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.
Monday, June 30, 2008
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.
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