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Some Critical Year-End Tax Considerations

Year-End Tax Considerations

Year-End Tax Considerations

Some Critical Year-End Tax Considerations

Very few important tax decisions have been passed down in 2015 and, with only a few weeks to go, it appears that we may move into the New Year with some important tax matters still unresolved. Some of the critical tax issues hanging in the balance as we move into 2016 are the tax extenders legislation, internet taxation and the licensing of tax preparers. All of these topics are in one stage or another of being discussed and considered by Congress but have not made it through the legislative system to be signed into law. With less than a month to go, it will be interesting to see if any of these measures are enacted before the end of the year.

One important tax measure that is on the hot seat this month is a renewal of the provisions of the bill officially titled the Tax Increase Prevention Act of 2014 (HR 5771). This bill, which included some very important bill tax breaks, officially expired on December 31, 2014. Although the Senate Finance Committee had said they would begin work on a new piece of legislation that would extend many of these provisions, they have yet to present their revisions. This means that, unless Congress acts quickly to extend these tax breaks and make them retroactive to January 1, 2015, they will not be available to individuals and businesses for the 2015 tax year. If this legislation is not extended, business will no longer have access to its 50% bonus depreciation provision or the increased expensing and investment ceiling limits of $500,000 and $2.5 million, respectively. Likewise, individual taxpayers will not be able to write off mortgage debt, deduct the premiums paid for private mortgage insurance or have the ability to use an itemized deduction for state and local sales taxes.

Another important tax issue in focus this month is the Internet Tax Freedom Act which is set to expire on December 11th. The taxing of internet access has been banned since 1997 but the law which prevents it is not a permanent one. This law, which has already been extended several times since its inception, is now set to expire this month. Although the House recently approved the Permanent Internet Tax freedom Act and the Senate followed with its version called the Internet Tax Freedom Forever Act, no further action has been taken to get this legislation signed into law.

In addition to the two tax issues outlined above, Congress is considering legislation that would require the licensing of tax preparers. After attempts by the Internal Revenue Service to require licensing failed in the court system, the Senate Finance committee agreed that they would act on the issue. Following this, member of the House of Representatives introduced a bill called the Tax Return Competency Act. However, the proposal, which is designed to help prevent tax fraud by screening individuals who provide tax preparation services, still sitting in committee. Although the IRS was hoping to have some type of legislation in place before the start of the 2016 tax season, only the time will tell whether this wish will become a reality.

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.

Audit Reconsideration Eliminates $100,000 Tax Balance

Audit Reconsideration Eliminates $100,000 Tax Balance

When Ms. H contacted our office, she was panicked over how to pay a back tax balance of $101,000.  She had recently received an official IRS Letter informing her of a balance due and threatening enforcement action since she had not responded to previous notices. This was followed almost immediately by a Notice of Intent to Audit. It turns out that Ms. H had sold her personal residence in a previous tax year and had forgotten to report the sale of the home on her tax return.  Although the IRS had sent various letters informing her of the discrepancy and assessing a tax balance due, she had not received them due to the fact that she had been moving around.

Our office quickly began working on the client’s back tax issues. We filed Powers of Attorney with the IRS and the California Franchise Tax Board and followed up by contacting both tax agencies to ensure that the client’s accounts would not be subjected to any collection activity while our tax professionals the prepared an audit reconsideration packet.  Within a few days, we had submitted a complete audit reconsideration request to the IRS and had stopped the CA FTB from assessing Ms. H’s accounts. The final ruling from the IRS was very favorable. Not only did our client not owe a back tax balance, but she received a refund of $8,000 from funds the IRS had withheld from previous tax years!

The tax settlement case of Ms. H illustrates several important points. First and foremost, it shows that a reputable tax settlement firm offers a huge advantage to clients who are trying to resolve on outstanding tax balance. Not only do these professionals know exactly what problems to look for when analyzing a client’s finances, but they have the experience necessary to successfully resolve those problems with the IRS and State Tax Agencies. In addition, this case shows that receiving a Notice of Intent to Audit does not necessarily mean that the recipient will owe a large tax amount. In addition to plain old random sampling, a tax return may be selected for audit for a variety of reasons including a filing error or missing tax information. Such was the case with Ms. H whose return was targeted for closer scrutiny due to her failure to report the proceeds from the sale of a home. Once the error is corrected and an accurate tax situation is presented for examination, the audit may actually result in a reduced tax balance or even a refund as happened in the situation described above.

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.

Security Summit Focuses on Identity Theft

Security Summit Focuses on Identity Theft

Security Summit Focuses on Identity Theft

Security Summit Focuses on Identity Theft

In March of this year, all of the major players in the tax industry came together to focus on the problems of identity theft and tax refund fraud. Their aim was to have safeguards in place before the beginning of the 2016 filing season. This convocation, identified as the Security Summit, includes the IRS, state tax authorities, and representatives from the tax software and financial services industries. Tax Commissioner John Koskinen, who has called the Security Summit an “unprecedented effort,” maintains that income tax fraud “is not a battle the IRS can fight alone.” He went on to say that identity theft has “become a serious threat to the nation’s tax system” and one that must be dealt with aggressively.

Tax fraud has become an increasingly serious problem as the percentage of e-filed returns has multiplied. Currently, almost every business and tax professional, as well as a significant number of individual taxpayers, files electronically. With this increase in convenience, comes a whole host of associated problems surrounding the issues of taxpayer identification, the sharing of information and internet security. It is exactly these topics that are the focus of the Security Summit. According to remarks made by Koskinen at an October 20th press conference, the Security Summit “now covers virtually the entire population of taxpayers who e-file their tax returns.”

The Security Summit has made significant progress since their initial meeting in March. To date, they have identified and tested more than 20 security items related to the electronic filing of taxes. These items, which focus on all aspects of tax return and tax refund fraud, will be made available to both the IRS and State Tax Agencies to be used in the prevention of identity theft and are expected to be in place by the time the 2016 filing season opens. They target such things as the time it takes to produce a return and identifying instances where multiple returns are generated automatically. The Summit has announced that implementation of these measures is internal. While they will serve to enhance the security of the transmission process, they will not affect how taxes are filed.

In addition to measure designed to enhance the security of e-filed returns, the Security Summit has made recommendations in several other areas. In particular, the Tax Professional Work Group, which is one of the working committees of the larger effort, is investigating other means by which tax preparers themselves can contribute to the prevention of identity theft. On top of this, the United States Tax Commissioner has asked Congress to pass legislation requiring W-2s, 1099s and other information returns to be sent out earlier, thus allowing more time for the matching of these items with the information submitted on tax returns.

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.

Charitable Contributions Require Documention

Charitable Contributions Require Documentation

Charitable Contributions Require Documentation

Charitable Contributions Require Documentation

Although charitable contributions can amount to a significant tax savings, they can also have the negative affect of flagging a return from audit when they are claimed in excess or not reported according to preset IRS guidelines. A case in point is that of Kunkel versus United States Tax Commissioner. In this 2011 United States Tax Court case, the court disallowed over $37,000 in noncash contributions due to lack of substantiation. While the Kunkels maintained that the value of each donation was less than $250, the court questioned the total amount of the contributions. They pointed out that the total donation amount could have only been achieved by making almost 100 trips to various donation sites. In addition, the Kunkels had no dated receipts from any of the receiving charities giving either a value or description of the property being donated.

In order to avoid a situation such as the one described above, it is important to follow the guidelines set by the Internal Revenue Service for reporting charitable contributions. According to these guidelines, increasingly strict documentation requirements are imposed on charitable donations above or below the following preset thresholds:

  •  Contributions of less than $250

Contributions of less than $250 require 1) the name and location of the charitable organization to which the donation is being made, 2) the date the donation is made and 3) a description of the property being donated. Although it is advisable to get a receipt from the organization to which the donation is being made, this is not required.

  •  Contributions in excess of $250

In addition to the documentation required for contributions of less than $250, those in excess of $250 must have a written receipt from the charitable organization to which the contribution is made. In addition to a description of the donated property, the receipt must include a good faith estimate of the property’s value as well as a statement indicating whether any goods or services were given in exchange for the contribution.

  •  Contributions in excess of $500

Charitable donations in excess of $500 require 1) a specific description of the property being donated, 2) the date the property was acquired, 3) the cost basis of the property, 4) the fair market value of the property at the time the donation is made and 5) a statement of the method used to calculate fair market value.

  • Contributions in excess of $5000

In addition to all of the documentation required for donations in excess of $500, charitable contributions in excess of $5000 require a qualified appraisal.

With the end of the calendar year fast aproaching, now is as good a time as any to review the IRS guidelines for documenting charitable contributions. Although the IRS sometimes allows charitable deductions even when the reporting taxpayer lacks the required documentation, there is no good reason to take a chance on this being the case. It is better to be safe than sorry! Charitable contributions can amount to a significant savings of tax dollars but proper reporting is essential.

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.

Focus on Trump’s Tax Plan

Focus on Trump’s Tax Plan

Focus on Trump's Tax Plan

Focus on Trump’s Tax Plan

Republican presidential candidate Donald Trump recently proposed an innovative new tax plan that he maintains would simplify the tax code and reduce both individual and business taxes while, at the same time, remaining revenue neutral. With Trump currently the front-runner in several of the major polls, Americans were especially interested to hear what he had to say about income taxes. In a nutshell, his plan proposes simplifying the tax code by eliminating loopholes and reducing tax brackets, expanding the 0% income tax bracket for individuals, lowering taxes paid by businesses of all types and eliminating the estate tax.

Here are some of the key provisions of his tax plan:

 Simpler Tax Code

Trump’s plan would drastically simplify the tax code by reducing the number of tax brackets as well as eliminating numerous penalties and loopholes. His plan suggests reducing the current seven tax brackets to four (0%, 10%, 20% and 25 %) as well as eliminating such complicating items as the Alternative Minimum Tax and the marriage penalty, among other things. (https://chacc.co.uk/)

 Lower Tax Rates

The tax brackets suggested by Trump would lower the current income tax rates across  he board. In addition, his the expansion of the 0% tax bracket to include individuals with an annual income of less than $25,000 and couples who earn less than $50,000 would  esult in an increase in the rolls of those would not owe any income tax. With the institution of the Trump’s tax plan, over half of American individuals and families would not owe any tax at all!

 Reduction in Business Taxes

The Trump tax plan would cap the business tax rate at 15% for businesses of any size or business structure. This would include the self-employed, Partnerships, LLCs, S- Corporations and even large C-Corporations that currently pay more than double that rate. Trump maintains that making the United States more attractive to business by lowering the corporate income tax rate to 15% from the 35% rate that they are currently paying would go a long way toward deterring corporate inversions.

Elimination of Estate Tax

Trump’s plan would completely eliminate the estate tax, thus allowing heirs to inherit estates of any size without having to pay income taxes. The argument in favor of this  tax move is that income taxes are paid at the time funds are earned so taxing them again amounts to double taxation. Although the ceiling on the asset value of estates that can be passed down tax free has been increasing over the past ten years, from $1,500,000 in 2005 to $5,430,000 for the current year, Trump’s plan would amount to a significant tax savings for those who inherit estates in excess of this amount.

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 settlementhttps://professionaltaxresolution.com/services/back-taxes-delinquent-returns/ option will be the best fit for your specific set of circumstances.