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.

 

 

 

It Will Be Here Sooner Than You Think: Preparing For the October 15th Deadline

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If you missed the April 15th deadline and filed for an extension, the October 15th cut-off date is rapidly approaching. Here is what you need to know in order to prepare for the deadline:

1. Paperwork: Regardless how you will be filing (DIY or with a tax pro) gather all the necessary paperwork now. That includes income documentation (W2s, 1099s, K-1s, if applicable). Confirm the information on these forms matches your name, address, social security number. Any discrepancies will result in delayed return processing and a delayed refund.

2. Social Security Numbers: Make sure the social security numbers for you, your spouse and your dependents are correct. If you are using a spreadsheet or app to organize your tax information, make sure the social security numbers are correctly recorded on the spreadsheet or in the app; incorrect or missing social security numbers will wreck havoc with your return and cause delays.

3. Deductions: Did you start a business, look for work, have a child, buy a home, volunteer or contribute to a charity? All of these activities are possible write-offs if you choose to itemize your tax deductions this year. There are additional deductions for child/dependent care, IRA contributions, medical expenses, and summer day camp for your kids. Tax deductions can lower your taxable income, which in turn will lower your overall tax liability.

Gather all of your expense receipts, and keep them handy for filing day. You’ll need to refer to them as you fill out your tax forms.

4. File Online: There are IRS-approved software packages for every budget, so avoid the long lines at the tax prep office and file online. Gather all of your tax records, set aside an hour or less, and file online. You’ll receive step-by-step instructions for each page, and support is readily available through the software package. If you select the direct deposit option for your refund, you can expect to receive the funds in about three weeks.

5. Request a Payment Plan: While you can’t request an extension to pay your taxes, you can request a payment plan. You’ll have up to six years to pay your tax balance if you qualify, and you’ll have payments you can live with.

With these tips in mind, the impending deadline need not feel like impending doom; instead it will be just another date on your calendar. Gather your paperwork, calculate your deductions, set aside some time, and go forth and file!

Married With Taxes: Deciding Whether to File Jointly or Separately

Sara Hammarback/freeimages
Sara Hammarback/freeimages

As a married taxpayer, you aren’t limited to filing a joint tax return with your spouse. Depending on your unique tax situation, it may benefit you to file separately. Here’s an overview of the benefits and drawbacks of the filing options available to you.

Married, Filing Separately

In most cases, it isn’t a good idea to use this filing status as a married person. One significant reason is that by filing under this status, you will automatically disqualify yourself from nearly every tax credit, such as the Earned Income Tax Credit (EITC) and the Child Tax Credit, even if you do meet the income guidelines.  You’ll also be facing an additional headache if you do file separately: you’ll have to divide all of your income and expenses on your tax form, which can be tiresome and nerve-wracking if you’re not very detail-oriented or are up against the tax filing deadline.

However…

As with any tax matter, there is always another angle. If your spouse is burdened with a sizable tax debt to which you have no connection, it would be to your advantage  to file separately. Doing so will allow you to not shoulder the burden of your spouse’s tax obligation. Instead, your tax returns would be treated as separate entities.

Benefits of Filing Jointly

If you or your spouse aren’t saddled with a separate tax debt, it would be to your benefit to file your tax returns jointly. The IRS encourages married couples to do so by offering a standard deduction that is twice that single standard deduction. You’ll also be able to claim a higher charitable contribution as a married couple, both of which could reduce your overall tax liability at the end of the year.

As with any tax matter, there is always a caveat, so it’s best for you and your spouse to meet with a qualified tax advisor at least once, especially if this will be your first year of marriage. Your tax advisor can assess your current financial situation, including any back taxes owed by either you or your spouse. From there, you’ll get a plan of action for filing your taxes: separately or jointly as a married couple.

Choosing the appropriate filing status for you is one of the key tax decisions you’ll make as a married person. Know and understand your options, and check in with a tax advisor to get answers to your specific questions. Marriage has its share of joys and headaches. While taxes certainly can’t be counted as one of the joys of marriage, they shouldn’t be a headache, either.

 

“To Err Is Human,” Your Guide to IRS Penalty Abatement

Marinela Prodan/freeimages
Marinela Prodan/freeimages

“To err is human, to forgive is divine.” In this case, the IRS could be the forgiving party in the equation. The First Time Abatement, or FTA, is available to you as a means of reducing or eliminating a tax penalty altogether.

Guidelines

The IRS will generally consider issuing a First-time Penalty Abatement if you have had no prior substantial tax penalties with the IRS within the past three years.  The IRS may grant you a First Time Abatement (FTA) in one of these two instances:

Reasonable cause would apply if there was a legitimate circumstance that prevented you from filing your tax return on time, such as a serious illness (sorry, having a bad case of the Mondays doesn’t count in this case) or disaster.

Complying with IRS regulations would be  nearly impossible under these circumstances, and the IRS will take that into consideration when deciding whether or not to grant you a one-time penalty abatement.

The IRS may also grant you the FTA if they made an error in calculating the amount of tax you owe. Be careful, though: the burden of proof will be on you in this case, so you’ll need to provide enough supporting documentation to prove your claim.

The FTA is a little-known program that can be of great help to you if you meet the guidelines. After all, why pay tax penalties if they were calculated in error or if circumstances such as illness or disaster prevented you from filing your taxes on time?

Time To Seek Help

As with any other tax matter, the IRS has a myriad of codes, regulations and requirements…in other words, you’ll need to jump through some hoops. In this case, having a knowledgeable tax attorney or Enrolled Agent by your side will help tremendously. They’ll interpret the IRS codes, requirements, and jargon for you, and they will let you know if you qualify for the FTA program.

Facing tax penalties due to circumstances beyond your control or IRS error is one instance where the IRS can be a little forgiving if you file for the FTA. This program can reduce or eliminate your tax penalty altogether if you are able to substantiate your claim with the right documentation.

If you’re facing tax penalties due to illness, disaster, or IRS error, don’t wait. We have tax attorneys and Enrolled Agents on staff who can assist you with the sometimes tricky process of filing for the FTA program. Get started today by clicking the white “Start Chat” button or by giving us a call. Don’t go it alone. We’re here to help.

Pregnancy-Related Deductions

Nancy Lowrie/freeimages
Nancy Lowrie/freeimages

 

Having your first child is not only a life-changing event, but also a time for many questions and concerns. There’s no doubt raising a child to age 18 is expensive: the most recent estimate, adjusted for inflation, is $304,480. Let’s not forget expenses before the child is even born.

Today we’re going to take a look at some of the deductible pregnancy-related expenses.

What’s Deductible

Generally the IRS regards any “medically necessary” pregnancy-related expense as a deductible expense. There’s a catch, however: they must be out-of-pocket expenses. Anything covered by your insurance isn’t deductible, but any expense not covered by insurance can be deductible. Here are some of those expenses:

  • Childbirth courses
  • Prenatal visits with a health care provider
  • Prescription medication
  • Ambulance transportation
  • Labor & delivery charges not covered by insurance
  • Hospital charges not covered by insurance
  • Medically-necessary tests.
  • Post-partum care

Ultrasounds are deductible as long as they are prescribed by your doctor. At the same time, novelty ultrasounds (3-D or similar) that aren’t prescribed by your doctor are not deductible. Great for the grandparents, but not deductible.

As badly as you want to write off the piles of sweats and yoga pants and/or maternity work clothes, they’re not deductible. Exception: If you are required to wear a work uniform and you purchase the “maternity” version of that uniform, you can take the deduction.

Exception to the exception: If your employer pays for or reimburses you for the maternity uniform, you can’t deduct the cost from your taxes.

If your budget allows for a Mother’s Helper to get you through those crazed sleep-deprived weeks after the baby is born, you may save your sanity but you can’t deduct the cost.

Exception: If you are on medical bed rest prescribed by your physician, you can deduct the cost of having a Mother’s Helper.

The Math

The IRS generally allows for costs exceeding 7.5 percent of your AGI (Adjusted Gross Income) to be claimed deduction. You will need to file the 1040 long form and attach schedule A, which is used for itemized deductions.

As with anything else tax-related, keep all of your related receipts and documents in a safe place so you can refer to them on tax day.

Having your first child is a landmark event in your life, and in the life of your friends and extended family. Raising a child is expensive, but you can take the sting out of some of the earlier costs by taking certain pregnancy-related deductions on your tax return.

Any life event such as marriage, buying a home, or big jump in salary, warrants checking in with a qualified tax advisor if you have any questions regarding pregnancy-related tax deductions. He or she can clarify which expenses can be deducted given your unique tax situation.

 

A Closer Look at The Installment Agreement

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Second In a Series

If you’re saddled with a tax bill that you can’t pay in full, the IRS offers an Installment Agreement program. Similar to the Offer In Compromise, this program allows qualified taxpayers to make monthly payments toward their tax debt, offering some relief from a sizable tax bill. We’ll take a closer look at this program and offer a general overview of its requirements and features. As with any individual tax scenario, it’s best to check with a tax pro regarding your specific case.

BACKGROUND: As part of the IRS Fresh Start initiative in 2008, the IRS made adjustments to the terms of the program, making it easier to obtain an Installment Agreement.  Taxpayers owing $50,000 or less in taxes can request an Installment Agreement by filing form 433-A (Collection Information Statement) online, and have up to 72 months (6 years) to pay off their tax debt.

Taxpayers who owe $50,00 or more must provide supporting documentation along with their written request, and must negotiate their payment plan with the IRS.

REQUIREMENTS: Taxpayers will need to meet the following requirements in order to move forward with their Installment Agreement request:

  • You must be current on your tax returns and have no pending tax returns from prior years. If you are self-employed, you must be current on your quarterly taxes;  if you own a business, you must be current on all of your payroll tax deposits and form 941 filings.

HOW IT WORKS: As with any tax matter, it’s best to have a tax pro in your corner. If you owe over $50,000 and can’t pay off the tax debt in six years or less, you will need to file form 433-A and propose a payment plan at that time. A qualified tax pro who has reviewed your tax scenario and other finances can help you in determining a payment amount you can live with.

You will need to make that first payment at the time you file your 433-A. Keep making those payments as you and your tax pro wait to hear from the IRS. It shows good faith that you are willing to chip away at your tax debt, and that the payment is one you can live with and make each month. It can take up to several months for the IRS to reach a decision and notify you by mail.

You can make those initial payments to the local IRS service center by using the payment coupons and bar code envelopes provided to you. You have the option of using either a personal check or a bank/cashier’s check.

Once your Installment Agreement has been approved, you have two more payment options available. You can either pay via payroll deduction (your employer will need to complete form 2159), or by direct debit from your bank account.

Whatever you do, make sure you make your payments on time and for the full amount. Missing a payment or having a late payment could result in the IRS revoking the Installment Agreement.

Likewise, your IA could be revoked altogether if you provide false or misleading information on your Collection Information Statement (form 433-A), if your financial situation changes drastically, if you miss a payment, or if you fail to file your tax returns on time.

Lying to your tax pro or the IRS about your financial circumstances (failing to disclose assets, for example) can land you in serious trouble with the IRS and your tax pro. Be truthful and accurate in dealing with your tax pro and the IRS.

WHAT HAPPENS IF THE IRS REJECTS AN INSTALLMENT AGREEMENT REQUEST

If your Installment Agreement request is rejected by the IRS, this is where a tax pro can be of benefit to you. They can negotiate with the IRS on your behalf, and keep your  request moving through the IRS channels, along with keeping you updated as the  request works its way through the IRS maze.

A tax pro is also more familiar with the IRS chain of command, and can lessen the burden of endless phone calls, emails and letters to the IRS.  At the very least, a tax pro will be able to explain the process to you free of IRS jargon, in terms that you can understand.

That alone is worth it.

If you are facing a sizable tax debt and have questions, be sure to find a qualified tax pro who can address your concerns, explain your payment options, and negotiate with the IRS on your behalf.

10 Traits Of A Reputable Tax Resolution Firm

How To Tell The Good Guys From The Bad Guys…

There is no doubt the recession and the ensuing financial fallout left many taxpayers in distress. Maybe you’re one of them.  Maybe you’re haunted by back taxes. Liens, IRS levies, and wage garnishments for unpaid tax to the Internal Revenue Service (IRS) and state tax agencies can all add to the stress of making ends meet. Dishonest tax resolution firms have emerged in recent years, eager to separate distressed tax payers from their money in exchange for little to no service. Are you in need of tax resolution assistance? Here are 10 traits of a reputable tax resolution firm.

1.  Credibility: A reputable tax firm employs the following staff members: Tax Attorneys, Enrolled Agents, and Tax Consultants. A good firm will also have support personnel such as Case Managers, who will assist you as your case moves from intake to resolution. Beware of firms that don’t have these personnel on staff. Only tax attorneys and Enrolled Agents can negotiate with the IRS or state tax boards on your behalf. You want the best representation possible, and a reputable firm will provide that for you backed by well-trained and educated support staff.

2.  Reputation: You want to ensure your tax resolution firm has a sterling reputation. The Better Business Bureau is an excellent starting point. Personal recommendations from friends and family are also a good source.

3.  Integrity: Beware of any tax resolution firm that doesn’t disclose all fees BEFORE they are rendered. There should be no surprises. A reputable firm can work with you if you aren’t able to pay their full fee upfront.

4.  Service by Licensed Professionals: Your case should be handled directly by a tax attorney, Enrolled Agent and/or a Tax Consultant working in-house. At no time will a reputable tax firm outsource their work to a “back end” company. Ask if your tax matter will be handled in-house. If you can’t or won’t get a straight answer, look elsewhere.

5.  Transparency: Your tax firm should have all information easily available for you, either in person or on their website. You should be able to access full information regarding staffing, fees, hours, and policies. Are you dealing with a firm that won’t disclose or offer that information? Time to find one that will.

6.  Honesty: Some taxpayers may not qualify for an Offer In Compromise, for example. Is your firm honest with you about the extent to which they’ll be able to help you, or are they evasive when questioned? Reputable tax firms will be honest in telling you whether or not they will be able to assist you. Avoid firms that won’t shoot straight with you when it comes to your tax matters.

7.  Reasonable and fair: A reputable tax resolution firm will charge a fair and reasonable fee to assist you with your tax matters. You will be offered an honest assessment of your tax situation, along with a reasonable fee. Fees are influenced by many factors: labor hours in researching your tax matter, outstanding tax/lien balance, the level of staff needed (tax attorney or Enrolled Agent?) among many. Dishonest firms will charge an outrageous sum. Do your homework. Call or email different firms. If the quote seems outrageous, it probably is. A reputable firm won’t strip you of your hard-earned money.

8.  Discretion: If you’ve ever seen any amount of daytime television, you’ve most likely seen those loudly-produced ads for tax debt relief for “pennies on the dollar.” Avoid them. They will most likely charge an exorbitant fee (they need to offset those advertising costs somehow) or will accept your case, even if you don’t qualify. A reputable firm doesn’t employ large radio and TV advertising campaigns. A good firm will rely on word-of-mouth from satisfied clients, an accessible, well-written website and social media marketing for their services. All of those approaches are low-cost and there is no reason to overcharge clients to offset advertising costs.

9.  A Stress-free Approach: A legitimate tax resolution firm won’t leave you feeling like you’ve dealt with a used car salesman. Owing back taxes or being faced with a lien or bank levy is stressful enough without the high-pressure sales pitch. A reputable firm will assess your tax situation, make suggestions, and leave the final decision up to you. Beware of high-pressure tactics to pay a fee or sign up for services that offer pricing “for a limited time only.” Head out the door and to the nearest reputable tax resolution firm.

10. Accessibility: When you call your tax firm representative, are you able to speak with the same person each time, or are you passed from person to person? Do you know your representative’s name? Do they show a genuine interest in you as the tax payer and do they convey an honest desire to help you? Do they keep you informed as your case progresses? All of these are signs of a reputable tax resolution firm, as they hire those who have the utmost integrity and desire to help distressed tax payers.

If you are a distressed tax payer, we can help. We offer service that is fair, reasonable, and suited to your needs. You can contact us by phone at 888-224-3004. If you prefer, you can also reach us via  chat by clicking the white “start chat” button on the upper right hand of our webpage. You can take comfort in knowing your tax matters will be handled discreetly, professionally and with integrity. We are among the “good guys” and  we’re here to help you.