Tax Preparation is Key in Claiming Your Adoption Credit; Thousands Have Yet to Receive Refund.

Posted on July 26, 2011 by Kursti Nakagawa

Thousands of Americans are still waiting on large refunds from the IRS due to their adoption credit. This is partly due to the fact that this is the first year the credit is refundable. This means the money goes directly to the taxpayer, and not applied to future taxes owed. This would be especially helpful to families who incur high costs for adoption, if they ever receive their money.

By the end of April, 2011, the Treasury Inspector for Tax Administration found that the IRS had received returns for over 72,000 taxpayers claiming nearly $900 million in adoption credits. More than half of those returns have been sent for further review and will be audited to verify proper documentation and claims.

According to the IRS, the problem is that many taxpayers do not submit proper returns, lacking documentation.

Get your tax return prepared the right way. Don’t think your past returns were done correctly? Contact one of the licensed experts at Professional Tax Resolution today!

Complicated Tax Settlements and Returns Are Our Specialty. We Found This Client $75,000!

Posted on July 8, 2011 by Kursti Nakagawa

There are many types of accounting, tax and tax settlement service providers. CPAs and accounting firms typically provide tax preparation services to businesses and individuals but rarely devote much effort to actual tax settlements. On the other hand, tax resolution and tax settlement firms focus mostly on settling outstanding tax debt without ensuring that all available tax code benefits have been used on the original tax filings. Professional Tax Resolution combines the expertise of tax settlement professionals and experienced, licensed tax preparers. The first step in any tax settlement case should be to confirm that the reported tax liability is correct and that all available tax code benefits have been utilized. Following that, a tax debt resolution plan can be mapped out.

Jeff F. came to us shortly before the April 15^th filing deadline. A successful chiropractor, Jeff had made large tax payments for himself and his corporation for many years. However, he owed a large tax liability for the previous year and had failed to make estimated tax payments for the current year. We told Jeff that we would be happy to prepare his individual and corporate tax returns and suggest a tax settlement option for the balances owed. Although his original tax filings had been prepared by two well established CPA firms, we suggested that we would review them prior to recommending a tax settlement plan just to confirm that the balances owed were correct and that no tax code benefits had been missed.

After reviewing the most recent returns, it appeared that, as expected, the returns had been filed properly. However, one important tax benefit had been overlooked. Jeff’s business is located within an Enterprise Zone that offers specific state tax benefits for companies located within the zone. One of the benefits is a state hiring credit made available to employers meeting certain specific criteria. Companies who qualify but have failed to claim this credit are permitted to amend returns and claim missed credits providing the returns are filed within the statutory amendment period. The vouchering process to obtain these credits is fairly involved and takes several months to complete but we determined that the potential tax benefits were worth the time and expense.

After several months of reviewing employee qualifications we were able to obtain qualifying vouchers and identify over $75,000 in unclaimed state tax credits for prior year’s tax returns. The best news was that the returns fell within the statutory amendment period so the refunds could still be claimed. In addition, the credits would apply to subsequent years so the client would be able to claim as much as $15,000 in tax credits for each year going forward. While these refunds only applied to state tax balances, the client was able to use the past refunds to pay outstanding IRS balances.

Complicated tax settlements are what we do at Professional Tax Resolution. This is yet another example of how a qualified tax settlement firm can provide real solutions to taxpayers faced with a significant amount of IRS tax debt.

2010 Electric Car Credit and Other Tax Incentives

Posted on February 14, 2011 by Kursti Nakagawa

There are a variety of reasons why taxpayers might find themselves with a significant amount of tax debt. Many individuals have outstanding tax liabilities because they have failed to file income tax returns or report portions of their income. In other situations, taxpayers have filed their returns but have done so incorrectly or relied upon the services of unqualified tax preparers who have made filing errors. At Professional Tax Resolution, our services go beyond those of a traditional tax settlement firm. Our goal is to stop collection activity, resolve any existing tax debt issues, and then work with the client to ensure that a problem situation does not repeat itself.

The government provides various types of tax credits to stimulate demand for certain products and industries. Most recently the IRS and various states have encouraged home sales and the purchase of energy efficient vehicles and appliances through the use of tax credits. While these incentives can provide taxpayers with substantial tax advantages, they can have devastating effects if they are filed incorrectly. It is not uncommon for our firm to meet with a new client who has been in tax compliance in the past but is now faced with a tax debt that is due to the incorrect filing of a tax return or an error in the reporting of a tax credit. If a tax credit is filed incorrectly, the IRS typically will not identify the error and disallow the credit until a year, or possibly two, after the filing of the original tax return. By this time, various types of filing, payment and accuracy related penalties and interest have often been applied to the outstanding tax debt. These assessments can add up to amounts that taxpayers simply are unable to pay.

Last year the IRS published numerous news articles about the fraud and improper filing of the $8,000 First-Time Homebuyer Credit. This year it is publishing similar articles about the misunderstanding and fraud related to the $7,500 electric drive motor vehicle credit. While taxpayers should certainly take advantage of these potentially lucrative tax incentives, they should also take care to make sure that they are in fact eligible for them and that they are properly filed.

Automobile companies are just beginning to mass market electric cars in response to increased consumer demand. This is at least partially a response to the lucrative tax incentives being offered by the Federal Government. President Obama is pushing to have a million electric cars on the road by 2015 and tax incentives are a large part of the strategy designed to make that number a reality. At present a $7,500 tax credit is available to any consumer purchasing an electric drive motor vehicle and additional credits are being offered to anyone who converts an existing gasoline powered automobile to plug-in.

Although the tax breaks may be serving their purpose in increasing demand for electric vehicles, a Treasury Department review revealed that thousands of taxpayers have claimed the credits for vehicles that don’t qualify. In fact, estimates indicate that over 20% of approximately $160 million in electric car tax credits claimed for the first half of 2010 were claimed in error. In response to the Treasury Department’s findings, the Inspector General has made numerous recommendations for recovering the wrongfully-claimed credits and for improving the reporting methods so as to avoid false claims in the future. The IRS has concurred, saying that it has taken “aggressive steps” to safeguard against improper payments as well as to “recapture the credits people erroneously claimed.”

At Professional Tax Resolution, we have the knowledge and experience to ensure that all of our clients’ tax filings are submitted accurately and according to established IRS guidelines. If a tax debt situation already exists, our experienced CPA’s will take the time to thoroughly analyze it in order to bring about resolution using the best tax settlement option available. The bottom line is not to try to handle a complex tax settlement case alone.

Visit www.professionaltaxresolution.com for more information about tax settlement options or contact us today at (949)-596-4143 to receive a free, no obligation consultation.