Taxes Are Due – Better Late Than Never!

Posted on April 14, 2014 by Kursti Nakagawa

Tax Time – Better Late Than Never!

Taxes Are Due – Better Late Than Never: The old saying “Better late Than Never!” applies to the filing tax of returns just as it does to most other aspects of life. With the April 15^th tax deadline on the horizon, many taxpayers are rushing to file either a completed tax return or a request for an automatic six-month extension. Failure to do so will subject the delinquent taxpayer to late filing penalties that will begin to accumulate along with interest that will be charged on any overdue tax balances. Although late filing penalties can be abated in certain specific instances when there is a valid reason for filing late, the reasons for the delay must be well documented. Even when these conditions are met, the IRS does not grant this form of tax relief automatically.

According to IRS tax filing statistics, approximately 75% of those taxpayers who were expected to file a 2013 tax return had already filed a week before the filing deadline. Looking at these figures in another way, about one out of every five tax filers waits until the week leading up to April 15^th to submit their return. Most tax returns (about 90%) are filed electronically. Of approximately 135 million people who will file a 2013 tax return, almost 80 million will receive a refund, The average refund is expected to be approximately $2800. These statistics mean that the IRS will be refunding over $200 billion for Tax Year 2013, about $66 million of this amount through direct deposit.

Regardless of your current or projected filing status, the CPAs and Enrolled Agents at Professional Tax Resolution would like to wish you well on Tax Day 2014. Should you be one of those taxpayers who fail to meet tomorrow’s tax deadline, we are here to help you review your tax filing and tax settlement options and communicate with the IRS on your behalf. Happy filing!

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.

Celebrities Who Ignored Tax Deadlines

Posted on March 17, 2014 by Kursti Nakagawa

Celebrities Who Ignored Tax Deadlines

Celebrities who Ignored Tax Deadlines – Ignoring tax deadlines and failing to pay outstanding tax balances can have severe consequences. Interest and penalties accumulate over time and can amount to a significant financial burden. In addition, the IRS has the authority to use more aggressive collection techniques such as tax levies, tax liens and wage garnishments when outstanding tax balances are not paid in full. The following examples illustrate the consequences suffered by some well known individuals who ignored their tax responsibilities.

This celebrity was slapped with a $6.2 million tax lien.

Although actor Nicolas Cage earned over $40 million in 2009, the IRS slapped him with a $6.2 million tax lien in that same year. He was apparently spending more money than he earned on such luxury items as yachts, homes, art, jewelry and vintage cars. It has recently been reported that Cage is trying to repair his finances and pay his tax debt by selling some of his properties as well as an entire island in the Bahamas!

This celebrity was arrested for state income tax evasion.

In December of 2012, actor Stephen Baldwin, the youngest of the Baldwin brothers, was arrested for state income tax evasion. The charge was due to the fact that he owed the State of New York over $350,000 in back taxes. This past March, he pled guilty to felony charges and paid $100,000 of the amount he owed. He must pay the balance of his past due tax liability by the end of this month in order to avoid jail time.

This celebrity accumulated a back tax balance of over $400,000.

When actor Gary Busey filed for bankruptcy protection in December of 2012, he was able to discharge more than $50,000 in liabilities. However, because tax debt is not covered by bankruptcy protection, he was left with an outstanding tax debt of $451,000. Time will tell whether Busey will suffer legal consequences or be able to negotiate a tax settlement agreement with the IRS to pay his back tax bill.

This celebrity is over $10 million in debt, most of it due to back taxes.

When singer Dionne Warwick filed for bankruptcy protection this past March, she listed only $25,000 in assets and over $10 million dollars of debt. Since most of this debt is apparently due to back taxes which are not relieved with a bankruptcy petition, she still faces an uphill financial battle. However, she is currently living in Brazil and working to pay her tax debt. Since she has an earning capacity of over $20,000 a month, her situation may not be as dire as some others who have monumental tax liabilities.

This celebrity was hit with multiple tax liens.

The IRS has filed multiple tax liens against R&B singer Toni Braxton in an attempt to collect almost $400,000 in back taxes owed for tax years 2008 and 2009. Although Braxton has filed for bankruptcy protection twice in recent years, the filings did not eliminate her tax debt. To date, there is no report that Braxton has resolved her tax problem.

This celebrity owes more than $1.5 million in unpaid taxes.

A tax lien was originally filed against O.J. Simpson in 1999 in an attempt to collect more than $1.5 million in delinquent taxes. However, due to the fact that Simpson is currently serving a 33-year prison sentence in a California correctional facility, it is unlikely that he will be able to resolve his tax bill!

As the above examples illustrate, it is never a good idea to ignore your tax responsibilities. The IRS is a powerful collection agency and will take whatever steps are necessary steps to collect the money they are owed. As the above examples illustrate, the worst choice a delinquent taxpayer can make is to ignore outstanding tax liabilities and hope they will go away. When the necessary funds are not available to pay a tax balance in full, it is advisable for a taxpayer to contact the IRS and attempt to take advantage of one of the many tax settlement options they offer.

If you have a back tax balance that you are unable to pay, our tax settlement professionals can help you determine the best course of action to resolve it. For more information about our services, visit us today at www.professionaltaxresolution.com. With over 16 years of 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. Contact us by phone at (877)-889-6527 or by email at info@protaxres.com to receive a free, no obligation consultation.

Tax Time – A Good Time to Resolve Back Tax Balances

Posted on February 13, 2014 by Kursti Nakagawa

Tax Time – A Good Time to Resolve Back Tax Balances

Tax Time – A Good Time to Resolve Back Tax Balances: Tax time is as good a time as any to resolve back taxes issues. Paying or settling back tax balances at the same time as filing current returns starts the new tax year off with a clean slate and avoids the escalating consequences that back tax balances can cause. The worst choice a taxpayer can make is to ignore outstanding tax liabilities and hope they will vanish. As always, the best course of action is to face the problem head on and pay the balance in full. If the necessary resources are lacking, as is often the case, there are numerous tax settlement options available. That being said, tax time is now and now is the best time to resolve back tax balances!

The consequences of ignoring back taxes escalate over time and can be severe. Penalties for failure to pay back taxes are assessed at a rate of 0.25% to 1% of the tax amount due for each month or partial that tax balances remain unpaid. These penalties continue to accumulate until they reach a maximum of 25% of the initial tax amount owed. In addition, since the IRS treats a back tax balance as a loan, they charge interest on the overdue amount at a rate that varies with the federal short term interest rate. If penalty and interest charges are not enough motivation to resolve back tax balances, the IRS or State Tax Agency may impose some type of enforced collection action. These aggressive collection activities include tax liens, tax levies and wage garnishments.

The best way to resolve an existing back tax liability is to pay the balance in full. If sufficient funds are not readily available, the taxpayer might consider putting the back tax amount on a credit card, withdrawing from a retirement account or taking out a bank loan. Short term extensions are available for taxpayers who will have the resources to pay their tax bill within 120 days. Additionally, there are numerous tax settlement options available for those who cannot make full payment either immediately or in the short term. These options include Installment Agreements, Partial Payment Installment Agreements and Offers in Compromise, among other things. Aside from these tax settlement options, penalty waivers are sometimes available for delinquent taxpayers who were unable to meet their tax obligations due to circumstances that were beyond their control.

The best course of action for a taxpayer who has a back tax balance may be to contact a certified tax professional for help in determining the best way to resolve the outstanding liability. Although numerous tax settlement alternatives are available, the qualifying criteria are specific and can be confusing. In addition the application procedures are complex and time consuming. That being said, it may take a professional with a thorough knowledge of the requirements of the various tax settlement alternatives to effectively maneuver the system.

Beware of IRS Penalties at Tax Time!

Posted on February 11, 2014 by Kursti Nakagawa

Beware of IRS Penalties at Tax Time!

Beware of IRS Penalties at Tax Time! Tax time is a good time for taxpayers to be reminded of some of the penalties that can be assessed by the IRS and State Tax Agencies for failure to comply with set deadlines for the filing of tax returns and the payment of tax amounts due. Since penalty amounts accumulate over time and are usually combined with interest charges on any outstanding tax balances, they can result in significant increases to the amounts owed to the collecting tax agencies.

Outlined below are some of the penalties that come into play at this time of year:

Penalty for a Bounced Check

The penalty for a disallowed check or money order made payable to the United States Treasury is 2% of the amount of the check for checks of $1,250 or more. If the amount of the check is under $1,250, the penalty is $25 or the full amount of the check, whichever is less. The penalty fees for disallowed payments cover electronic payments as well as paper checks.

Late Filing Penalty

The penalty for the late filing of a tax return is 5% of the unpaid tax balance for each month or partial month that the return is late up to a maximum penalty of 25 %. A minimum penalty of $100 or 100% of the tax due, whichever is less is imposed for any tax return that is more than 60 days overdue.

Late Payment Penalty

The penalty for failing to pay tax amounts due is assessed at a rate of 0.5% for each month or partial month that the tax balance remains unpaid after the filing deadline. This percentage is reduced to 0.25 % for any taxpayer who has entered into a valid installment agreement with the collecting tax agency. Taxpayers who have filed for a 6 month extension and have paid at least 90% of the tax amount due at the time the extension was filed are exempt from paying a late payment penalty provided they pay the balance of any taxes owed at the time the extended return is filed.

The assessment of a tax penalty must be officially communicated to the taxpayer by means of an IRS Letter, an IRS Notice or a similar type of written notification from one of the State Tax Agencies. Each written penalty notice must include an explanation of why the penalty is being assessed and how the amount of the penalty was calculated. Upon receiving an official notice informing you of the assessment of a tax penalty, the best course of action is always to address the issue immediately before tax balances accumulate beyond what they already are.

If you have received a penalty notice or have 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.

Family Finances: Tax Settlement, Innocent Spouse Relief, and Injured Spouse Relief

Posted on October 24, 2013 by Kursti Nakagawa

Family Finances

A recent study by Fidelity Investments revealed that individuals often lack adequate knowledge of family finances. The results of the study showed that a surprising number of marriage partners have insufficient information about important financial matters such as insurance policies, investment accounts, physical assets, beneficiary designations and income taxes, among other things. While this lack of awareness may not be a problem when life is going smoothly, it can have unforeseen consequences there is a bump in the road. In the face of a death, a divorce or a sudden disability, a spouse who does not have a satisfactory understanding of family finances can find themselves at a serious disadvantage.

The results of the recent Fidelity study showed that, while most couples reported that they communicated effectively about financial matters, a much smaller percentage said that they shared daily financial decisions. Less than half of the retired couples surveyed agreed on what type of lifestyle they expected to lead in retirement and only a slightly larger percentage had an acceptable level of information about retirement planning. Moreover, only 28 % of the couples surveyed said that either spouse could single-handedly manage the retirement finances.

Although it is natural to postpone a discussion of family finances when there is no immediate problem, it is important to be prepared for the uncertainty of the future. An unforeseen event can leave either partner with complete financial responsibility. With this in mind, financially responsible couples would be well advised to take the following steps:

Inventory Investment Accounts
Inventory Physical Assets
Prioritize Investments to be Tapped for Retirement
Discuss Income Tax Returns and Related Tax Issues
Prepare Wills with Agreed Upon Financial Conditions

Although the discussion of topics such as those outlined above can be stressful and uncomfortable, not doing so may well leave either spouse in an unfortunate situation. Consider, for example, the spouse who is left with a very aggressive investment portfolio upon his or her mate’s death. If the surviving spouse has no knowledge of the type of investments in the portfolio, they could very well suffer a significant loss if the market suddenly takes a sharp downward turn. Similarly, consider the predicament of a spouse who has no knowledge of his or her mate’s tax obligations. Faced with an unexpected death or divorce, the surviving spouse could be left with a tax debt about which they have no knowledge. Although tax this situation can be handled with a tax settlement agreement in the form of Injured Spouse Relief or Innocent Spouse Relief, it certainly not a situation anyone would chose to face.

If you have questions about Injured Spouse Relief or Innocent Spouse Relief, the CPAs, Enrolled Agents and Tax Attorneys at Professional Tax Resolution can provide you with the answers you are looking for. Visit us today at www.professionaltaxresolution.com for more information about these and other tax settlement options. Complete our online request form or call us at 877.889.6527 to receive a free, no obligation consultation.