Tax Penalties: Removing the Failure to Pay Penalty

Posted on June 25, 2012 by Kursti Nakagawa

Have you received an IRS notice of Failure to Pay? Last week, we discussed the IRS penalties and consequences of Failure to Pay, which is when a taxpayer fails to either meet a tax filing deadline, or make a tax payment by its due date. The consequences for Failure to File include 5% per month of the taxes due according to a tax return that the IRS has prepared in your place, with the maximum penalty being 25% of the owed amount. For outstanding taxes, the monthly IRS Failure to Pay Penalty can be 0.25%–1.0% of the amount due, with the average being a 0.5% IRS penalty. These penalties can accumulate over time and become a large financial burden.

So, how can you remove the IRS Failure to Pay Penalty and reach a tax settlement? The IRS realizes that not every situation is black and white. They understand that a taxpayer’s full compliance is not always possible. Here are a few steps that may be helpful.

Reasonable cause If there is a legitimate reason for your failure to pay, the IRS may opt to remove your penalties. About a third of all IRS penalties are later removed. Reasonable causes include: the death of a family member or close friend, unavoidable absence (including hospitalization, prison, rehab, etc.), destruction of the location where the taxpayer’s records are held (by fire, flood, etc.), inability to pay due to material impairment by civil disturbances (such as divorce), bad or incorrect advice from a tax professional or directly from the IRS, and errors made while acting with “ordinary business care and prudence.” Whatever your reason, be prepared to answer questions about your situation and have the necessary applicable documentation to back it up.

Penalty abatement If you do have a reasonable cause, you may apply for penalty abatement. This is a formal dispute of the penalties and interest from failure to pay. Penalty abatement can also apply when you have an administrative waiver, or if IRS made a mistake. If you have a reasonable explanation for your situation and failure to pay, your penalties and interest could be completely removed and a refund could be claimed. Penalty abatements can be filed through sending a letter to the IRS or completing a Request for Abatement and Refund form.

IRS Fresh Start Program If you were unemployed for 30 consecutive days in 2011, or in 2012 prior to April 17^th, you may be eligible for the Fresh Start Program. This IRS initiative gives taxpayers 6 months to pay their taxes without incurring failure to pay penalties, as long as the tax liabilities are paid in full by October 15^th, 2012. The Fresh Start Program also applies self-employed individuals with a 25% or more drop in income during 2011. To qualify, the adjusted gross income (AGI) of a single filer must be less than $100,000, and joint filers less than $200,000. There is an application form for the Fresh Start Program on the IRS website.

If you have received an IRS Failure to Pay notice, our tax specialists can help you determine if the assessed tax penalty is accurate. Then, they can work with you on a payment plan, or determine if there was a reasonable cause that could apply to penalty abatement. For more information about our tax debt resolution services, visit us today at professionaltaxresolution.com. Contact us by phone at (877)-889-6527 or by email at info@protaxres.com to receive a free, no obligation consultation.

Deceptive TaxMasters Firm Mishandles Clients’ Taxes

Posted on March 22, 2012 by Kursti Nakagawa

When choosing tax expert for your personal tax preparation needs or a business tax specialist for business tax preparation, it is highly important to choose a proven tax advisor with expertise in tax settlements and favorable reviews from previous clients.

This is what clients of TaxMasters, a recently bankrupted tax preparation company in Houston, Texas, learned after trusting their tax returns to this company, who had broadcast a nationwide commercial promising to settle tax debt for less. The State of Texas is suing Tax Masters because they advertised free consultations with a tax specialist, but calls were actually received by salespeople not qualified to give help with taxes. This would be a violation of the Texas Deceptive Trade Practices Act. TaxMasters may have delayed submitting clients’ taxes until all fees were collected from them. This was resulting in missed tax deadlines, incurring fees and interest owed to the IRS.

This recent blog on ProfessionalTaxResolution.com describes how to choose a tax settlement professional. For your business tax preparation needs, here are tips for selecting a business tax resolution specialist.

It is very important to know you are speaking with a tax professional and not a salesperson when you handle your taxes to avoid costly mistakes and deceptive practices. If you have trouble paying your taxes all at once, options like installment agreements through the IRS can split up the sum into more manageable monthly payments. An offer in compromise can also be reached, where taxpayer’s tax liability is settled for lower than full amount that is owed.

If you are in need of any type of tax settlement services or have tax debt, the qualified tax specialists at Professional Tax resolution can provide you with the help you need. Because our professionals are familiar with all of the available tax settlement options and are experienced at negotiating tax settlement agreements with the IRS, we can ensure that you will receive the maximum tax advantage for your specific financial situation. For more information about our tax settlement services, visit us today at professionaltaxresolution.com. Contact us by phone at (877)-889-6527 or by email at info@protaxres.com to receive a free, no obligation consultation.

Professional Tax Resolution – A Good Choice for Your Tax Settlement Needs

Posted on March 16, 2012 by Kursti Nakagawa

The tax specialists at Professional Tax Resolution are a good choice for resolving your tax settlement issues. They are:

Licensed The tax resolution professionals at Professional Tax Resolution are Certified Public Accountants and Enrolled Agents. These are the only tax specialists who can represent you before the IRS on all tax issues, not just returns they have personally prepared.

Experienced The tax specialists at Professional Tax Resolution resolve tax debt issues for both individuals and businesses all day, every day. Because tax settlement is their only focus, they know how to successfully negotiate with the IRS to achieve the best tax resolution outcome for each client.

Knowledgeable The tax specialists at Professional Tax Resolution are familiar with all of the available tax settlement options and are well equipped to select the one that best fits each client’s specific situation to help with tax resolution. They have a thorough understanding of tax law and the experience to use this knowledge to successfully resolve any tax debt issue.

Honest and Ethical The tax specialists at Professional Tax Resolution are honest and ethical. They thoroughly analyze each client’s tax debt situation and provide a realistic evaluation of what type of tax settlement the client can expect. They never make extravagant promises they know they cannot keep.

Proven with a Great Track Record The tax specialists at Professional Tax Resolution have an established record of past accomplishments. Stories of past successes can be read on their website at professionaltaxresolution.com. Reviews can be found on numerous rating sites including Yelp and Merchant Circle.

If you have an outstanding tax liability, visit us today at professionaltaxresolution.com. With over 16 years of experience, our licensed tax professionals have the knowledge and experience necessary to provide you with the best tax settlement help available. Contact us today at (877) 889-6527 or info@protaxres.com to receive a free, no obligation consultation.

Avoid IRS Penalties – Settle your IRS Tax Debt – Tax Settlement Tips

Posted on February 20, 2012 by Kursti Nakagawa

If you have been disregarding a notice from the IRS, tax filing deadlines, or ignoring tax liabilities, it is probably time to think about filing those back tax returns and paying outstanding tax balances. Even though the Obama Administration’s 2012 Budget request for increased funding for the Internal Revenues Service was not approved, the ability of the IRS to enforce tax compliance has improved over time. System modernization and software improvements have made it harder for a taxpayer to stay under the IRS radar by making it easier for this powerful collection agency to track down individuals who fail to file tax returns or owe back taxes.

When tax amounts are owed over an extended period of time, the financial burden can become overwhelming due to the continued accumulation of penalties and interest. It is not unusual for these additional amounts assessed by the IRS to total as much as 50% of the original tax amount owed. The financial consequences of failing to file a tax return or owing back taxes are outlined below:

Failure to File Penalty The Failure to File Penalty is calculated on the tax balance due as shown on the tax return. This penalty is 5% of the tax amount due for each month the return is late, with a maximum penalty of 25%. Although it is seldom invoked, a taxpayer who fails to meet a filing deadline can also be charged with a misdemeanor, which carries a maximum fine of $25,000 and up to a one-year prison term.

Failure to Pay Penalty The Failure to Pay Penalty is calculated on the tax balance due as shown on the tax return. These penalty charges are assessed at the rate of 0.5% for each month that the tax balance is not paid in full, beginning from the original April 15^th filing deadline. The Failure to Pay Penalty has no limit on the maximum percentage amount that can be assessed.

Interest Interest is charged on the balance of any tax liability for each day the back tax balance is not paid in full. The interest rate, which is variable and set quarterly, is currently 4%.

With the downturn of the economy, even more taxpayers have missed filing deadlines or have found themselves with outstanding tax balances that they are unable to pay. When these tax debts or unfiled tax returns are left unresolved, the IRS will initiate collection activities to enforce compliance and collect the tax amounts owed. Unpaid tax debt or unfiled tax returns will result in collection efforts by the IRS. These collection activities begin with the assessment of interest and penalties and are followed by more aggressive actions including the filing of tax liens or tax levies and the initiation of wage garnishments. On a positive note, there are many tax settlement options available to taxpayers who are unable to pay the tax balances they owe. The important thing is to begin the resolution process immediately before penalties and interest accumulate further or the more severe consequences of owing the tax debt are imposed.

A licensed tax professional will be familiar with all of the tax settlement alternatives available and can be invaluable asset to a taxpayer who is the subject of collection attempts by the IRS. If you have failed to meet tax filing deadlines or have an unresolved tax liability, our experienced tax professionals can help you become tax compliant. For more information about our tax settlement services, visit www.professionaltaxresolution.com. The members of our staff have a thorough understanding of tax law together with the experience to know which tax settlement option will most effectively resolve your specific back tax issues. Contact us today at (877) 889-6527 or info@protaxres.com to receive a free, no obligation consultation.

Back Taxes and Small Businesses -Tips to Avoid Tax Debt

Posted on December 16, 2011 by Kursti Nakagawa

Back Tax Issues for Small Businesses

What back tax issues are commonly encountered by small businesses?

Due to the complexity of tax law, many small business owners do not know how to use available deductions to reduce their lax liability and therefore end up with tax balances that are more than the business can afford to pay.

With the current state of the economy, many small businesses have cash flow problems. When this is the case, they may use available cash to fund operations rather than making tax payments.

What types of tax payments are small businesses responsible for?

Small businesses are responsible for paying sales taxes (often to multiple states), payroll taxes and quarterly tax payments.

What are the consequences when small businesses do not make their tax payments on time?

The IRS has the power to impose harsh penalties when small businesses fail to meet their tax deadlines. The reason for the delinquency is usually not taken into consideration.

One of the harshest penalties is imposed when a small business fails to meet its payroll tax deadlines. The penalty is called the Trust Fund recovery Penalty and is equal to 100 percent of the payroll tax balance. This penalty does not take into account the reason for the delinquency and can assign blame to anyone who was, in any way, responsible for the payroll tax debt.

What solutions are available to small businesses with back tax issues?

The best way for a small business to deal with a back tax issue is to face it head on rather than to wait for the liability to increase due to the compounding of interest and penalties.

Many states offer voluntary reporting programs and, while no such program is currently offered by the IRS, they due offer numerous tax debt settlement options.

While small business owners may rationalize that they will clear up their tax debt issues down the road when business is more profitable, this is usually not a wise decision. The IRS is more likely to approve a settlement agreement when business income and profits are low, not to mention that he legal and financial consequences of not addressing a back tax issue can be severe.

Due to the complexity of tax law, especially as it applies to small businesses, the best approach to resolving back tax issues is often to enlist the help of a qualified tax professional.

If you are a small business with unresolved tax debt, our experiences professionals can help you resolve your back tax issues. For more information about our tax debt resolution services, call us by phone at (877) 889-6527 to receive a free, no obligation consultation.