Tax Refunds May Be Delayed This Year

Posted on February 27, 2012 by Kursti Nakagawa

The IRS website “Where’s My Refund” for checking refunds is up again after being down for the better part of a week. The website was back in action about midday last Wednesday after being out of service since Feb. 15.

Taxpayers who had received IRS acknowledgment that their tax returns were being processed were startled when they visited the website during the week and got a message that the IRS had no information regarding their return.

The IRS said it was an error message and that if the IRS said the filing had been received, it was being processed.

With the “Where’s My Refund” site back up, you can now check the website 72 hours after your e-filed return has been accepted to see the status of your refund. Those who mail in their returns can check four weeks after they send in their signed return.

The IRS did not say exactly what the problem was, but issued this statement:

“As with the start of any tax season, there were system validations that occurred requiring some fine-tuning of our systems. As part of this, in January, the IRS announced that some taxpayer refunds could be issued approximately one week later than initial projections they may have received, but these refunds were still in line with historical refund delivery times.”

The IRS said in most cases, it issues refunds 10 to 21 days after a return is received.

If you have tax debt issues and need help with tax settlement, our experienced tax professionals can provide you with the tax help you need. Our tax specialists can help you get your maximum refund and help you with back taxes owed. For more information about our tax debt resolution services, visit us today at professionaltaxresolution.com. Contact us by phone at (949)596-4143 or by email at info@protaxres.com to receive a free, no obligation consultation.

Avoid IRS Penalties – Settle your IRS Tax Debt – Tax Settlement Tips

Posted on February 20, 2012 by Kursti Nakagawa

If you have been disregarding a notice from the IRS, tax filing deadlines, or ignoring tax liabilities, it is probably time to think about filing those back tax returns and paying outstanding tax balances. Even though the Obama Administration’s 2012 Budget request for increased funding for the Internal Revenues Service was not approved, the ability of the IRS to enforce tax compliance has improved over time. System modernization and software improvements have made it harder for a taxpayer to stay under the IRS radar by making it easier for this powerful collection agency to track down individuals who fail to file tax returns or owe back taxes.

When tax amounts are owed over an extended period of time, the financial burden can become overwhelming due to the continued accumulation of penalties and interest. It is not unusual for these additional amounts assessed by the IRS to total as much as 50% of the original tax amount owed. The financial consequences of failing to file a tax return or owing back taxes are outlined below:

Failure to File Penalty The Failure to File Penalty is calculated on the tax balance due as shown on the tax return. This penalty is 5% of the tax amount due for each month the return is late, with a maximum penalty of 25%. Although it is seldom invoked, a taxpayer who fails to meet a filing deadline can also be charged with a misdemeanor, which carries a maximum fine of $25,000 and up to a one-year prison term.

Failure to Pay Penalty The Failure to Pay Penalty is calculated on the tax balance due as shown on the tax return. These penalty charges are assessed at the rate of 0.5% for each month that the tax balance is not paid in full, beginning from the original April 15^th filing deadline. The Failure to Pay Penalty has no limit on the maximum percentage amount that can be assessed.

Interest Interest is charged on the balance of any tax liability for each day the back tax balance is not paid in full. The interest rate, which is variable and set quarterly, is currently 4%.

With the downturn of the economy, even more taxpayers have missed filing deadlines or have found themselves with outstanding tax balances that they are unable to pay. When these tax debts or unfiled tax returns are left unresolved, the IRS will initiate collection activities to enforce compliance and collect the tax amounts owed. Unpaid tax debt or unfiled tax returns will result in collection efforts by the IRS. These collection activities begin with the assessment of interest and penalties and are followed by more aggressive actions including the filing of tax liens or tax levies and the initiation of wage garnishments. On a positive note, there are many tax settlement options available to taxpayers who are unable to pay the tax balances they owe. The important thing is to begin the resolution process immediately before penalties and interest accumulate further or the more severe consequences of owing the tax debt are imposed.

A licensed tax professional will be familiar with all of the tax settlement alternatives available and can be invaluable asset to a taxpayer who is the subject of collection attempts by the IRS. If you have failed to meet tax filing deadlines or have an unresolved tax liability, our experienced tax professionals can help you become tax compliant. For more information about our tax settlement services, visit www.professionaltaxresolution.com. The members of our staff have a thorough understanding of tax law together with the experience to know which tax settlement option will most effectively resolve your specific back tax issues. Contact us today at (877) 889-6527 or info@protaxres.com to receive a free, no obligation consultation.

Tax Settlement Advantages Set to Expire in 2012

Posted on February 9, 2012 by Kursti Nakagawa

The Tax Relief, Unemployment Reauthorization, and Job Creation Act of 2010 was designed to provide temporary stability and continuity to the economy by extending tax rates, estate tax laws and certain tax credits, tax deductions, and business tax incentives that had been put in place under the Bush Administration. Some of the provisions of the Tax Relief Act expired at the end of 2011, while others will run out on December 31, 2012. This gives accountants and tax professionals less than a year to make use of the tax planning and tax settlement advantages this legislation provides.

The following tax advantages provided by the Tax Relief Act will expire or revert to previous levels at the end of 2012:

Tax Rates

Personal tax rates will increase from a range of 10% to 35% to a levels ranging from 15% to 39.6%.
Long term capital gains tax rates will increase from 0% and 15 % to 10% and 20%.
Dividends will be taxes at ordinary tax rates instead of 15 %.

Tax Credits

The American Opportunity Tax Credit, which provides a credit of up to $2500 for each of the first four years of undergraduate education, will expire.
The Child Tax Credit, which provides up to $1000 in tax credits for minor children, will revert to the previous $500 maximum.
The Earned Income Tax Credit will revert to allowing a maximum of two dependents, rather than three.
The Adoption Tax Credit will revert from a limit of $12,650 back to its previous maximum of $5000.
The Dependent and Child Care Tax Credit will revert from a maximum of $3000 for one child and $6000 for two or more children to maximums of $2400 and $4800 respectively.

Tax Deductions

The limit on itemized deductions for higher income earners will be reinstated.
The phase out for personal tax exemptions will be reinstated.
The tax deduction for student loan interest will revert to the previous tax law that only allows it as a deduction for the first 60 months of repayment.

Estate Tax Provisions

The estate tax exemption will revert from $5 million back to 1 million.
The gift tax exemption will revert from $5 million back to 1 million.
Certain provisions that allow more assets from family owned businesses to pass along to beneficiaries will expire.

Business Tax Incentives

The 50-percent bonus depreciation allowance for property placed in service will expire.
The expensing limit will revert from $125,000 to $25,000.
The expensing limit will revert $500,000 to $200,000.

The provisions of The Tax Relief, Unemployment Reauthorization, and Job Creation Act of 2010 that are still in effect for 2012 provide significant tax saving and tax settlement opportunities. Experienced tax professionals understand the ramifications of this important piece of legislation and are focused on taking advantage of the remaining tax credits, tax deductions, tax exemptions, and tax incentives for their clients before the window of opportunity closes at the end of 2012. (Clonazepam)

If you are in need of any type of tax planning, tax preparation or tax settlement services, our experienced tax professionals can provide you with the tax help you need. Our tax specialists are familiar with all of the current and impending changes to the IRS tax code and can ensure that these changes are used to give you the maximum tax advantage for your specific financial situation. For more information about our tax debt resolution services, visit us today at www.professionaltaxresolution.com. Contact us by phone at (949)-596-4143 or by email at info@protaxres.com to receive a free, no obligation consultation.

IRS Tax Tips – Tax Help – Retirement Plan Changes for 2012

Posted on January 25, 2012 by Kursti Nakagawa

The best way to avoid incurring an outstanding tax debt is to avoid owing the taxes in the first place. That being the case, contributing to a retirement plan is often one of the easiest and most effective ways of accomplishing this. In addition to allowing for the accumulation of retirement benefits, retirement plan contributions can provide taxpayers with a variety of tax saving opportunities including tax credits, tax deductions and a reduction in taxable income.

To maximize available tax and retirement benefits, taxpayers should be aware of some significant changes that will affect retirement plan contributions for the current tax year.

The following changes have already been initiated or are expected to occur during 2012:

• Increase in Contribution Limits
The contribution limit for 401(k) and 403(b) plans as well as the Federal Government’s Thrift Savings Plan has been increased by $500. The new limit for each of these plans is $17,000 for taxpayers under age 50 and $22,500 for taxpayers age 50 and over.

• Increase in Income Limits for Tax Deductions
The income limits for allowing a tax deduction for traditional IRA contributions have been increased by $2000. The new income limits provide that deductions will be phased out between $58,000 and $68,000 for single taxpayers and between $92,000 and $112,000 for married taxpayers filing jointly.

• Increase in Income Limits for Roth IRA Contributions
The income limits for making Roth IRA contributions will increase by $3000 for single taxpayers and by $4000 for married taxpayers filing jointly. The new limits are between $110,000 and $125,000 for single taxpayers and between $173,000 and $183,000 for married couples.

• Increase in Income Limits for Receiving the Saver’s Tax Credit
The new limits provide a $1000 tax credit for single taxpayers with an adjusted gross income of up to $28,000 and a $2000 tax credit for married couples with an adjusted gross income of up to $57,500 when they contribute to a qualified retirement plan.

• Increase in Plan Transparency
Effective May 31, 2012, a Department of Labor regulation will increase retirement plan transparency by requiring that 401(k) plans disclose to plan participants the fees associated with participating in the plan as well as the cost of each investment option.

• Reinstatement of Matching Contributions by Employers
Employers are expected to continue reinstating matching 401(k) contributions.

If you are an individual or a small business looking for help with tax preparation, tax planning or tax debt resolution, visit us today at www.professionaltaxresolution.com to learn about our full range of tax and accounting services. Contact us by phone at (877) 889-6527 or by email at info@protaxres.com to receive a free, no obligation consultation.

IRS Audit Red Flags – What the IRS is looking for – Tax Tips Part 3

Posted on January 18, 2012 by Kursti Nakagawa

Are you self employed? Do you file a Schedule C? If so, you have a higher likelihood of getting audited. Individuals and small business often make small mistakes that flags their tax return for an audit. Taxes are no place to falsify information but small mistakes and common practices such as rounding numbers can give an IRS agent enough reason to audit your entire return. Of course, doing your taxes the right way from the start is always the best advice. In part three of our three part series on Tax Tips to Avoiding a Costly IRS Audit, here is a list of additional “Red Flags” that can trigger an audit of a tax return. In this segment we focus upon those that are self employed or who own a small business.

Small Business/Self Employed Tax Return Red Flags

Schedule C – Overly Abused: Because there is so much abuse in the Schedule C it may be prudent for taxpayers to incorporate or form an LLC. The mere reporting of businesses operations on Schedule C rather than a separate corporate tax return increases a taxpayer’s chances of being audited 50 times.

Schedule C – Taxpayers who are employed by others (i.e. who receive a W-2 at year end) and who also claim a loss from a Schedule C business operation are likely to find their tax returns audited by the IRS.

Schedule C – Cash businesses: Small business owners, who have cash businesses: taxi drivers, car washes, bars, nail salons, hairdressers, small restaurants are easy targets for IRS auditors.

Schedule C – Large Meal and Entertainment Expenses: Big deductions for meals, travel and entertainment are always a audit red flag. Make sure your business conforms to strict substantiation rules for the expenses: amount, place, persons attending, business purpose and nature of discussion or meeting. Also, receipts are required for expenditures over $75 or any expense for lodging while traveling. Essentially if your meals, entertainment and travel expenses are more than 10 percent of your business’s gross income there needs to be a good reason.

Schedule C – Reporting business losses for more than 2 years consecutively: The IRS has a rule that you cannot deduct losses from a hobby on your tax return. You must be in business with the intent of making a profit. If the IRS deems that your “business” is actually a hobby, they will disallow the deductions.

Schedule C – Loss-generating activity sounds like a hobby:…dog breeding, horse racing, antique seller, classic car reseller. Tax laws don’t allow you to deduct hobby losses on Schedule C; however, you do have to report any income earned from your hobbies.

Schedule C – Claiming 100% business use for an automobile: Make sure you have very detailed mileage logs and precise calendar entries for the purpose of every road trip. if you use the IRS’ standard mileage rate to deduct your business vehicle costs, ensure that you are not also claiming actual expenses for maintenance, insurance and other out-of-pocket costs depreciation.

These and other tax tips are just examples of the type of the proactive, year-round tax guidance we provide to our clients. If you need to file your 2011 or prior year tax returns, or if you have an IRS or State Tax problem, our experienced tax professionals can help. For more information about our tax services, visit us today at www.professionaltaxresolution.com. You may also Contact us by phone at (877) 889-6527 or by email at info@protaxres.com to receive a free, no obligation consultation.