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.

Know Your Tax Settlement Options

Posted on September 4, 2014 by Kursti Nakagawa

Know Your Tax Settlement Options

Know Your Tax Settlement Options – Concurrently with stepping up their efforts to identify taxpayers who owe back taxes, the IRS has been introducing new tax settlement programs to help these individuals resolve their tax debts. Because ignoring overdue taxes can result in such serious consequences as wage garnishments, tax liens and tax levies, in addition to the accrual of interest and penalties, delinquent taxpayers should be encouraged to resolve their back tax balances as quickly as possible. The worst choice a taxpayer can make is to ignore an outstanding tax liability and allow the consequences imposed by the Internal Revenue Service to escalate!

The following list outlines some of the alternatives available for resolving a back tax balance:

Paying the Balance in Full When sufficient liquid funds are not immediately available to pay the full balance of a tax debt, a delinquent taxpayer can often pay a the entire amount by applying for a bank loan, charging the outstanding tax balance to a credit card or taking money out of a retirement account.

Requesting an Extension A taxpayer who will have the necessary funds to pay a back tax balance within 120 days can request a short term administrative tax extension. Although interest will continued to be charged during the period of the extension, the IRS will not impose penalties or initiate enforced collection activities during this time.

Applying for a Penalty Waiver A Penalty Waiver is tax settlement option offered by the IRS for the purpose of reducing or eliminating previously assessed penalties. Penalty Waivers are normally granted only when a taxpayer is able to show that they were unable to fulfill their tax obligations due to circumstances beyond their control. (winandoffice.com)

Requesting an Installment Agreement An Installment Agreement is a tax settlement option that allows a delinquent taxpayer to pay off a back tax balance in installments when they are unable to pay the full amount at one time. Such an agreement is approved almost automatically if the total amount of the tax debt is less than $10,000 and the taxpayer is in good standing with the IRS. The length of the repayment period and the size of the installments are generally based on the total amount of the back tax balance together with the taxpayer’s financial situation.

Negotiating a Partial Payment Installment Agreement A Partial Payment Installment Agreement is a tax settlement option whereby the IRS agrees to accept partial payment of an outstanding tax liability. Because the collecting tax agency is agreeing to settle a tax debt for less than the full amount owed, the delinquent taxpayer is required to submit documentation substantiating the fact that they are financially unable to pay the full balance of the debt. The payment terms of a Partial Payment Installment Agreement are normally based on of the amount of the back tax balance in addition to the financial condition of the taxpayer requesting settlement.

Submitting an Offer in Compromise The Offer in Compromise is another tax settlement alternative that enables a delinquent taxpayer settle a tax debt for less than the full amount owed. Although it can be an excellent way to resolve a back tax balance, the qualification criteria are very specific and are strictly adhered to. In order for an Offer in Compromise to be accepted by the collecting tax agency, the delinquent taxpayer must submit documentation showing that they will be unable to pay the full balance of their tax debt within a reasonable amount of time.

Qualifying for Innocent Spouse Relief Innocent Spouse Relief is a tax resolution option that is available to a spouse who has incurred a tax liability on a joint tax return due to items improperly reported on the return by the other spouse without their knowledge. Such items could include the omission or inaccurate reporting of income or the misuse of tax credits or tax deductions, among other things.

If you have a back tax balance that you are unable to pay, our tax settlement professionals will assist you in resolving it. Visit us today at www.professionaltaxresolution.com for more information about our services. With over 50 combined years of experience in the business of resolving tax debt, we can help you determine which tax settlement option will be the best fit for your specific set of circumstances. Contact us by phone at (877)-889-6527 or by email at info@protaxres.com to receive a free, no obligation consultation.

Do Not Ignore Mail from the IRS….

Posted on June 17, 2014 by Kursti Nakagawa

Ignoring Communication from the IRS Brings Serious Consequences

Why You Should Not Ignore Mail from the IRS – Although the issuance of an IRS Notice of Deficiency is usually the first step in the collection of an outstanding tax liability, ignoring it can have serious consequences. The Notice of Deficiency is an official communication from the IRS informing a taxpayer that the tax amount due shown on their tax return is less than the amount owed according to the calculations of the IRS. Because the IRS is allowed to collect a tax debt without proof that the debt exists, a taxpayer who receives an IRS Notice of Deficiency must either pay the tax liability shown on the notice or file a petition with the United States Tax Court contesting the tax amount owed. The burden of proof rests with the taxpayer.

A Notice of Deficiency is a formal written communication from the IRS. It is sent by certified or registered mail to a taxpayer’s last address of record for the purpose of announcing a tax deficiency. It must include an explanation of the deficiency together with a statement of the total amount of taxes, interest and penalties that have been assessed. In addition, the Notice of Deficiency informs the receiving taxpayer of their appeal rights with the United States Tax Court and states the cutoff date for filing an appeal. Although a IRS Notice of Deficiency is most often sent when there is a discrepancy between IRS calculations and the tax amount due shown a on a tax return, it can also be sent when no tax return has been filed.

A taxpayer must respond to a Notice of Deficiency within 90 days from the date it was mailed or within 150 days if it was mailed to an address outside of the United States. The taxpayer must either pay the assessed tax liability or to file an appeal with the United States Tax Court. Once the appeal deadline has passed, the appeal process is closed and the IRS has the authority to collect the tax amount owed. At this point, the IRS is likely to issue a Notice of Intent to Levy. The Notice of Intent to Levy allows a response time of 30 days (which is not required if the IRS determines that collection of the tax debt is in jeopardy), after which a taxpayer’s property can be seized to cover their tax debt. A taxpayer’s only option once the 90 day appeal deadline has passed is to pay the tax balance owed and apply for a refund, although even this action may not stop the collection process once it is set in motion!

Because tax law is complex and receiving an official communication from the IRS can be intimidating and sometimes confusing, it may be advisable for a taxpayer to enlist the services if a qualified tax professional before responding to a Notice of Deficiency. A CPA or Enrolled Agent will be able to determine whether the tax amount shown on the Notice of Deficiency is accurate and will be able to communicate effectively with the IRS on the taxpayer’s behalf.

If you have received an IRS Notice of Deficiency, a Notice of Intent to Levy or have been officially warned of an impending tax lien or wage garnishment, we can help you stop the immediate collection activity and work toward resolving your tax debt. Visit www.professionaltaxresolution.com to learn more about full range of tax settlement services. Contact us today at (949) 596-4143 or email us at info@protaxres.com to receive a free, no obligation consultation and get the tax relief you deserve.

Tax Deadline for Citizens Living Abroad

Posted on June 12, 2014 by Kursti Nakagawa

Tax Deadline for Citizens Living Abroad

Tax Deadline for Citizens Living Abroad – The tax filing deadline for United States citizens living abroad is on the horizon. That deadline is June 15^th (pushed to June 16^th for 2014). This automatic two month tax extension is granted to all overseas residents and does not require an extension request. The only condition for claiming the extension is for the taxpayer to attach a written statement when the return is submitted stating that both the primary residence and main place of business are outside of the country.

If a taxpayer residing abroad is unable to file a tax return within the automatic two month extension period, they must then file a written request to gain an additional four month extension. Although neither a late filing penalty nor a late payment penalty will be assessed on any returns covered by these extension periods, interest will normally accrue on any tax amount owed. As is true for taxpayers residing within the United States, all tax returns for United States citizens residing outside the county must be filed by the October 15^th tax extension deadline.

The United States is one of a few countries that requires its citizens living abroad to pay income taxes. This filing requirement applies to any United States citizen who earns more than $10,000 ($20,000 for a joint return) in any given year. Although rule applies even when some or all of the income is earned outside the country, certain income earned from foreign sources is exempt from taxation. In addition, taxpayers can sometimes claim a tax credit on their United States tax return for taxes paid outside of the county.

On top of filing an income tax return, United States citizens residing abroad are required to submit an FBAR Report if they hold foreign assets in excess of $10,000. Although the deadline for submitting the FBAR Report to the United States Department of Treasury is June 30^th, some of the information contained in the report is required for the tax return due two weeks earlier. Ownership in foreign businesses and holdings of other foreign assets must be itemized on the FBAR Report while Income from these same sources is required for the income tax return.

If you are a United States citizen residing abroad, our tax settlement professionals can help you evaluate and meet your tax filing requirements. The CPAs and Enrolled Agents at Professional Tax Resolution are experts in the area of foreign tax compliance and can help you evaluate your foreign income reporting requirements. Our experienced tax settlement professionals offer a free, no obligation consultation to answer any tax question or to discuss tax resolution optionsfor a tax debt you are unable to pay. For more information about out full range of tax services, call us at 877.889.6527 or visit our website at www.professionaltaxresolution.com.

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.