The New Tax Year Resolution You Must Make Right Now

calculator-1019743_1280Ignoring that past due tax debt will get your new year off to a stressful start

2015 will be history in a matter of days. If looking back on 2015 also includes an outstanding tax debt, addressing that tax debt needs to be at the top of your New Year’s resolutions list.

Penalties and fees

If you have not  yet paid your 2014 taxes, you’ve been racking up penalties and fees for each month of non-payment. The IRS assesses a non-payment penalty of 1/2 of 1 percent of the balance for each month after the initial due date. It may not sound like much, but it can penalties can add up to as much as 25 percent of the balance due.

That’s a lot if you’re on a tight budget, and penalties can add up quickly, not to mention past due notices from the IRS.

Don’t panic, and don’t ignore the IRS

Don’t assume the IRS will forget about those outstanding taxes, because their role is to collect tax payments from citizens. If you’re ignoring their written notices in hopes the IRS will forget and move on, it will never happen.

The IRS will become more aggressive with each passing month of non-payment. Regardless of where you are in this collection cycle, the IRS won’t forget. If you are facing asset seizure for non-payment of past due taxes, you need to take action immediately to protect your bank account and other assets.

Your best defense against the IRS

The bad news is you owe back taxes. The good news is that there are tax professionals who can help you. A qualified tax pro can determine if you’re eligible for an installment agreement, Offer In Compromise or Currently Non-Collectible status. A tax pro such as an Enrolled Agent or tax attorney can represent you in negotiations with the IRS.

One key advantage to hiring a tax pro: they know the complex IRS tax code inside and out, so you won’t have to. A qualified tax pro will also ensure your rights are upheld throughout the collection proceedings. They will also explain each step to you in terms that you can understand.

You won’t hear jargon or “legalese,” but you will hear an honest assessment of your financial circumstances and your options. Your tax pro can work with you in arriving at a payment arrangement you can live with over time.

If you’re facing 2016 with an outstanding tax bill, now is the time to take charge and take back your life. We have qualified tax pros on staff who can help you sort out your options, negotiate on your behalf with the IRS, and advise you every step of the way. Even better, they can translate that complex IRS jargon that might be difficult to interpret and understand.

If you’re ready to face 2016 with a clear plan of action, give us a call today at (888) 224-3004. You can also chat with us by clicking the white “Start Chat” button at the top of our homepage.

Either way, you don’t face to face past due taxes alone. We can help.

 

 

 

Life After Bankruptcy: Filing Your Taxes

Photo: Melenchon
Photo: Melenchon

Bad things can happen to good people: Illness, job loss, catastrophic medical expenses and natural disasters can wreck havoc on individual finances. In some cases, the only solution is to file for bankruptcy protection.

Bankruptcy not only affects your finances and credit rating, you’ll also have to take a different approach to filing your taxes. Here’s a brief look at those changes. Remember, if you are facing bankruptcy, it’s best to consult with a bankruptcy attorney for advice regarding your individual circumstances.

Once a consumer (also known as the debtor) files for bankruptcy, they are in effect turning over their affairs to a trustee. The trustee will then act on the debtor’s behalf in managing any non-exempt assets used for repaying creditors.  This arrangement forms an estate, much like an estate for an incapacitated or deceased person.

The debtor will file their customary 1040 form, and either the debtor or the trustee will file the 1041 form, which is the estate’s tax return.

Chapter 7: This form of bankruptcy is for individuals and married couples. In this case, there will be no trustee, since there are no assets that can be used to repay creditors. The tax scenario changes in that the debtor will not only file their 1040, they will also file their 1041 form on behalf of the bankruptcy estate.

Chapter 13: This is also for individuals and couples who have non-exempt assets that can be used for repaying creditors. The trustees manages these assets and utilizes them for repayment. Any tax refunds, for example would be used for repayment to creditors via the bankruptcy estate each year until creditors are paid off.

You will file your regular 1040 form, and the bankruptcy trustee will file the 1041 form on behalf of the bankruptcy estate.

Although post-bankruptcy tax filings are best handled by a qualified tax professional, learning about a bankruptcy’s impact on your tax scenario will hopefully demystify the process for you.

The decision to file for bankruptcy is never easy, and it takes careful consideration under the guidance of a qualified bankruptcy attorney.

By filing on behalf of yourself and the estate, there is less chance for errors or omissions when it comes to filing taxes in the wake of a bankruptcy filing. Plan carefully, enlist a bankruptcy attorney and a tax advisor, and you can begin to rebuild your finances over time.

 

Who Can Prepare Your Taxes?

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Find the right tax pro for your needs.

Last week, we discussed how to look for an ethical and qualified tax pro. If you’ve decided to not take the DIY approach to tax filing this year and enlist a tax pro, it’s also important to understand the difference between qualified tax preparers. Here’s a look at the various individuals that can file a tax return on your behalf.

PTIN holders: A PTIN holder is an individual that is not a Certified Public Accountant (CPA), tax attorney or Enrolled Agent(EA). While they can prepare and file a return on your behalf, they can only represent you under limited circumstances: With IRS revenue agents, IRS customer service representatives and those in the Taxpayer Advocate Service. A PTIN holder can’t represent you in an audit, appeal or collection proceeding.

Annual Filing Season Program Participants: This new officially program recognizes preparers who are not a CPA, EA, or tax attorney, but who have attended continuing education hours in preparation for each filing season. The IRS will issue them a Record of Completion. As with PTIN holders, a Filing Season Program Participant can’t represent you in an audit, appeal or collection proceeding. They can, however, represent you with IRS customer service agents, revenue agents, and Taxpayer Advocate personnel.

If you have a more complex return (rental properties, business or estate returns, extensive itemized deductions, foreclosure) or are facing IRS collection action, it’s best to work with a tax pro who has more extensive representation capabilities. Enrolled Agents, Certified Public Accountants and tax attorneys can represent you in an audit, collection action, and appeal action in addition to preparing and filing a return on your behalf.

Enrolled Agent(EA): An EA is licensed by the IRS and must pass a three-part Special Enrollment Exam. An EA must also be proficient in tax planning, preparing and filing individual and business returns and must participate in at least 72 hours of continuing education courses every three years.

Certified Public Accountant (CPA): A CPA must have a degree in accounting from an accredited college or university, and must be licensed by the state Board of Accountancy in their state. In addition to passing the Uniform CPA Exam, a CPA must also meet ongoing ethical and character standards in order to continue to practice. Some CPAs specialize in tax planning and tax return preparation.

Tax attorney: Like all other attorneys, a tax attorney has attended an accredited law school, passed the state bar exam, and must meet ongoing ethical standards in order to remain in practice. They have additional coursework in taxation, and can represent you before the IRS. Your tax attorney can represent you in IRS proceedings for an audit, an appeal, or collection matter. You can find a tax attorney either as part of a group practice or as a sole practitioner.

We have tax pros on staff who can help you with just about any tax scenario you can think of, from representing you before the IRS to preparing and filing your return. Just give us a call or click the white “start chat” button at the top of any of our pages and get started today. Approach the coming tax season with peace of mind so you can focus on what matters to you most.

What Is a CP504 Notice?

 

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If you’re struggling with a tax debt, chances are you’ve already received the CP 501 and CP 502 notices from the IRS. Both of those notices advised you of the total amount due, including interest and penalties. What if you blew off those notices, or put them in the “read later” pile? The IRS then issues the CP 504 notice, or Notice of Intent to Levy. It’s the IRS’s way of saying, “We mean business.”

The CP504 is only sent if you haven’t responded to any previous correspondence from the IRS regarding your tax debt, either by phone or by mail.  The IRS is essentially asking you to pay up or run the risk of asset levy or asset seizure.

Consequences of Ignoring the CP504

If you don’t respond to the CP504, the IRS can begin to take action against you in order to recover the money you owe to them. This can include:

  • Levying your state tax refund. If you will be getting a refund on your state income taxes, the IRS can seize that money in order to recover the money you owe them.
  • If your state tax refund isn’t enough to cover the balance owed and interest penalties, the IRS can place a federal tax lien on any profits you receive from selling a major asset such as land or a home. A federal tax lien is also considered a public record which will show on your credit report.

Other actions

The IRS can also seize bank accounts, investments, autos, RVs, and insurance policies in order to recover the debt you owe them. The IRS can also garnish your wages. In other words, ignoring a CP504 notice has serious long-term consequences that could jeopardize your financial well-being.

What You Can Do

Contact the IRS the day you get the notice in the mail. On the letter you’ll find a phone number for the IRS and any other contact information. Contact them immediately as a show of good faith that you’re working to resolve the tax debt.

If you disagree with the amount due, you can file an appeal. It may not resolve the debt altogether, but it does demonstrate that you are being proactive in resolving the debt.

Request an installment plan. There is no charge to set up an installment plan, but it is imperative that you make those payments on time without fail.

Better yet, get in touch with a qualified tax advisor who can inform you of your rights in dealing with the IRS. A qualified tax pro can also correspond with the IRS on your behalf, which is to your benefit if the thought of dealing with the IRS leaves you feeling intimidated or tongue-tied.

Your tax pro can also assess your financial situation to see if you would qualify for an installment plan, Offer In Compromise or any other abatement program. By understanding your rights and options, you and your tax pro can map out a strategy for addressing and eventually resolving your tax debt.

The IRS CP504 notice is sent after you don’t respond to any of their earlier notices. Ignoring a CP504 notice can result in result in asset seizure of levy as the IRS attempts to recover the debt you owe them.

If you receive a CP504 notice, don’t ignore it. Contact the IRS yourself, or enlist a qualified tax advisor to walk you through the process. We have Enrolled Agents and tax attorneys on staff to assist you in dealing with your outstanding tax debt and the IRS.

Why go it alone if you don’t have to? Get started today by clicking the white “Start Chat” button at the top right-hand corner or by giving us a call. Don’t let the IRS get the upper hand.

When to Hire a Tax Attorney

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You come home from a long day at work to find an IRS notice in your mailbox. You tear open the envelope to find an audit notice…or worse.   You know you should have a representative by your side, but which one? Today we’re going to look at a few situations that are best handled by a tax attorney.

Audit

You open your mail to find an audit notice from the IRS. At this point, it’s hard not to think of the worst possible outcome. After all, you’ve never been audited before.

The audit process is a legally binding contract between you and the IRS. Just as you wouldn’t go to civil court without representation, the same applies to dealing with an audit.

A qualified tax attorney can represent you during the audit process and explain the proceedings to you in a way that you’ll understand…free of jargon and legalese.

Your tax attorney will also see to it that the audit progresses in a timely manner, otherwise known as due process.

Your tax attorney can also negotiate with the IRS on your behalf, make payment arrangements if you owe any penalties or fees after the audit, and file for penalty abatement on your behalf.

Communications

If the thought of interacting with the IRS on any level renders you speechless or unable to convey your situation clearly, you’re not alone. At the same time, if you’re one of those who can’t communicate well under pressure without getting intimidated or flustered, a tax attorney is a wise investment.

They can not only interpret IRS jargon, but they can also communicate directly with the IRS on your behalf via phone, letter, or email.

Furthermore, a tax attorney can also push back if the IRS agent tries to intimidate them. Tax attorneys deal with the IRS for a living, so there isn’t any tactic they haven’t dealt with before.

Legal Action

The IRS has the right to file criminal charges against you if they have reason to believe that you are either purposely avoiding tax payment (tax evasion) or are hiding income from the government or falsifying your tax returns (tax fraud).

Both charges carry severe penalties, including jail time. If the IRS files criminal charges against you, your first course of action is to “lawyer up” AKA hire a tax attorney.

After carefully evaluating and researching your case, your tax attorney can determine whether or not you can receive a lesser degree of punishment, and they can represent you in court.

Missing Returns

If for any reason you neglect to file your tax returns, you’ll want an attorney to plead your case to the IRS. Those missning returns will need to be accounted for a filed.

The IRS may have some serious questions regarding the missing tax returns, and the circumstances under which they were missing, e.g., why they weren’t filed in the first place. Your attorney can not only communicate with the IRS on your behalf, they may be able to work toward a more manageable outcome after you file those past due returns.

You should retain a tax attorney whenever you are faced with an audit, criminal charges, or need to file past due returns. A competent tax attorney can communicate and negotiate with the IRS on your behalf, which can save you time and money in the long run.

If you’re facing a serious tax matter and need legal representation, we have qualified tax attorneys on staff to help you. Don’t let a notice from the IRS ruin your day. Give us a call or click the white “Start Chat” button in the upper-right hand corner of any of our webpages. Don’t go it alone when dealing with a serious tax matter. We can help.