and duplication of paperwork, which in general, pose a serious IRS problem.
On the other side, there are instances when additional costs are incurred when filing for an amended tax return. No matter how attractive 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 error. In addition, the IRS can charge you with more lenient fees if you choose to initiate the move of bringing your mistakes to their attention.
A number of these errors are discrepancies pertaining to your deductions or credits, your total income, your dependents or your filing status. When you send a corrected tax return to the IRS, you may even be able to receive a refund. But if the mistake you made doesn’t lead to you receiving more money, and in fact incurs any penalties, it is best to own up to that mistake as well.
The form you have to use to file a corrected or amended tax return is Form 1040X, Amended U.S. Individual Income Tax Return. This, in effect, corrects the discrepancies filed under Forms 1040EZ, 1040A, or 1040 Amended tax returns should always be submitted through the mail. Electronic 1040X forms are not yet compatible to the IRS’ e-file systems. In the 1040x, you are simply asked to identify the data that need to be amended and the reasons for the requested adjustments.
The usual reasons to filing for amended tax returns include a correction in filing status. Usually, taxpayers need to change from a single filer to a head of household filer. Such change entitles you to a refund as there is a substantial difference in the deductions available to those who are eligible to head of household status.
If you have diligently 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 reduced to only two years.
If you’ve just filed and you have discovered an error, you may want to wait until you receive your refund and all of the paperwork for that tax return has been processed before filing an amended tax return. This eliminates the possibilities of confusion regarding tax records and duplication of paperwork, which in general, pose a serious IRS problem.
On the other side, there are instances when additional costs are incurred when filing for an amended tax return. No matter how attractive 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 error. In addition, the IRS can charge you with more lenient fees if you choose to initiate the move of bringing your mistakes to their attention.
Tuesday, June 3, 2008
The Nature of IRS Penalties
There are many valid reasons why taxpayers generally feel at least a little apprehension when talking about IRS penalties and paying back taxes. Fortunately, guidelines and processes directed to 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, circumstances like not filing tax returns, incorrectly filing of taxes, misleading the IRS and not paying quarterly taxes endanger taxpayers for penalties. For a more comprehensive reference, you may consult the Penalty Handbook, which outlines all possible penalties and tackles the processes on tax penalty abatement and IRS penalty assessment. It becomes clear then that aside from the regular collection of taxes, the government also earns through the interests gathered from delinquent taxpayers.
Since the government wants to ensure that IRS penalties assessment is done properly, it provided taxpayers with several courses of action and made the process of dismissing tax levies relatively more friendly. The process is now friendlier in comparison to the outrageous battle it once was.
Taxpayers learn about interests, levels and abatement of penalties by reading the IRS Penalties Handbook. When taxpayers take the time to educate themselves on how IRS penalties work, they considerably reduce their chances of being subjected to these consequences.
Fortunately, penalties are no longer automatic, as indicated in the IRS Penalty Policy Statement. 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 makes from the collection of penalties alone. Approximately, the total often amounts to over $15 billion. Not only is this a substantial source of income for the IRS, conversely, it is also the cause of a great amount of frustration on the part of taxpayers.
The situation worsens, for some people, as the penalty is added to the total amount of tax due. Interest is then accumulated based on this new, larger sum. The interest that the IRS charges on any tax debts is generally quite large with levels as high as 25%. With this, the debt can be doubled or tripled over a very short span of time, making it hard for people to settle the entire amount due.
When you are issued with a notice stating your IRS penalties, the first thing that you have to do is make a written request for the cancellation of this. This is the beginning of the abatement process, which, fortunately, is a right given to all proplr. Provisions of all IRS penalties contain a “good faith exception.” This states that if it proven that you did not purposely attempt to defraud the IRS, the latter can actually legally cancel the penalties enforced on you. Again, IRS penalties can be quite intimidating to common taxpayers, but the presence of alternatives and resources make this matter easier to manage.
To review, circumstances like not filing tax returns, incorrectly filing of taxes, misleading the IRS and not paying quarterly taxes endanger taxpayers for penalties. For a more comprehensive reference, you may consult the Penalty Handbook, which outlines all possible penalties and tackles the processes on tax penalty abatement and IRS penalty assessment. It becomes clear then that aside from the regular collection of taxes, the government also earns through the interests gathered from delinquent taxpayers.
Since the government wants to ensure that IRS penalties assessment is done properly, it provided taxpayers with several courses of action and made the process of dismissing tax levies relatively more friendly. The process is now friendlier in comparison to the outrageous battle it once was.
Taxpayers learn about interests, levels and abatement of penalties by reading the IRS Penalties Handbook. When taxpayers take the time to educate themselves on how IRS penalties work, they considerably reduce their chances of being subjected to these consequences.
Fortunately, penalties are no longer automatic, as indicated in the IRS Penalty Policy Statement. 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 makes from the collection of penalties alone. Approximately, the total often amounts to over $15 billion. Not only is this a substantial source of income for the IRS, conversely, it is also the cause of a great amount of frustration on the part of taxpayers.
The situation worsens, for some people, as the penalty is added to the total amount of tax due. Interest is then accumulated based on this new, larger sum. The interest that the IRS charges on any tax debts is generally quite large with levels as high as 25%. With this, the debt can be doubled or tripled over a very short span of time, making it hard for people to settle the entire amount due.
When you are issued with a notice stating your IRS penalties, the first thing that you have to do is make a written request for the cancellation of this. This is the beginning of the abatement process, which, fortunately, is a right given to all proplr. Provisions of all IRS penalties contain a “good faith exception.” This states that if it proven that you did not purposely attempt to defraud the IRS, the latter can actually legally cancel the penalties enforced on you. Again, IRS penalties can be quite intimidating to common taxpayers, but the presence of alternatives and resources make this matter easier to manage.
Friday, May 30, 2008
IRS Audit Flags
Root canals and IRS audits are 2 things that can make you cringe. You'll be able to avoid a root canal if you look after your teeth. Similarly, you'll be able to steer clear of an IRS audit by steering clear of particular practices and take care of your financial health. The IRS may need to audit you if several red flags appear.
The IRS determines the accuracy of your tax returns in an audit. You must be able to prove particular deductions.
You may be shocked by these IRS audit flags:
* Believe it or not, claiming too much in charitable donations may be a flag to IRS auditors. You're likely to be flagged for an audit if you declare $2000 when the average is $500. You need to save your receipts and be able to prove all $2000.
* Too many deductions for those who are self-employed. The IRS is very cautious to look for these kinds of deductions.
* People who earn over $100,000 are scrutinized more carefully.
* Last year's and this year's returns are inconsistent. These can be as simple as a name change due to marriage, but inconsistencies do stick out and are likely to be noticed.
* Considerable changes in income. For instance, the IRS will target you for an audit if you just made $20,000 this year when you earned $20,000 last year. Of course, there are plenty of reasons why your income may have changed so much. Proving it is necessary.
* The IRS flags incomplete tax returns. If an IRS employee has to interpret your tax return because of incomplete answers or unreadable handwriting, they are more likely to flag you for an audit.
* Inconsistencies between state and federal returns.
You can steer clear of an IRS audit by filing your tax returns accurately. Documentation should be kept for at least 3 years. Follow these tips to steer clear of further issues:
* Know that you can settle in installments, do the audit by mail without meeting the IRS, question its accuracy, and other rights.
* Be prepared to show receipts by keeping documentation.
* If the issue is too complicated for you, a professional should be consulted.
* You have nothing to fear if it is an honest error.
* Don't provide more information than needed.
* Do not panic because accuracy is just reviewed and you're not being accused of anything.
Your IRS issue shouldn't be a nightmare. Steer clear of audits, and if you happen to be flagged for one, stay calm. You can always consult a lawyer for help.
The IRS determines the accuracy of your tax returns in an audit. You must be able to prove particular deductions.
You may be shocked by these IRS audit flags:
* Believe it or not, claiming too much in charitable donations may be a flag to IRS auditors. You're likely to be flagged for an audit if you declare $2000 when the average is $500. You need to save your receipts and be able to prove all $2000.
* Too many deductions for those who are self-employed. The IRS is very cautious to look for these kinds of deductions.
* People who earn over $100,000 are scrutinized more carefully.
* Last year's and this year's returns are inconsistent. These can be as simple as a name change due to marriage, but inconsistencies do stick out and are likely to be noticed.
* Considerable changes in income. For instance, the IRS will target you for an audit if you just made $20,000 this year when you earned $20,000 last year. Of course, there are plenty of reasons why your income may have changed so much. Proving it is necessary.
* The IRS flags incomplete tax returns. If an IRS employee has to interpret your tax return because of incomplete answers or unreadable handwriting, they are more likely to flag you for an audit.
* Inconsistencies between state and federal returns.
You can steer clear of an IRS audit by filing your tax returns accurately. Documentation should be kept for at least 3 years. Follow these tips to steer clear of further issues:
* Know that you can settle in installments, do the audit by mail without meeting the IRS, question its accuracy, and other rights.
* Be prepared to show receipts by keeping documentation.
* If the issue is too complicated for you, a professional should be consulted.
* You have nothing to fear if it is an honest error.
* Don't provide more information than needed.
* Do not panic because accuracy is just reviewed and you're not being accused of anything.
Your IRS issue shouldn't be a nightmare. Steer clear of audits, and if you happen to be flagged for one, stay calm. You can always consult a lawyer for help.
Tuesday, May 27, 2008
How Far Does IRS Jurisdiction Go?
Being aware of how far and wide the reach of the IRS goes is a little unclear, and there are some people who try to walk around the law to avoid paying taxes. Tax "protesters" usually try to dispute the jurisdiction of the IRS and the constitutionality. As a taxpayer, you must know the laws, so you don't end up having IRS issues in the future. Let us take a look at the reach and jurisdiction of the Internal Revenue Service.
Jurisdiction is a term commonly heard on movies, providing power to leaders to handle and enforce consequences on legal situations.
Since it has jurisdiction over all US taxpayers and people who make income in the US, the IRS is a bit amorphous. If you fail to understand that you have obligations to pay taxes as a taxpayer, you'll definitely have IRS issues.
Relating to the IRS is the Code of Federal Regulations Title 26:
"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."
If you're a resident of the US, a non-resident earning money in the United States, a citizen living in foreign countries, or a citizen making money in foreign countries, the IRS has jurisdiction over you as a taxpayer. If you don't pay taxes on property, earnings, capital gains, etc., you will encounter IRS issues.
The IRS has no jurisdiction over some people. In this excerpt 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."
By visiting the IRS website or your state's tax website, you can avoid IRS problems and figure out if you are a non-taxpayer.
To negate the IRS's jurisdiction, tax protesters insist that the 16th Amendment giving Congress the power to collect taxes on income wasn't officially ratified. The 16th Amendment was indeed ratified with a majority vote.
Another argument is that the IRS isn't a government agency at all, and thus, has no jurisdiction or authority over anyone. This is a ridiculous argument because the Secretary of the Treasury has power to maintain and enforce internal revenue laws. Because of this power, the IRS was founded. Arguments like these can lead honest people to suffer serious IRS problems. Taxpayers are indeed under the jurisdiction of the IRS.
IRS issues result from failure to truthfully declare income or pay taxes. If you're a taxpayer, you are under the jurisdiction of the IRS.
Jurisdiction is a term commonly heard on movies, providing power to leaders to handle and enforce consequences on legal situations.
Since it has jurisdiction over all US taxpayers and people who make income in the US, the IRS is a bit amorphous. If you fail to understand that you have obligations to pay taxes as a taxpayer, you'll definitely have IRS issues.
Relating to the IRS is the Code of Federal Regulations Title 26:
"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."
If you're a resident of the US, a non-resident earning money in the United States, a citizen living in foreign countries, or a citizen making money in foreign countries, the IRS has jurisdiction over you as a taxpayer. If you don't pay taxes on property, earnings, capital gains, etc., you will encounter IRS issues.
The IRS has no jurisdiction over some people. In this excerpt 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."
By visiting the IRS website or your state's tax website, you can avoid IRS problems and figure out if you are a non-taxpayer.
To negate the IRS's jurisdiction, tax protesters insist that the 16th Amendment giving Congress the power to collect taxes on income wasn't officially ratified. The 16th Amendment was indeed ratified with a majority vote.
Another argument is that the IRS isn't a government agency at all, and thus, has no jurisdiction or authority over anyone. This is a ridiculous argument because the Secretary of the Treasury has power to maintain and enforce internal revenue laws. Because of this power, the IRS was founded. Arguments like these can lead honest people to suffer serious IRS problems. Taxpayers are indeed under the jurisdiction of the IRS.
IRS issues result from failure to truthfully declare income or pay taxes. If you're a taxpayer, you are under the jurisdiction of the IRS.
Saturday, May 24, 2008
You and Your Tax Lawyer
There are professionals qualified to help you if you are daunted by the tax laws' complex rules. Tax attorneys from Tampa can help you with the deductions and the various forms to fill out so you'll grasp them better.
A Tampa Tax lawyer can be a need and a gem in several circumstances. You will require a qualified professional in these situations:
* If you are building a business. Business tax laws are more complicated than personal taxes.
* The IRS is investigating you.
* A Tampa tax attorney can help with back tax problems and audits.
* Help with real estate or property taxes.
* If your wages have been garnished or bank accounts levied.
Though you can choose to represent yourself, hiring an experienced Tampa tax attorney definitely has benefits. A tax lawyer has the skills and knowledge to deal with the IRS, which would assist you if it's your first time.
Your tax lawyer from Tampa will protect your rights to privacy by only furnishing the IRS with the needed details. They also understand the tax laws by heart so they can negatiate better in your stead.
Your stress levels will be minimized if you get a tax lawyer from Tampa. The proceeding becomes a negotiation among professionals so it is no longer an emotional crisis for you.
The IRS would prefer dealing with a tax attorney and not think you are guilty because you had one. A solution could be easily arrived at if you assert your rights and employ a representative to speak for you.
In court or in negotiations, you have a valuable ally in a tax lawyer who is familiar with the tax system. Your lawyer will examine your situation and advise you of the best course of action. You'll also enjoy attorney-client privileges.
In a tax lawyer, what must you look for? First, they have to be licensed in your state to practice law. They should also possess advanced training in tax law, like a Master's of Law degree in taxation or background in accounting. Some tax lawyers are also CPAs (Certified Public Accountants). Make sure any Tampa tax attorney you are considering getting has extensive experience in your type of situation. Find out straight out and also Google him/her.
When you have IRS problems, sometimes the only solution is to hire a Tampa tax attorney. Let someone else take a portion of your stress and deal with the IRS.
A Tampa Tax lawyer can be a need and a gem in several circumstances. You will require a qualified professional in these situations:
* If you are building a business. Business tax laws are more complicated than personal taxes.
* The IRS is investigating you.
* A Tampa tax attorney can help with back tax problems and audits.
* Help with real estate or property taxes.
* If your wages have been garnished or bank accounts levied.
Though you can choose to represent yourself, hiring an experienced Tampa tax attorney definitely has benefits. A tax lawyer has the skills and knowledge to deal with the IRS, which would assist you if it's your first time.
Your tax lawyer from Tampa will protect your rights to privacy by only furnishing the IRS with the needed details. They also understand the tax laws by heart so they can negatiate better in your stead.
Your stress levels will be minimized if you get a tax lawyer from Tampa. The proceeding becomes a negotiation among professionals so it is no longer an emotional crisis for you.
The IRS would prefer dealing with a tax attorney and not think you are guilty because you had one. A solution could be easily arrived at if you assert your rights and employ a representative to speak for you.
In court or in negotiations, you have a valuable ally in a tax lawyer who is familiar with the tax system. Your lawyer will examine your situation and advise you of the best course of action. You'll also enjoy attorney-client privileges.
In a tax lawyer, what must you look for? First, they have to be licensed in your state to practice law. They should also possess advanced training in tax law, like a Master's of Law degree in taxation or background in accounting. Some tax lawyers are also CPAs (Certified Public Accountants). Make sure any Tampa tax attorney you are considering getting has extensive experience in your type of situation. Find out straight out and also Google him/her.
When you have IRS problems, sometimes the only solution is to hire a Tampa tax attorney. Let someone else take a portion of your stress and deal with the IRS.
Wednesday, May 21, 2008
The Penalties of Not Filing Your Taxes
You may think that what you do will be unnoticed by the IRS because of the millions of other taxpayers. You convince yourself that it does not matter even if you don't pay your taxes. You are not right, unfortunately, as the IRS will notice. What are the consequences for not filing your taxes? Where can you go for advise - can the IRS help?
You will probably believe that not filing for your taxes is a small thing but the government perceives this as stealing and considers it an offense. There are different levels of penalties depending on your tax status:
* Filing for taxes late
* Not filing for taxes at all
* Not paying taxes
The penalties for filing your taxes late are by far the easiest to deal with. The IRS tacks on a penalty of 5% per month. For instance, a 15% interest will be charged to you if you filed on June and it is supposed to be submitted on April 15.Your maximum penalty is 25%.
What should you do if April 15 is almost near, and you still did not file your tax return?
Should your circumstances call for an extension in filing for your taxes, you may call the IRS. You can process this request by filling out Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. An approved request grants you up to August 15, instead of April 15, to take care of your tax returns. If you need more time, you can use Form 2688. It is imperative that you file for an extension as doing otherwise automatically gives you the 5% interest.
Requesting for an extension, on the other hand, is not tantamount to saying that you have more time to pay for the taxes that you owe. The law requires that you should settle at least 90% of the total taxable income otherwise you will be given a monthly penalty of 0.5% This then brings us to the next type of penalty.
Certainly, it is more preferred not to pay the whole amount than not file at all. Let us use the example that you owe $5000. Paying only $1000 results to a mere $20 charge, which is 0.5% multiplied by $4000. Thus, it is important that you file and pay your taxes whatever way you can.
The IRS may make use of more severe measures should the agency see that you continue to be a delinquent tax payer. First, the penalty increases 1% a month. Then, the IRS may urge you to mortgage assets or file for a loan. Third, they can use more rigorous collection techniques like wage garnishment and levying bank accounts.
The IRS can really help you before your situation gets out of control. given. Installment plans, temporary delays and Offer in Compromise are yet other choices that can be tried out. For additional information, visit the IRS site. All these only reveal that the IRS, indeed, is nothing like the way they are portrayed to be.
Not even bothering to file your taxes gives you the most burdensome consequences. You will be charged 5% of the amount you owe, per month. The maximum penalty for this infraction, however, is 25%. Say you owe $5000 and have been five months late in filing. To calculate your penalty, you need to multiply 5000 by 25%. This tacks on another $1250 to your bill. In this situation, it is more difficult get IRS assistance.
The IRS may accomplish a return and mail the bills and fees to a tax payer who, over time, refuses to file. This option, on the other hand, forfeits the deductions he should have been entitled to.The IRS may press for criminal or civil charges should the above option prove to be futile. To refrain from reaching at these unfavorable situations, ask for the assistance of the IRS. There are always ways that you can arrange to pay what you owe without incurring serious consequences.
You will probably believe that not filing for your taxes is a small thing but the government perceives this as stealing and considers it an offense. There are different levels of penalties depending on your tax status:
* Filing for taxes late
* Not filing for taxes at all
* Not paying taxes
The penalties for filing your taxes late are by far the easiest to deal with. The IRS tacks on a penalty of 5% per month. For instance, a 15% interest will be charged to you if you filed on June and it is supposed to be submitted on April 15.Your maximum penalty is 25%.
What should you do if April 15 is almost near, and you still did not file your tax return?
Should your circumstances call for an extension in filing for your taxes, you may call the IRS. You can process this request by filling out Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. An approved request grants you up to August 15, instead of April 15, to take care of your tax returns. If you need more time, you can use Form 2688. It is imperative that you file for an extension as doing otherwise automatically gives you the 5% interest.
Requesting for an extension, on the other hand, is not tantamount to saying that you have more time to pay for the taxes that you owe. The law requires that you should settle at least 90% of the total taxable income otherwise you will be given a monthly penalty of 0.5% This then brings us to the next type of penalty.
Certainly, it is more preferred not to pay the whole amount than not file at all. Let us use the example that you owe $5000. Paying only $1000 results to a mere $20 charge, which is 0.5% multiplied by $4000. Thus, it is important that you file and pay your taxes whatever way you can.
The IRS may make use of more severe measures should the agency see that you continue to be a delinquent tax payer. First, the penalty increases 1% a month. Then, the IRS may urge you to mortgage assets or file for a loan. Third, they can use more rigorous collection techniques like wage garnishment and levying bank accounts.
The IRS can really help you before your situation gets out of control. given. Installment plans, temporary delays and Offer in Compromise are yet other choices that can be tried out. For additional information, visit the IRS site. All these only reveal that the IRS, indeed, is nothing like the way they are portrayed to be.
Not even bothering to file your taxes gives you the most burdensome consequences. You will be charged 5% of the amount you owe, per month. The maximum penalty for this infraction, however, is 25%. Say you owe $5000 and have been five months late in filing. To calculate your penalty, you need to multiply 5000 by 25%. This tacks on another $1250 to your bill. In this situation, it is more difficult get IRS assistance.
The IRS may accomplish a return and mail the bills and fees to a tax payer who, over time, refuses to file. This option, on the other hand, forfeits the deductions he should have been entitled to.The IRS may press for criminal or civil charges should the above option prove to be futile. To refrain from reaching at these unfavorable situations, ask for the assistance of the IRS. There are always ways that you can arrange to pay what you owe without incurring serious consequences.
Sunday, May 18, 2008
Rightful Ways of Reducing Your Taxes
For many, especially those who are non-accountants and non-tax attorneys, tax time and understanding our deductions is a tall order. We are torn between taking the standard deductions or itemizing them. Let us try to examine what the common deductions are, how these are defined, how to identify if you qualify and how to benefit from these. When the water gets murky, you can always consult an accountant for more detailed IRS help.
Tax deductions are useful in reducing your total taxable income as they are expenses subtracted from your gross income. Tax deductions are incurred by a taxpayer from a number of reasons and purposes.
Standardized and Itemized deductions are the two kinds of tax deductions. Standard deductions, which are dependent on a person's civil status: single, married, head of household, are fixed amounts subtracted from the gross income. This article will, on the other hand, focus on itemized deduction, which is a corresponding amount for certain pre-determined expenses. Asking for IRS or professional assistance will surely be of great help if you are in doubt as to which type of deduction you can file for.
You can also take advantage of tax credits, which can be obtained from a variety of reasons like having children, adopting children, paying college tuition, earned income tax credit and energy efficiency. Unlike tax deductions, these are taken from your total taxable income. Guidelines in checking for your eligibility to certain tax credits can be found in the tax forms and IRS website
Here are some of the most common tax deductions that we can avail of:
* Professional and business-related association fees
* Costs of job-hunting
* Job agency fees
* Fees for professional books and publications
* Union fees
* Business attire and uniforms
* Home and office expenses
* Alimony and other legal fees to collect taxable income
* Tax preparation and advice charges
* Moving to a new job expenses
* IRA set-up and administration fees
* Other legal fees
* Charitable donations
* Business liability costs and insurance premiums
* Tuition fees for job-related classes
To avoid overpayment, it is important that you look for IRS assistance when calculating your taxes. Should you opt to do it on your own, read the IRS booklet, utilize the online tax preparation service and contact the IRS for assistance in your itemization.
How do you avail of these deductions? For manual computation of taxes, notes in the instruction booklet will help you determine your eligibility. If you go online, the system will help you through the process. A professional tax preparer will also be a useful resource for checking for the deductions you qualify for IRS help is also available through their list of miscellaneous deductions posted online.
Increasing the amount for refund or reducing the amount of taxes due are lawfully addressed through tax deductions. To ensure that you are claiming all the deductions to which you are eligible to - or not mistakenly claiming for deductions- IRS assistance or expert help is always helpful. Otherwise, take time to conscientiously go over the instructions in your booklet. In reality, many have overpaid, so be mindful of the deductions that you are entitled to.
Tax deductions are useful in reducing your total taxable income as they are expenses subtracted from your gross income. Tax deductions are incurred by a taxpayer from a number of reasons and purposes.
Standardized and Itemized deductions are the two kinds of tax deductions. Standard deductions, which are dependent on a person's civil status: single, married, head of household, are fixed amounts subtracted from the gross income. This article will, on the other hand, focus on itemized deduction, which is a corresponding amount for certain pre-determined expenses. Asking for IRS or professional assistance will surely be of great help if you are in doubt as to which type of deduction you can file for.
You can also take advantage of tax credits, which can be obtained from a variety of reasons like having children, adopting children, paying college tuition, earned income tax credit and energy efficiency. Unlike tax deductions, these are taken from your total taxable income. Guidelines in checking for your eligibility to certain tax credits can be found in the tax forms and IRS website
Here are some of the most common tax deductions that we can avail of:
* Professional and business-related association fees
* Costs of job-hunting
* Job agency fees
* Fees for professional books and publications
* Union fees
* Business attire and uniforms
* Home and office expenses
* Alimony and other legal fees to collect taxable income
* Tax preparation and advice charges
* Moving to a new job expenses
* IRA set-up and administration fees
* Other legal fees
* Charitable donations
* Business liability costs and insurance premiums
* Tuition fees for job-related classes
To avoid overpayment, it is important that you look for IRS assistance when calculating your taxes. Should you opt to do it on your own, read the IRS booklet, utilize the online tax preparation service and contact the IRS for assistance in your itemization.
How do you avail of these deductions? For manual computation of taxes, notes in the instruction booklet will help you determine your eligibility. If you go online, the system will help you through the process. A professional tax preparer will also be a useful resource for checking for the deductions you qualify for IRS help is also available through their list of miscellaneous deductions posted online.
Increasing the amount for refund or reducing the amount of taxes due are lawfully addressed through tax deductions. To ensure that you are claiming all the deductions to which you are eligible to - or not mistakenly claiming for deductions- IRS assistance or expert help is always helpful. Otherwise, take time to conscientiously go over the instructions in your booklet. In reality, many have overpaid, so be mindful of the deductions that you are entitled to.
Wednesday, May 14, 2008
What Deductions Are Considered By The IRS?
People uncover their creative imaginations when tax time comes around. For instance, a man made a fallout shelter for fear of a nuclear war. He decided to deduct the costs as a "preventative medical expense." A woman purchased a $5000 mink coat and declared it as a business expense, claiming she needed it to visit customers. The best is a business owner who hired an arsonist to burn his store. He then attempted to deduct the $10,000 "arsonist fee" from his taxes. The IRS denied that deduction, naturally.
Take a peek at the common IRS deductions that you can take. To decide which deductions the IRS take, consult a Tampa tax lawyer.
Under IRS rule, these business expenses are deductible:
* Business tools (Because they were vital to her work, an "adult performer" deducted her breast implant price successfully. Deductible for the rest of us are stuff such as work boots and clothes.)
* Membership dues or union dues for professional associations or organizations.
* Job-related education.
* Job search expenses.
* Expenses spent on business trips that are not refunded by your company.
* Dry cleaning of work clothes for nurses, police officers, and security guards, like lab coats is deductible.
* Home office.
Deductible work expenses take up a long list. To ensure you take advantage of the deductions appropriate for you, contact a tax attorney. Some common tax deductibles include:
* Student loan interests.
* Health premiums that are at least 7.5% of your income. Because the rules vary for this, ask a tax lawyer.
* Fuel-efficient vehicles.
* Secured loans mortgage interests.
There are not-so-common deductions that are legitimate. So you do not miss out on deductions that are legal, consult with a tax professional.
* Tax deductions for natural disasters.
* Your first job's moving expenses.
* Non-cash charitable donations such as materials for a charity bake sale.
* Expenses spent by teachers that are not refunded by the employers totaling $250.
* Snacks for your employees as long as these are not considered compensation or wages for work.
* Yearly college tuition of up to $4000.
What deductions are you entitled to? You can always look online, which is particularly convenient if you do your taxes with an online tax preparation service. Often, the service will walk you through deductions to see if you are right for it. If you'd like a bit more help, consult with an accountant or Tampa tax attorney.
Knowing what you can and cannot claim is important. The IRS considered a deduction by a dairy farmer who claimed his African safari. His claim was that it was needed for work because he was learning about wild animals. The IRS seemed to believe this was completely acceptable. Be careful, however. A male model attempted to write off his entire designer wardrobe on the grounds that he needed to look good at all times. They weren't official company clothes, even if it was valid. If you're unsure, you are not alone. Talk with a Tampa tax attorney and have all the deductions you require.
Take a peek at the common IRS deductions that you can take. To decide which deductions the IRS take, consult a Tampa tax lawyer.
Under IRS rule, these business expenses are deductible:
* Business tools (Because they were vital to her work, an "adult performer" deducted her breast implant price successfully. Deductible for the rest of us are stuff such as work boots and clothes.)
* Membership dues or union dues for professional associations or organizations.
* Job-related education.
* Job search expenses.
* Expenses spent on business trips that are not refunded by your company.
* Dry cleaning of work clothes for nurses, police officers, and security guards, like lab coats is deductible.
* Home office.
Deductible work expenses take up a long list. To ensure you take advantage of the deductions appropriate for you, contact a tax attorney. Some common tax deductibles include:
* Student loan interests.
* Health premiums that are at least 7.5% of your income. Because the rules vary for this, ask a tax lawyer.
* Fuel-efficient vehicles.
* Secured loans mortgage interests.
There are not-so-common deductions that are legitimate. So you do not miss out on deductions that are legal, consult with a tax professional.
* Tax deductions for natural disasters.
* Your first job's moving expenses.
* Non-cash charitable donations such as materials for a charity bake sale.
* Expenses spent by teachers that are not refunded by the employers totaling $250.
* Snacks for your employees as long as these are not considered compensation or wages for work.
* Yearly college tuition of up to $4000.
What deductions are you entitled to? You can always look online, which is particularly convenient if you do your taxes with an online tax preparation service. Often, the service will walk you through deductions to see if you are right for it. If you'd like a bit more help, consult with an accountant or Tampa tax attorney.
Knowing what you can and cannot claim is important. The IRS considered a deduction by a dairy farmer who claimed his African safari. His claim was that it was needed for work because he was learning about wild animals. The IRS seemed to believe this was completely acceptable. Be careful, however. A male model attempted to write off his entire designer wardrobe on the grounds that he needed to look good at all times. They weren't official company clothes, even if it was valid. If you're unsure, you are not alone. Talk with a Tampa tax attorney and have all the deductions you require.
Friday, February 29, 2008
Handling Interest Charges
You give yourself IRS problems if you settle your taxes late or don't pay at all. The unpaid tax is considered as borrowed money, so you are charged interest on your unpaid taxes, as required by the U.S. Congress. Not only that, you are also charged penalties for late payment.
You'll know you're punished by the IRS with the interest and penalties on your late/unpaid taxes. Furthermore, it doesn't take long for the tax bill to double or triple up. It's because interest is computed based on the entire amount, starting on the time the tax was due, and penalties are assessed and compounded on a daily basis.
You'll still be charged interest, regardless why you have unpaid/late taxes. Even if it's a mathematical error on your tax return, interest will increase for the amount of taxes not paid. Unless the IRS receives full payment, interest will not stop accumulating. Interest is posted every 3 months but compounded every day. It can go from 4-10% per year.
A detailed interest and penalty printout is available when requested. This printout will show: 1) lists of all your tax penalties and interest computations; 2) the dates, interest rates, any 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 showing amount due, which will include updated penalty and interest figures.
Our company can help you go over the documents to see if you do, in fact, need to pay the interest and penalties charged to you. Unless it was wrongly applied or is due to delays by the IRS, interest is normally never abated or cancelled. An Offer in Compromise may lessen or eliminate the interest, if you are eligible.
You'll know you're punished by the IRS with the interest and penalties on your late/unpaid taxes. Furthermore, it doesn't take long for the tax bill to double or triple up. It's because interest is computed based on the entire amount, starting on the time the tax was due, and penalties are assessed and compounded on a daily basis.
You'll still be charged interest, regardless why you have unpaid/late taxes. Even if it's a mathematical error on your tax return, interest will increase for the amount of taxes not paid. Unless the IRS receives full payment, interest will not stop accumulating. Interest is posted every 3 months but compounded every day. It can go from 4-10% per year.
A detailed interest and penalty printout is available when requested. This printout will show: 1) lists of all your tax penalties and interest computations; 2) the dates, interest rates, any 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 showing amount due, which will include updated penalty and interest figures.
Our company can help you go over the documents to see if you do, in fact, need to pay the interest and penalties charged to you. Unless it was wrongly applied or is due to delays by the IRS, interest is normally never abated or cancelled. An Offer in Compromise may lessen or eliminate the interest, if you are eligible.
Thursday, February 14, 2008
IRS Computer Notices
If you have IRS problems, you might be afraid your mailbox. Will I get a notice from the IRS today? Was an error found in my tax return by an IRS computer audit? Do I need to pay the IRS more money?
Because the IRS doesn't have the manpower to perform face-to-face audits with every taxpayer, it uses its computer system to check tax returns and send out notices. If an error was uncovered on your tax return, you'll receive a notice informing you of it and you may be required to pay more taxes or given a refund, which is very unlikely. Interest and penalties will be on the balance due. The information the IRS computers use is from its own files and from other sources.
This example is just one of approximately 300 kinds of IRS computer notices generated. These are the most common notices:
If you receive any of the 300 computer-generated notices and you do not agree with it, do not hesitate to challenge the IRS and ask that it be corrected. File copies of all IRS correspondence in your records.
If the notice is right and you do owe the IRS money and don't settle in a month, you will start receiving a series of computer-generated bills known as the "500 series". The "500 series" will include a reminder that you have a tax debt (CP-501), your speedy action is required (CP-503), and a levy will be issued if you don't reply as soon as possible (CP-504).
Because the IRS doesn't have the manpower to perform face-to-face audits with every taxpayer, it uses its computer system to check tax returns and send out notices. If an error was uncovered on your tax return, you'll receive a notice informing you of it and you may be required to pay more taxes or given a refund, which is very unlikely. Interest and penalties will be on the balance due. The information the IRS computers use is from its own files and from other sources.
This example is just one of approximately 300 kinds of IRS computer notices generated. These are the most common notices:
- Claims you did not report all of your income: The IRS computer determines if you've reported all of your income by searching its files and comparing your information.
- Claims you made a math or clerical error: The IRS computer analyzes your return to check the math and clerical responses.
- Claims you failed to file your return: The IRS computer can see if a return was filed as needed.
If you receive any of the 300 computer-generated notices and you do not agree with it, do not hesitate to challenge the IRS and ask that it be corrected. File copies of all IRS correspondence in your records.
If the notice is right and you do owe the IRS money and don't settle in a month, you will start receiving a series of computer-generated bills known as the "500 series". The "500 series" will include a reminder that you have a tax debt (CP-501), your speedy action is required (CP-503), and a levy will be issued if you don't reply as soon as possible (CP-504).
Monday, February 11, 2008
What's with a Correspondence Audit?
A correspondence audit through the mail is commenced when an error on your tax return is uncovered by the IRS computers. You will be told of the discrepancy on an IRS notice and you will be asked to submit documents to substantiate the tax return. You will either be issued a refund or asked to settle the additional taxes if the error is mathematical.
Be prepared against IRS problems and audits by always making copies of your return and its attached documentation. Cooperate with a correspondence audit.
No matter what the IRS�s request is, make sure you compare a copy of the return with what's written on the IRS notice to verify the necessity of a correction or the need of additional taxes. Do not automatically send the requested money without further inquiries. They can make mistakes too.
Follow the instructions in the IRS notice promptly. Ignoring it will only make things worse.
If you don't agree with the IRS notice, follow the directions on it in a timely manner. Other documents should be attached. On the other hand, if you agree with it, simply sign and date the IRS notice and send it with the correct payment.
If you disagree with the notice, the IRS will evaluate your claim, and if it is allowed, you will be notified and the audit with stop. An Examination Report will be sent to you if the IRS disallows your claim, and you have 30 days to accept the changes and sign it or ask for an appeal.
If you have queries regarding the audit, you can contact the name and number that is listed on the notice or write to the auditor,requesting for him to contact you.
Be prepared against IRS problems and audits by always making copies of your return and its attached documentation. Cooperate with a correspondence audit.
No matter what the IRS�s request is, make sure you compare a copy of the return with what's written on the IRS notice to verify the necessity of a correction or the need of additional taxes. Do not automatically send the requested money without further inquiries. They can make mistakes too.
Follow the instructions in the IRS notice promptly. Ignoring it will only make things worse.
If you don't agree with the IRS notice, follow the directions on it in a timely manner. Other documents should be attached. On the other hand, if you agree with it, simply sign and date the IRS notice and send it with the correct payment.
If you disagree with the notice, the IRS will evaluate your claim, and if it is allowed, you will be notified and the audit with stop. An Examination Report will be sent to you if the IRS disallows your claim, and you have 30 days to accept the changes and sign it or ask for an appeal.
If you have queries regarding the audit, you can contact the name and number that is listed on the notice or write to the auditor,requesting for him to contact you.
Friday, February 8, 2008
Facing an IRS Audit
The two kinds of audits done by the IRS are the face-to-face audit and correspondence audit. Your IRS issues are just starting if you receive notice of either of these 2.
The Correspondence Audit
The mail is how a correspondence audit is done. Corrections on tax returns are found by the IRS computers. If so, a notice is mailed to the taxpayer. This IRS notice shouldn't be dismissed. If you need to pay more taxes, act immediately. Interest and penalties may be added to the bill if there are delays. If you do not agree with the notice, mail your reply and attach documentation to support your case. You should have copies of the correspondence.
Face-to-face Audit
You know you have an impending face-to-face audit if you get a notice specifying a date and time to meet with a tax auditor or revenue agent or requesting you to contact them for an appointment.
What must be done?
The Correspondence Audit
The mail is how a correspondence audit is done. Corrections on tax returns are found by the IRS computers. If so, a notice is mailed to the taxpayer. This IRS notice shouldn't be dismissed. If you need to pay more taxes, act immediately. Interest and penalties may be added to the bill if there are delays. If you do not agree with the notice, mail your reply and attach documentation to support your case. You should have copies of the correspondence.
Face-to-face Audit
You know you have an impending face-to-face audit if you get a notice specifying a date and time to meet with a tax auditor or revenue agent or requesting you to contact them for an appointment.
What must be done?
- Do not dismiss the notice. If you do not reply within thirty days, the IRS will take action. You might receive a bill next time.
- Read the notice and follow the directions. You'll be informed which items are under review and the information you will need to take with you to the audit.
- Organize your documents. It is your responsibility to prove that your tax return is accurate. If you go to the audit organized and prepared for the auditor�s queries, it will make the job easier for the auditor. Consider this a plus.
- Ask for copies of missing records because you need supporting documents to prove your case.
- Don't take information not required to the audit. If information that was not required is brought up, tell the auditor that it isn't on hand.
- Be calm and polite in the audit.
- Only copies must be given to the auditor, not the original documents.
- Try to answer inquiries with either "yes" and "no." Small talk may lead you to divulge sensitive information. The auditor will have cause to believe that you have not reported all your income on your tax return when you speak about big purchases or vacations. This could tell him that he has to expand the audit.
- Know that you have a right to an appeal if you do not agree with the audit's outcome.
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