Tax Penalties to Increase in 2017

Posted on September 20, 2016 by Kursti Nakagawa

Tax Penalties Set to Increase in 2017

According to the annual Bloomberg BNA report of projected tax rates, tax penalties are set to increase in 2017. The projected tax penalty increases will be applied pretty much across the board. They include penalties such as the Failure to File Penalty and the Failure to Pay Penalty imposed on individual and business taxpayers as well as significant increases in penalty assessments for tax preparers. Although the adjustments represent the expected annual increases due to inflation, they are also a result of the heightened focus by the IRS on collecting back taxes as well as tightening up the regulations governing tax preparation.

The Failure to File Penalty is one of those sharply affected by the 2017 tax penalty increases. Over the last few years this particular penalty has increased from a maximum of 25% of the tax amount owed to a maximum of 100% for 2017! Previously, a taxpayer who did not file a tax return was assessed a penalty amount of five percent of the tax amount owed for each month that the return was delinquent up to a maximum of 25% of the back tax balance. For 2017, any taxpayer who has not filed a tax return within 60 days of the filing deadline will be assessed a Failure to File Penalty of not less than $210 or 100% of the tax balance owed. The Failure to Pay Penalty is expected to hold at 0.5 % of the unpaid tax balance to be assessed each month beginning from the original due date of the return until the tax balance is paid the in full or is resolved through the negotiation of a tax settlement agreement. Likewise, the 2016 back tax balance of $50,000 used to define a “seriously delinquent” taxpayer is expected remain unchanged for 2017.

Another area which will see tax penalty increases in 2017 is that of penalties levied against tax preparers. These include penalties for various errors and omissions including Failure to Sign Return, Failure to Provide Taxpayer Identification Number, Failure to Provide Copy of Return to Taxpayer, Failure to File Correct Information Returns and Failure to Be Diligent in Determining the Child Tax Credit, the Earned Income Tax Credit and the American Opportunity Tax Credit. The maximum penalty for each of these errors will increase to $25,500 for 2017, up from a maximum of $25,000 in 2016. This represents an increase of 2%. Partnerships and S-Corporations will also see tax penalty increases in 2017. As of the first of next year, each partner or shareholder will be fined $200 for failure to file a corporate tax return or failure to file the correct information 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.

What Happens If You Can’t Pay Your Taxes?

Posted on April 26, 2016 by Kursti Nakagawa

What Happens If You Can’t Pay Your Taxes?

What Happens if You Can’t Pay Your Taxes?

What happens if you owe tax money to the IRS and you cannot afford to pay it? Most importantly, do not ignore the IRS. They have a lot of information on you and are not going to forget about the money that is owed. To prevent the IRS from initiating aggressive collection techniques such as freezing your bank accounts and garnishing your wages, it best to contact them promptly. A tax problem will not go away. On the contrary, it will only compound and increase over time until it is resolved. There are several options available for resolving a tax debt. Some of these options can be initiated directly with the IRS. However, if your tax problem is complicated, it may be in your best interest to hire a qualified tax resolution specialist to assist you. Here are some steps to take if you owe back taxes and do not have the necessary funds to pay the balance in full:

File Your Taxes on Time (even if you don’t have the funds to pay the balance due): No matter what your financial situation, stick with the same process each tax year and submit your tax return by the filing deadline. Whether you decide to use the services of a CPA/accounting firm or a seasonal tax company or file on-line yourself via tax prep software, always send in your return on time or file for a tax extension. If you fail to do this, you will be assessed a failure to file penalty which will begin to accrue the day after tax day. This penalty will be levied in addition to interest and possible failure to pay penalties on any taxes you may owe. These penalties and interest charges will add up very quickly over time so it is always advisable to avoid the late filing penalty even if your do not have sufficient funds to pay the tax balances owed. Okay, this is good information, but what if you already owe the IRS money?

Set up a Payment Plan: If you owe back taxes, it is best contact the IRS immediately.The IRS would rather work with people who acknowledge owing back taxes rather than chasing around after them around to collect the outstanding tax liabilities. There are several types of installment plans that can be set up to pay off a tax bill over time. To review theses plans as well as other options available for settling a back tax balance, see the following IRS link: https://www.irs.gov/Businesses/Small-Businesses- &-Self-Employed/Filing-Past- Due-Tax- Returns . If this is your first time failing to pay your taxes on time, the IRS may be lenient and waive the penalty. See the following IRS link for information on penalty abatements: https://www.irs.gov/Businesses/Small-Businesses-&-Self- Employed/Penalty-Relief- Due-to- First-Time- Penalty-Abatement- or-Other-Administrative-Waiver.

Seek a qualified CPA or a Tax Resolution Specialist: If your tax problem is too big or too complex for you to solve on your own, a CPA or a qualified tax resolution specialist will be able help you explore your tax settlement options. Such an individual should be able to look at your situation to see which settlement options will work best for your specific set of circumstances. In addition, CPAs and Enrolled Agents have the power to negotiate directly with the IRS on your behalf in order to reach the best settlement agreement possible. Once a tax settlement plan has been set up, it is important that the payments are made according to the payment schedule and that taxes are filed on time each year. Late payments or failing to file tax returns by the filing deadlines will normally negate a previously negotiated tax settlement agreement. Simply make it a habit!

Tax Debt May Result in Loss of Passport

Posted on February 29, 2016 by Kursti Nakagawa

Tax Debt May Result in Loss of Passport

One of the numerous bills passed by Congress toward the end of last year was the Fast Act (Fixing America’s Surface Transportation Act). Executed on December 5, 2015, the main focal points of the bill are improving the county’s transportation infrastructure, strengthening public transportation and improving highway safety. However, in addition to the Fast Act’s focus on these transportation related issues, it contains an important line item which allows the State Department to go after United States citizens who owe back taxes by interrupting their use of a passport. The bill allows the government to refuse to issue a passport, fail to renew a passport or revoke a current passport if a taxpayer owes back taxes in excess of a certain threshold amount. This provision is particularly significant because, for the first time, it allows the IRS to share information with the State Department.

The IRS has been aggressively trying to collect back taxes for the past several years. However, they have recently had to scale back on the number of employees devoted to tax collection in order to deal with such pressing issues such as tax fraud, identity theft and tax scams. In light of this employee shortage, the Fast Act takes a step in the direction of collecting back taxes by interfacing with the State Department. It declares that any United States taxpayer who owes $50,000 or more in taxes, interest and penalties is considered to be in “seriously delinquent debt.” Once this designation has been established, the bill allows the IRS to turn to the Secretary of State to deny a passport when one is about to be issued or renewed by such an individual. Because a passport is a strong representation of freedom for any U.S. citizen, the new bill makes a powerful statement about the government’s focus on collecting delinquent tax payments.

If you are a taxpayer who falls into delinquent taxpayer category described above, it may well be advisable for you to contact a competent tax settlement professional to investigate your tax settlement options. Among other alternatives, these options include an IRS Offer in Compromise or IRS Installment Agreement. While a traditional Installment Agreement simply makes payment of a tax debt more manageable by setting up a payment plan, both the Offer and Compromise and the Partial Payment Installment Agreement settle the debt for less than the full amount owed. An additional option is to request a Collection Due Process Hearing. Once a taxpayer and the IRS have agreed upon a method for paying the back tax balance, the Secretary of State will go through the motions of removing the hold on the taxpayer’s passport. Similar to the IRS revoking a lien or a levy, the Secretary of State will deem the taxpayer’s current passport valid or issue a release allowing a passport to be renewed or a new one to be issued.

Tax Fraud Back in the Limelight

Posted on February 15, 2016 by Kursti Nakagawa

Tax Fraud Back in the Limelight

The subject of tax fraud often makes the news headlines somewhere around the opening of tax season and it appears that Tax Season 2106 is no exception. Numerous state tax agencies, including Illinois, Hawaii, Utah and, most recently, South Carolina, have already announced tax refund delays due the threat of identity theft and tax refund fraud. Although the Internal Revenue Service has not issued any similar notices of delay, they have nonetheless issued bulletins warning taxpayers of potential fraudulent activity and suggesting precautions to take to combat it.

The refund delays announced by certain states are the result of increased security measures that have been put in place to prevent identity theft and other types of tax fraud. A spokesperson for the Illinois Department of Revenue, which has announced that they are unlikely to issue any tax refunds before the middle of March, has said that efforts used last year “illustrate the positive impact that additional delays and scrutiny have had in combating tax return and identity theft.” Other states have followed suit. The Hawaii Department of Taxation announced that refunds may be delayed by as much as 16 weeks while the Utah legislature actually passed a law prohibiting the issuing of tax refunds before March 1st unless all returns and required forms were submitted by January 31st. Veranda Smith of the Federation of Tax Administrators has said that the general trend for tax agencies will be to move in the direction longer lead times in order to allow more time for the matching of information sent from multiple sources.

In addition to the delays announced by certain states, the Internal Revenue Service continues to take steps to combat tax fraud. They have published security tips on their website and have met jointly with representatives of software companies and state tax agencies for the purpose of sharing data and standardizing online security protocol. On top of this, the software companies are taking their own steps to protect taxpayers from fraudulent activity. Some have published stepped up requirements for passwords while others, such as Turbo Tax, are requiring the use of a security code sent to the cellphone in order to log on to the tax software. While the 2105 Turbo Tax software required the use of this code for the initial use of theprogram, the 2016 version has increased this security measure by giving users the option of using the code each time they log in. All of these steps are part of a clear tend on the part of the IRS, state tax agencies and software companies to increase tax return security.

Trust Fund Recovery Penalty Averted!

Posted on January 25, 2016 by Kursti Nakagawa

Trust Fund Recovery Penalty Averted!

Professional Tax Resolution latest Success Story: Trust Fund Recovery and Penalty Averted. The owner of BM Corporation contacted our office shortly after receiving a subpoena from the IRS requesting all of their banking records. Unsure of how to respond to the notice and fearful of the potential consequences it might hold, they contacted Professional Tax Resolution for help. Our staff responded immediately by filing a Power of Attorney and contacting the IRS Revenue Officer. Within a matter of three weeks, we had submitted all of the company’s back payroll tax returns and completed the necessary business financial statements. In addition, our tax resolution specialists had negotiated a tax settlement agreement for payoff of Trust Fund monies which included an initial payment together with a payment plan for the remainder the back tax balance owed. All of this work was done prior to the IRS reviewing the client’s bank statements!

As frequently happens, BM Corporation had responded to a cash flow shortage by using payroll tax funds to cover the operating expenses of the business. It was this situation that resulted in them falling behind on their payroll tax obligations. Although they had planned to catch up when their financial situation improved, this had not yet happened at the time they received the IRS subpoena requesting their banking records. Because payroll taxes include amounts that have been withheld from an employee’s paycheck and are being held in trust by the employer until payroll tax payments are due, the IRS purses collection of these taxes very aggressively. Had Professional Tax Resolution not intervened in the case of BM Corporation, the company would likely have been assessed very quickly and heavily.

The tax settlement situation described above illustrates how experienced tax professionals offer a distinct advantage in dealing with the IRS. They not only know the consequences of unpaid tax balances, but they know to resolve them in the quickest and most effective way possible. In the case of BM Corporation, speedy intervention on the part of the tax specialists at Professional Tax Resolution almost certainly avoided an assessment of the Trust Fund Recovery Penalty which is equal to 100% of the back payroll tax balance owed. Not only was the penalty averted and a payment plan put in place, but it was all accomplished prior the IRS even reviewing company bank statements!