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.

Government Employees Have Delinquent Tax Balances

Posted on June 2, 2014 by Kursti Nakagawa

Delinquent Taxes and Government Employees

Government Employees Have Delinquent Tax Balances – Various government workers have been in the news recently for their delinquent taxes. One article reported that over 1100 IRS employees who owed back taxes and had other tax related problems had, in fact, received bonuses. Another recent report divulged that, as of September 2013, various federal government employees and government retirees owed over three million dollars in unpaid taxes. In a nutshell, it appears that government employees are no different than the general population of taxpayers. Some do not pay their tax bills.

A recent audit of the IRS revealed that over 1000 IRS employees who were in violation of one or more of the tax guidelines set by the very agency they work had received bonus pay in spite of their noncompliance. The Treasury General for Tax Administration reported that the IRS employees who had received bonus compensation had various tax violations including back tax balances, the underreporting of income and late tax payments. While the IRS is not currently required to withhold bonuses for tax law noncompliance, it has said that it will work toward changing this policy based on the recommendations of the recent audit. In a recent statement, IRS officials said they “recognize the need for proper personnel policies” and will “strive to protect the integrity of the tax system.”

Another recent report discussed the delinquent taxes owed by government employees in general. According to his study, members of Congress have a higher percentage of delinquent taxpayers than the IRS. While the Treasury Department, which includes the IRS, has a 1.2% rate of noncompliance, the percentages are 3.24% for Senators and 4.87% for members of the House of Representatives. Results of this same study showed that the departments with the highest noncompliance rates were the Department of Veterans’ Affairs and the Department of Housing and Urban Development with rates of 4.38% and 5.29 % respectively. Off the large governmental agencies, the worst offenders were the Smithsonian Institution, the Government Printing Office and the Court Services and Offender Services Agency, all with tax noncompliance rates in excess of six percent. According to the IRS data released in this recent study, approximately 3.3% of federal government employees and federal government retirees owe back taxes.

If you have a delinquent tax bill, our tax settlement professionals are happy to discuss your tax resolution options free of charge. For more information about our tax settlement services, call us at 877.889.6527 or visit our website at www.professionaltaxresolution.com. Our experienced CPAs and Enrolled Agents have a thorough understanding of tax law together with the experience to know which tax settlement option will be the best fit for your specific tax delinquency.

The Tax Debt Debate

Posted on May 22, 2014 by Kursti Nakagawa

The Tax Debt Debate

The Tax Debt Debate – One interesting provision of the Tax Extenders Bill that is currently stalled in the United States Senate is the privatization of tax debt collection activities. The Tax Extenders Bill, which is unlikely to be voted on again this month, contains a clause that suggests turning delinquent tax accounts over to private collection agencies. This idea, which has actually been tried before, is the subject of much debate. While proponents believe that private companies specializing in debt collection will be better equipped to collect outstanding tax liabilities, opponents believe that their tactics may be unfair, especially to those taxpayers who are unable to pay their tax debt.

The tax gap, which is the difference between the dollar amount of taxes owed to the IRS and the amount they actually collect, has always been there. In fact, the data shows that it has remained fairly constant over recent years when measured according to the taxpayer compliance rate. Two years ago, the IRS released data comparing the 2006 tax gap to that of 2001. Although the gross tax gap increased over the five year period, from $345 billion to $450 billion, most of that amount was due to an increase in total tax liabilities. The compliance rate remained fairly constant at about 83%. Amounts collected following enforced collection activities by the IRS increased that rate to approximately 86% for both years. The IRS report noted that the compliance rate was highest where there was third party reporting or withholding. As expected, the percentage was much lower in areas such as retail business income where there is little or no information reporting.

In spite of the fact that total dollar amount of the tax gap is significant, many believe that turning the collection of tax debt over to private collection agencies is not the answer. After analyzing tax debt collection activities by the IRS for 2013, National Taxpayer Advocate Nina Olsen released a statement saying that 79% of the delinquent taxes were owed by taxpayers with incomes below the poverty line. Ms. Olsen maintains that these tax debts are not collectible by any method. She further asserts that turning them over to private collections agencies might jeopardize taxpayer rights and still not achieve the intended result of increasing tax revenue. IRS Commissioner John Koskinen is also opposed to the privatized collection of tax debt but cites a different reason. He points out that the last time this method was tried, it did not accomplish its objective. While $98 billion in back taxes was collected by private agencies, it cost more than that amount to administer the collection program and pay the agencies for their efforts!

If you have an outstanding tax liability, contact out tax settlement professionals today to discuss your tax debt resolution options. For more information about our tax settlement services, visit us today at www.professionaltaxresolution.com or call us at 877.889.6527 for a free consultation. We resolve tax problems all day, every day and have helped many satisfied clients successfully resolve their tax debt issues.

IRS Back Tax Tips – Help with Late Tax Bills – Pay Your Tax Debt

Posted on January 13, 2012 by Kursti Nakagawa

Did you receive an IRS notice that you owe back taxes? While owing money can be a big worry, ignoring the problem will only make things worse. There are options to pay your tax debt, even if you can’t do it all at once.

If you need help with tax resolution because you owe back taxes, you can take advantage of different methods of payment or request that the payments be broken up into installments. Here are some tips:

A late tax bill from the IRS is expected to be paid promptly, including the taxes owed, penalties, and interest. You may want to get a loan so you can pay it in full to avoid making installment payments if you do not already have the money ready. A bank loan could have a lower interest rate than what you would have to pay in additional interest and penalties.

Tax bills can be paid via credit card. Your credit card could also have a lower interest rate than what you would have to pay in additional interest and penalties.

Tax bills may also be paid through checks, money orders, cash, cashier’s checks, or electronic fund transfers.

If you are unable to pay in full, you may be eligible to request an installment agreement between you and the IRS. The agreement would break up the amount due into monthly installments. Make sure that your required returns are all filed and your estimated tax payments are current.

You can request installment payments whether your tax bill is over or under $25,000. You should be informed within roughly 30 days if the IRS approves or denies your request, or if they need more information.

If you receive a late tax bill, our experienced professionals can help you resolve your back tax issues. For more information about our tax debt resolution services, visit us today at www.professionaltaxresolution.com. Contact us by phone at (877) 889-6527 or by email at info@protaxres.com to receive a free, no obligation consultation.

IRS Offer in Compromise – A Review of Eligibility Guidelines

Posted on November 9, 2011 by Kursti Nakagawa

We get a number of calls inquiring about the IRS Offer in Compromise Program. While an IRS Offer in Compromise is a very effective tax settlement option for a very well defined group of taxpayers, it is definitely not the optimum solution for anyone with an unresolved tax debt. The acceptance criteria for an Offer in Compromise are very specific, the application process is lengthy and the rejection rate can be high. Amazingly the IRS can also take up to two years from the date it receives the initial application to accept or reject an Offer in Compromise. With this timeframe in mind, it is often advantageous to enlist professional help when considering this tax settlement option. An experienced tax settlement professional will be able to determine whether the taxpayer meets the strict IRS qualification criteria and, following that determination, will ensure that the Offer in Compromise application is submitted according to published IRS guidelines. Utilizing a qualified CPA or tax professional can drastically reduce the rejection rate because the preliminary work to qualify you as an applicant and to appropriately complete the forms is done for you.

Not sure if you qualify? The primary components necessary to obtain a successful Offer in Compromise tax settlement are outlined below:

The taxpayer must meet one of the three eligibility criteria specified by the IRS. Those three criteria are

1) doubt as to whether the taxpayer is liable for the tax debt

2) doubt as to whether the taxpayer has the means to pay the tax debt

3) a determination that settling the tax debt would promote effective tax resolution.

Since the Offer in Compromise allows a taxpayer to settle a tax debt for less than the full amount owed, the IRS only accepts applications that adhere strictly to theses acceptance criteria.

The taxpayer’s eligibility must be adequately documented. Sufficient documentation to support one of the three eligibility criteria is required. This documentation may include tax returns and other financial records, disability claims and records of medical treatment and hospitalization, among other things
The total amount of the tax debt must be accurate. This means that the taxpayer must be current in submitting tax returns. All previously submitted returns must be checked for accuracy and refiled when necessary.
The Offer in Compromise application must have been submitted according to specific IRS guidelines. All of the necessary forms included with the application must be complete and all required fees and supporting documentation must be included.

Once an Offer in Compromise application is submitted, the IRS will begin its review process. During this time additional information and supporting documentation will be requested when necessary. The review process usually takes anywhere from six to twelve months but can take a maximum of two years. If the application is not officially accepted or rejected within two years, the IRS is required to accept the offer.

If you have an unresolved tax debt, visit us today at www.professionaltaxresolution.com for more information about our customized tax settlement assistance. With over 16 years of experience working with the IRS, our experienced professionals will help you determine which available tax settlement option best meets your specific needs. Contact us by phone at (877) 889-6527 or by email at info@protaxres.com to learn more about our services and to receive a free, no obligation consultation