Why You Should File Your Taxes

Posted on March 16, 2015 by Kursti Nakagawa

Why You Should File Your Taxes by April 15

Taxes Due April 15

April 15th is an important filing deadline for individual taxpayers. If the Internal Revenue Service does not receive either a completed tax return or an application for a six-month tax extension by this date, they will automatically assess a failure-to-file penalty. In addition, they will begin to assess a failure-to-pay penalty on any tax amounts owed. Although the failure-to-file penalty can be diverted by applying for a six month tax extension, late payment and interest assessments will automatically begin to accrue as of the April 15th tax deadline regardless of whether a tax extension has been filed.

Because the penalties and interest described above are compounded over time, the financial consequences of failing to file tax returns and failing to pay tax amounts owed can be significant. The failure-to-file penalty is assessed at a rate of 5% of the back tax balance for each month or partial month that a return is not filed up to a maximum of 25% of the outstanding tax liability shown on the return. A minimum penalty of either $100 or the entire amount of the back tax balance is assessed for any return that is not filed within 60 days of the filing deadline. In addition, a failure-to-pay penalty is assessed at a rate of 0.5% per month for each month or partial month following the filing deadline where a back tax balance remains unpaid. This rate is reduced it 0.25% if a taxpayer is making payments according to the terms of an official installment agreement and is excused altogether if a tax extension was filed and 90% of the back tax balance was paid on or before the original filing deadline. The failure-to-pay penalty is assessed for a maximum or 50 months, thus capping out at maximum of 25% of the original tax liability.

The lesson to be learned from all of this is that the filing of tax returns and the paying tax bills should be taken seriously. As is pointed out above, the financial consequences of not doing so can be significant. The failure-to-file penalty can be avoided by simply filing a tax return by the filing deadline even in the case where funds are not available to pay the tax amounts due. Outside of this, a taxpayer should avoid the compounding of penalties and interest by being proactive in coming up with a plan to pay any outstanding tax liability. To this end, the IRS is willing to work with delinquent taxpayers to come up with payment plans they can afford. Once a payment amount is determined based on the size of the back tax balance and the taxpayer’s financial situation, the taxpayer simply pays this monthly installment amount until the back tax balance is paid off. This is a far better solution than ignoring a tax bill and then having to pay the back taxes plus an additional 25% of the original tax amount owed.

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.

IRS Becoming Aggressive About Offshore Tax Evasion

Posted on February 8, 2015 by Kursti Nakagawa

IRS/ Offshore Bank Accounts

IRS Becoming Aggressive About Offshore Tax Evasion One problem the IRS has to tackle is that of United States taxpayers who dodge paying taxes by placing their funds in offshore accounts and then failing to report them. In the last several years, the IRS has made it clear that this is breaking the law and that taxpayer’s who are caught hiding foreign assets may face penalties, fines and even criminal prosecution. “It’s a bad bet to hide money and income offshore,” said IRS Commissioner John Koskinen. “Taxpayers are best served by coming in voluntarily and getting their taxes and filing requirements in order.”

The IRS has recently become more aggressive in finding taxpayers who are hiding their money in offshore accounts. In 2009, they started the Offshore Voluntary Disclosure Program. This program allows United States citizens who have foreign bank accounts to voluntarily disclose the accounts to the IRS and, in return, be assessed lowered penalties and avoid criminal prosecution. Since the inception of this program, the IRS has collected over seven billion dollars in back taxes and penalties from offshore accounts. They have also issued rules under the Foreign Account Tax Compliance Act mandating foreign financial institutions to inform them of any accounts held by United States citizens.

As part of their ongoing attempt to combat offshore tax evasion, the IRS has set aside a page on its website devoted to this issue. The page, entitled “Abusive Offshore Tax Avoidance Schemes” explains the laws governing the reporting of foreign income as well as outlining some of the legitimate offshore activities. It also highlights some of the institutions and activities that are in the IRS radar as far as avoiding foreign taxes are concerned.Some of those include:

Private banking (U.S. and offshore)
Personal investment companies
Captive insurance companies
International Business Companies (IBCs)
Foreign (offshore) partnerships, LLCs and LLPs
Foreign trusts
Foreign corporations
Offshore private annuities
Captive insurance companies
Offshore bank accounts and credit cards
Related-party loans

In summary, the IRS is constantly on the lookout for schemes designed to avoid paying taxes on income from assets held in offshore accounts. They claim that, to date, they have audited thousands of offshore back accounts. In the process, they have collected billions of dollars in restitution and initiated numerous criminal investigations. The long and short of this issue is that failing to report income and assets held in foreign accounts is not a wise move in light of the recent IRS crackdown! 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. (https://allproshadeconcepts.com/) 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.[/tab] [/tabcontent] [/tabs]

Tax Debt of 100k Settled for $13,150

Posted on January 13, 2015 by Kursti Nakagawa

Ms. H, a single mother, had suffered extreme misfortune in several areas. As a real estate agent, her income flat lined when the housing market crashed, making it difficult for her to meet her monthly financial obligations. To make matters worse, her son was involved in a car accident in which he suffered major head injuries. Then, while she was juggling medical bills as well as managing the care of her injured son, Ms. H received an official IRS Notice informing her of an outstanding tax liability. She had not filed tax returns for ten years and, according to IRS calculations, owed over $100,000 in back taxes. As would be expected, she was panic stricken about her dire financial situation.

When Ms. H contacted Professional Tax Resolution for help with back taxes, she was immediately placed in contact with a tax expert who set up a face to face meeting in order to determine the best solution for her specific situation. Following this meeting, our tax professionals got to work preparing and submitting the ten years of back tax returns. Although the returns showed that Ms. H owed a back tax balance in excess of $40,000, our tax team was not deterred. They promptly launched into the next phase of the tax resolution process which was to do a financial and demographical analysis of Ms. H’s situation. The analysis documented her financial hardship, making her an ideal candidate for an Offer in Compromise.

Once it was determined that Ms. H met the eligibility criteria for an IRS Offer in Compromise, our professionals promptly prepared and submitted the application. Within a short time, the IRS accepted the offer, successfully settling her federal tax debt of almost 100k for $6,150. In addition, the tax experts at Professional Tax Resolution negotiated an Installment Agreement with the California Tax Franchise Board whereby Ms. H was able to pay off the $7000 back tax balance owed to them in monthly installments of $110. Overall, her tax debt, which was originally recorded as over $100,000, was settled for $13,150!

The members of the Professional Tax Resolution team are devoted to their clientele and are always focused on negotiating the most beneficial tax settlement agreement possible. We sympathize with our clients and understand that each situation is unique. Please contact our office to see how our professionals can assist you. Our tax experts are experienced at communicating with the IRS and guarantee to follow your particular tax settlement process though to a final resolution. 

2015 Tax Filing Date Announced

Posted on December 31, 2014 by Kursti Nakagawa

2015 Tax Filing Date Announced

2015 Tax Filing Date Announced

2015 Tax Filing Date Announced – The tax filing date for the New Year has recently been announced by the IRS. Tax filing will begin on Tuesday, January 20th, 2015. In addition, as part of the tax extenders package which President Obama signed into effect on December 19, 2014, all taxpayers can file at the same time.

Although the tax extenders package was approved just weeks ago, the Internal Revenue Service has announced that the 2015 tax season will be begin in a timely fashion. The opening date is actually 10 to 11 days earlier than it was in previous tax seasons. In addition, rather that having a tiered tax season opening, the new legislation allows all taxpayers to begin filing at the same time.

In IRS Commissioner Koskinen’s remarks about the new tax extenders package, he said that, “[w]e have reviewed the late tax law changes and determined there was nothing preventing us from continuing our updating and testing of our systems.” He went on to say that IRS employees would continue an aggressive schedule of testing over the next month in order to complete the final stages of preparation of their tax systems for the timely opening of the 2015 tax season.

Although the tax extenders legislation was passed by both houses of Congress and signed into effect by President Obama just weeks before the end of the year, it reinstates many valuable tax breaks that had expired at the end of 2013. Its tax saving provisions will allow both individual taxpayers and businesses owners to save valuable 2014 tax dollars. The bill, aptly named the Tax Increase Prevention Act of 2014, is certainly a welcome holiday treat for many!

Happy New Year to All!

Tax Extenders Bill Passed

Posted on December 19, 2014 by Kursti Nakagawa

Tax Bill Passed By Congress

Tax Extenders Bill Passed – With time running out, Congress has passed the long awaited tax extenders bill. Although President Obama has not yet signed the legislation into effect, his signature is expected. The bill, officially identified as the Tax Increase Prevention Act of 2014 (HR 5771), extends some very significant tax breaks through the end of 2014 and makes them retroactive to January 1, 3013 when they originally expired. It important to note, however, that the new legislation only covers items that are put into effect before December 31, 2014. At his point, there are no plans to extend the bill’s tax benefits into 2015 and beyond.

Some of the tax saving provisions of HR 5771 are summarized below:

Mortgage Debt

The tax extenders bill allows homeowners to continue to take advantage of the provisions of the Mortgage Debt Relief Act of 2007 through end of the year. Prior to 2007, if a lender wrote off a mortgage debt, or any portion of it, the forgiven amount had to be reported to the IRS as income. With the passage of the Mortgage Debt Relief Act, qualifying homeowners were allowed an exclusion for forgiven mortgage debt, a tax benefit that has now been extended through the end of 2014.

Mortgage Insurance

The passage of the tax extenders bill will extend, through the end of 2014, the deduction for premiums paid for private mortgage insurance (PMI). This tax deduction, which is lumped with mortgage interest on the tax return, was established in 2007 and had been in effect though the end of 2013 when it expired. The tax extenders bill will reinstate this tax break by allowing a deduction for mortgage insurance premiums on a homeowner’s 2014 tax return.

Sales Tax

For taxpayers who itemize deductions, the ability to deduct state and local sales taxes paid in lieu of state and local income taxes has been extended through the end of 2014. This provision could potentially amount to a significant tax savings, especially for residents of certain states who have made large purchases during 2014. Like other provisions of the tax extenders bill, this tax break had expired on December 31, 2013.

Retirement Plan Distributions

The passage of the tax extender legislation will allow taxpayers who are 70 ½ and older to exclude from gross income up to $100,000 in IRA withdrawals, provided that the funds are transferred directly to an approved public charity. Without this extension, IRA withdrawals would be taxed as ordinary income even if they were contributed directly to charity. This income exclusion for IRA withdrawals is available even for those taxpayers who do not itemize their deductions.

Education

The passage of the new tax extenders legislation will reinstate the above-the-line deduction for tuition and related educational expenses that expired at the end of 2013. Any qualifying amounts that are paid before the end of the year, for an educational term that starts no later than March 31, 2015, are allowed. The maximum allowable deduction of $4000 has an income phase out, with no deduction allowed for individuals with incomes in excess of $80,000 ($160,000 for married couples).

Bonus Depreciation

The new tax extender bill allows businesses of any size to claim a 50% bonus depreciation allowance on property that is placed in service before the end of the year. In order to qualify, the newly acquired property must satisfy certain requirements and be placed in original use by the business claiming the tax deduction before December 31, 2014.

Expensing

One of the biggest benefits of the tax extenders legislation for business owners is the extension of the Section 179 expensing and investment ceiling limits that had originally expired at the end of 2103. The bill reinstates the $500,000 expensing limit and the $2.5 million investment ceiling limit that were in effect until the beginning of the year, replacing the much lower $25,000 limit and $200,000 ceiling which would otherwise have applied to 2014 purchases of qualified property.

Although it is coming in just under the wire, the tax extenders legislation recently passed by both houses of Congress reinstates many valuable tax breaks that had expired at the end of 2013. Once it is signed into law by President Obama, it will allow both individual taxpayers and businesses owners to save valuable 2014 tax dollars. (vallartainfo.com) The bill, aptly named the Tax Increase Prevention Act of 2014, is certainly a welcome holiday treat for many!