Tax Time – A Good Time to Resolve Back Tax Balances

Posted on February 13, 2014 by Kursti Nakagawa

Tax Time – A Good Time to Resolve Back Tax Balances: Tax time is as good a time as any to resolve back taxes issues. Paying or settling back tax balances at the same time as filing current returns starts the new tax year off with a clean slate and avoids the escalating consequences that back tax balances can cause. The worst choice a taxpayer can make is to ignore outstanding tax liabilities and hope they will vanish. As always, the best course of action is to face the problem head on and pay the balance in full. If the necessary resources are lacking, as is often the case, there are numerous tax settlement options available. That being said, tax time is now and now is the best time to resolve back tax balances!

The consequences of ignoring back taxes escalate over time and can be severe. Penalties for failure to pay back taxes are assessed at a rate of 0.25% to 1% of the tax amount due for each month or partial that tax balances remain unpaid. These penalties continue to accumulate until they reach a maximum of 25% of the initial tax amount owed. In addition, since the IRS treats a back tax balance as a loan, they charge interest on the overdue amount at a rate that varies with the federal short term interest rate. If penalty and interest charges are not enough motivation to resolve back tax balances, the IRS or State Tax Agency may impose some type of enforced collection action. These aggressive collection activities include tax liens, tax levies and wage garnishments.

The best way to resolve an existing back tax liability is to pay the balance in full. If sufficient funds are not readily available, the taxpayer might consider putting the back tax amount on a credit card, withdrawing from a retirement account or taking out a bank loan. Short term extensions are available for taxpayers who will have the resources to pay their tax bill within 120 days. Additionally, there are numerous tax settlement options available for those who cannot make full payment either immediately or in the short term. These options include Installment Agreements, Partial Payment Installment Agreements and Offers in Compromise, among other things. Aside from these tax settlement options, penalty waivers are sometimes available for delinquent taxpayers who were unable to meet their tax obligations due to circumstances that were beyond their control.

The best course of action for a taxpayer who has a back tax balance may be to contact a certified tax professional for help in determining the best way to resolve the outstanding liability. Although numerous tax settlement alternatives are available, the qualifying criteria are specific and can be confusing. In addition the application procedures are complex and time consuming. That being said, it may take a professional with a thorough knowledge of the requirements of the various tax settlement alternatives to effectively maneuver the system.

If you have tax questions or a tax debt you are unable to pay, our tax settlement professionals are happy to discuss your tax resolution options free of charge. For more information about our services, visit us today at www.professionaltaxresolution.com or call us at 877.889.6527. With over 16 years in the business of resolving tax debt, we have a thorough understanding of tax law together with the experience to know which settlement option will be the best fit for your specific set of circumstances.

Beware of IRS Penalties at Tax Time!

Posted on February 11, 2014 by Kursti Nakagawa

Beware of IRS Penalties at Tax Time!

Beware of IRS Penalties at Tax Time! Tax time is a good time for taxpayers to be reminded of some of the penalties that can be assessed by the IRS and State Tax Agencies for failure to comply with set deadlines for the filing of tax returns and the payment of tax amounts due. Since penalty amounts accumulate over time and are usually combined with interest charges on any outstanding tax balances, they can result in significant increases to the amounts owed to the collecting tax agencies.

Outlined below are some of the penalties that come into play at this time of year:

Penalty for a Bounced Check

The penalty for a disallowed check or money order made payable to the United States Treasury is 2% of the amount of the check for checks of $1,250 or more. If the amount of the check is under $1,250, the penalty is $25 or the full amount of the check, whichever is less. The penalty fees for disallowed payments cover electronic payments as well as paper checks.

Late Filing Penalty

The penalty for the late filing of a tax return is 5% of the unpaid tax balance for each month or partial month that the return is late up to a maximum penalty of 25 %. A minimum penalty of $100 or 100% of the tax due, whichever is less is imposed for any tax return that is more than 60 days overdue.

Late Payment Penalty

The penalty for failing to pay tax amounts due is assessed at a rate of 0.5% for each month or partial month that the tax balance remains unpaid after the filing deadline. This percentage is reduced to 0.25 % for any taxpayer who has entered into a valid installment agreement with the collecting tax agency. Taxpayers who have filed for a 6 month extension and have paid at least 90% of the tax amount due at the time the extension was filed are exempt from paying a late payment penalty provided they pay the balance of any taxes owed at the time the extended return is filed.

The assessment of a tax penalty must be officially communicated to the taxpayer by means of an IRS Letter, an IRS Notice or a similar type of written notification from one of the State Tax Agencies. Each written penalty notice must include an explanation of why the penalty is being assessed and how the amount of the penalty was calculated. Upon receiving an official notice informing you of the assessment of a tax penalty, the best course of action is always to address the issue immediately before tax balances accumulate beyond what they already are.

If you have received a penalty notice or have a tax debt you are unable to pay, our tax settlement professionals are happy to discuss your tax resolution options free of charge. For more information about our services, visit us today at www.professionaltaxresolution.com or call us at 877.889.6527. With over 16 years in the business of resolving tax debt, we have a thorough understanding of tax law together with the experience to know which settlement option will be the best fit for your specific set of circumstances.

Tax Breaks You Don’t Want to Miss!

Posted on January 30, 2014 by Kursti Nakagawa

Tax Breaks You Don’t Want To Miss!

Many taxpayers pay income taxes in excess of what they actually owe by failing to take advantage of all of the tax breaks they can legitimately claim. The use of tax deductions to reduce taxable income and tax credits to reduce net tax liability can significantly reduce the total amount of income taxes owed for any given year. Failure to use available deductions and credits in addition various tax exemptions and tax incentives automatically means that you will overpay your tax bill. Therefore, as you get ready to file your 2013 tax return, you may want to review the list of available tax breaks to ensure that you are using the provisions of the tax code to your maximum tax advantage.

Listed below are some tax breaks you don’t want to miss when filing your 2013 return:

State Income Tax If you owed state income tax with the filing of your 2012 tax return, you can deduct the amount of that payment together with any state income tax taken out of your 2013 paychecks or paid in the form of quarterly state income tax payments during 2013.
State Sales Tax If you itemize your deductions, you are given the option of deducting either state income tax payments or an amount for state sales tax taken from the IRS sales tax tables, whichever is larger. For taxpayers who live in states where there is no state income tax, the sales tax deduction is especially important. The sales tax paid on a large purchase such as a vehicle and be listed as a separate deduction.
Costs Incurred for Charity In addition to deducting cash and non-cash charitable contributions, taxpayers can deduct any expenses incurred while doing charitable service work. This can include mileage expenses, ingredients for food contributions and supplies purchased to support a local church or school. If you claim a donation in excess of $250 to any given charity, you must obtain a statement from the charity documenting your contribution.
Job Search Expenses The expenses incurred while searching for a job can be included as an itemized deduction if they exceed 2 percent of your adjusted gross income for that year. Such expenses include, but are not limited to, transportation costs, food and lodging costs, employment agency fees and other advertising expenses such as the printing of resumes and business cards.
Refinancing Points When you purchase a home, you can count the amount you pay in refinancing points as a tax deduction. If you refinance an existing loan, you can deduct the points in equal increments over the life of the loan.
Travel Expenses for Military Reserves Military reservists can claim travel expenses incurred when traveling to and from military reserve training. These expenses can be claimed as long as the training location is a minimum of 100 miles from home had involves an overnight stay. Allowable expenses include lodging, half the cost of meals and 56.5 cents per mile plus tolls and parking fees if travel is by automobile.
Child Care Credit Working parents are eligible for a tax break to cover the cost of child care, including summer camp. The limit for this credit is $3000 for per child which is then reduced by an incrementally decreasing percentage as income increases. The minimum credit is 20% of $3000 for families earning over $43,000. If the amount of the child care tax credit is more than the amount of the annual tax bill, you can only use whatever amount reduces the tax bill to zero.
Energy Saving Improvements Taxpayers can deduct 10 % of energy saving improvements such as insulation up to a maximum of $500 and up to 30% of the cost of alternative energy equipment including installation. The basic deduction for energy saving equipment ends in 2013 but that for alternative energy equipment goes through 2016.
American Opportunity Tax Credit The American Opportunity Tax Credit is good for all four years of college. The maximum amount of the credit is $2500 for those with incomes of $80,000 or less ($160,000 for a couple) and decreases for those with higher incomes. If the credit exceeds the tax bill in any give year, it will result in a refund.
Lifetime Learning Credit The Lifetime Learning Credit is equal to a maximum of $2000 per year and can be used for any type of higher education including the improvement of job skills. The maximum credit is available to those earning less than $53,000 and phases out for those earning more than $63,000 ($107,000 and $127,000 for couples).The Lifetime Learning Credit can be used for any number of years.

If you have questions about claiming available credits and deductions or about a tax debt you are unable to pay, our experienced professionals are happy to discuss your situation free of charge. For more information about our services, call us today at 877.889.6527 or visit us at www.professionaltaxresolution.com. With over 16 years in the business of resolving tax problems, we have a thorough understanding of tax law tax together with the experience to know how to apply that knowledge to your maximum tax advantage.

Foreign Banks Take Advantage of Tax Amnesty Offer

Posted on January 27, 2014 by Kursti Nakagawa

Foreign Banks Take Advantage of Tax Amnesty Offer

Foreign Banks Take Advantage of Tax Amnesty Offer: In its latest attempt to tackle the problem of offshore tax evasion, the United States Department of Justice offered Swiss banks that are not currently under criminal investigation the chance to apply for tax amnesty. Banks that chose to accept the offer were given until December 31^st to turn over information on any undeclared foreign accounts and to provide information as to how they helped United States citizens hide their foreign assets. A recent report indicated that over one third of the 300 banks that were extended this recent amnesty option have accepted the terms and agreed to cooperate.

Under the terms of this latest tax amnesty program, foreign banks must pay penalties equal to a certain percentage of the value of their undisclosed American accounts in order to avoid prosecution. This percentage is determined by when the undisclosed accounts were opened and is highest for those accounts opened after the 2009 prosecution of UBS. The fines range from 20 percent of the value of undisclosed assets for those accounts opened before August, 2008 up to 50 % for those opened after February, 2009. While the Swiss government is critical of these steeply escalating percentages, it has apparently encouraged banks to cooperate.

The crackdown on offshore tax evasion increased in intensity after the 2009 conviction of UBS, the largest Swiss bank, for hiding over $20 billion dollars in United States assets. As part of this conviction, UBS paid a penalty of over $700 million and turned over in excess of 4000 foreign accounts. In addition, 100 United States taxpayers and financial advisers were criminally prosecuted while over 30,000 others avoided prosecution by disclosing their offshore accounts and paying the back taxes and penalties associated with the disclosures. Since that time, the Unites States Department of Justice has allocated more and more resources to identifying offshore assets and penalizing those institutions and individuals who attempt to hide them. This latest tax amnesty offer is part of that ongoing effort.

If you have questions about the reporting of assets held in foreign accounts or about a tax debt you are unable to pay, our tax settlement professionals are happy to discuss your situation free of charge. For more information about our services, call us today at 877.889.6527 or visit us at www.professionaltaxresolution.com. With over 16 years in the business of resolving tax problems, we have a thorough understanding of both domestic and foreign tax law tax together with the experience to know how to apply that knowledge to your specific financial situation.

Out with the Old……Extended Tax Provisions 2014

Posted on January 14, 2014 by Kursti Nakagawa

Extended Tax Provisions 2014 – It is common knowledge that tax law is constantly changing and it seems that Tax Year 2014 will be no exception. Every year the government makes some changes to the tax code in an attempt to make it fit the current economic climate. These changes include doing away with existing tax laws, initiating new laws and either renewing temporary tax provisions or allowing them to expire. When the American Taxpayer Relief Act was signed into law in January of 2013, it established some new tax laws as well as extending some temporary provisions through the end of the year. Fifty-five of those temporary provisions expired on December 31^st. Although some of those measures are sure to be renewed, there is no telling which ones that will be or when the renewals will take place.

Listed below are a few of the changes that are on the books for Tax Year 2014:

Affordable Health Care Penalty Taxpayers who fail to buy a health insurance plan before the enrollment deadline of March 31, 2014 will be assessed a penalty equal to either 1% of the yearly household income or a set amount for each uninsured individual or family, whichever is higher. The penalty will be due with the filing of the 2014 tax return.
Joint Tax Returns for Same-Sex Couples Starting in 2014 with returns, same sex couples will file their federal tax returns either jointly or as married filing separately, regardless of whether they live in a state that recognizes same-sex marriage. However, if they live in a state that does not recognize same-sex unions they will have to file separate state returns as single taxpayers.
Regulation of Tax Preparers A final decision on the regulation of professional taxpayers will probably be made some time in 2014. The IRS wants tax preparers who are not already licensed CPAs, Enrolled Agents or attorneys to be required to pass a competency exam and complete continuing education hours. However, a lawsuit has been filed against the IRS with reference to this issue and an appellate court decision is now pending.
Tax Brackets and Personal Exemption Income tax brackets have been widened for 2014 and the personal exemption amount has been increased slightly, from $3900 to $3950.

If you have questions about changes to the tax code for 2014 or need help resolving a tax debt that you are unable to pay, our experienced professionals can provide you with the help you are looking for. Visit us today at www.professionaltaxresolution.com to find out more about our services or call us at 877.889.6527 to set up a free, no obligation consultation. With over 16 years in the business of resolving tax debt, we have the experience to know which settlement option will be the best fit for your specific set of circumstances.