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 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.

IRS Penalties for Hiding Income Offshore

Posted on June 13, 2012 by Kursti Nakagawa

You may remember Mitt Romney’s refusal to make his complete tax returns public due to his offshore accounts in the Cayman Islands in January. Romney at least reported the income to the IRS, if not the American public. The OC Register reported this week that Lake Forest resident Louis Joseph Vadino is being investigated by the IRS for evading 12 years of taxes totaling nearly $4 million. He did this mainly by opening foreign bank accounts and creating companies outside of the U.S. to hold property titles, some of them hidden under the relatives’ names. He is scheduled to go to trial at the end of July.

The IRS has specially trained examiners and international partners that make sure U.S. citizens and residents accurately report income and pay the appropriate taxes on foreign entities. Failure to report foreign sources of income may be a criminal act. Worldwide income and foreign bank or investment accounts are required to be reported on your U.S. tax return. Filing rules for tax returns on income, estates, and gifts are generally identical whether you are living in the U.S. or abroad.

If you do attempt to evade taxes on income from foreign sources, you can be subject to additional taxes, IRS penalties, interest, fines, imprisonment, or deportation if you have a green card.

The Offshore Voluntary Disclosure Initiative (OVDI) of 2012, an IRS initiative that was extended indefinitely after being in effect from 2009–2011, allows taxpayers who have hidden offshore accounts to become compliant and current with their taxes without criminal liability. While they can face a 27.5% IRS penalty, taxpayers in limited circumstances may qualify for a penalty of 5%. Offshore accounts or assets that did not surpass $75,000 in any calendar year will have a penalty of 12.5%. Taxpayers may choose to be examined by the IRS if they feel the penalties are disproportionate to their income. Unreported foreign gifts or bequests of $100,000 or more in one year can be penalized from 25%–35%, even if no taxes are due. Under the OVDI process, penalties are waived for this situation.

While the tax penalties under OVDI may seem high, the benefits of voluntarily reporting this income far outweigh the costs. The IRS tax penalties could be much higher if the offshore income is discovered by examiners, not to mention the criminal prosecution that can lead to time in jail.

If you need help with becoming compliant with the IRS, our experienced tax settlement professionals can help. We can also help you file your taxes. Please visit professionaltaxresolution.com for more information on our tax resolution services. You may also call us at (877) 889-6527 or email info@protaxres.com to receive a free, no obligation consultation.

Late Tax Return? What Happens Next

Posted on April 18, 2012 by Kursti Nakagawa

It’s the day after taxes were due, April 18^th, 2012. What do you do if you still haven’t filed your tax return?

The IRS has some guidelines for what happens with returns that are past due. If the IRS doesn’t hear from you and you don’t file a return:

The IRS will increase your taxes as they assess penalties and interest.

A substitute return will be filed for you from the IRS, based only on information they have from sources other than you. Therefore, you would not get any additional exemptions or deductions you could be entitled to and your tax liability could be overstated.

After the IRS assesses your taxes, the IRS will begin the collection process. They could place a levy, which is legal seizure of property to pay tax debt, on your wages or bank accounts. They could also file a federal tax lien, which is a claim used as security for a tax debt, against property you own.

While the IRS may have already filed a substitute return, you should still prepare and file your own return because the IRS can adjust your account for correctness. You can then take advantage of the allowed exemptions, credits, and deductions. To make sure your tax settlement makes the most of your deductions, it can be smart to consult a professional tax resolution specialist.

If you need help because you didn’t make the tax filing deadline or have an unresolved tax liability, our experienced tax resolution professionals can provide the tax settlement and tax preparation help you need. For more information about our tax preparation and tax settlement services, visit us today at professionaltaxresolution.com. Our staff has the knowledge and experience to help you file your late taxes in a timely manner. Contact us today at (877) 596-4143 or info@protaxres.com to receive a free, no obligation consultation.

IRS Back Tax Tips – Help with Late Tax Bills – Pay Your Tax Debt

Posted on January 13, 2012 by Kursti Nakagawa

Did you receive an IRS notice that you owe back taxes? While owing money can be a big worry, ignoring the problem will only make things worse. There are options to pay your tax debt, even if you can’t do it all at once.

If you need help with tax resolution because you owe back taxes, you can take advantage of different methods of payment or request that the payments be broken up into installments. Here are some tips:

A late tax bill from the IRS is expected to be paid promptly, including the taxes owed, penalties, and interest. You may want to get a loan so you can pay it in full to avoid making installment payments if you do not already have the money ready. A bank loan could have a lower interest rate than what you would have to pay in additional interest and penalties.

Tax bills can be paid via credit card. Your credit card could also have a lower interest rate than what you would have to pay in additional interest and penalties.

Tax bills may also be paid through checks, money orders, cash, cashier’s checks, or electronic fund transfers.

If you are unable to pay in full, you may be eligible to request an installment agreement between you and the IRS. The agreement would break up the amount due into monthly installments. Make sure that your required returns are all filed and your estimated tax payments are current.

You can request installment payments whether your tax bill is over or under $25,000. You should be informed within roughly 30 days if the IRS approves or denies your request, or if they need more information.

If you receive a late tax bill, our experienced professionals can help you resolve your back tax issues. For more information about our tax debt resolution services, visit us today at www.professionaltaxresolution.com. Contact us by phone at (877) 889-6527 or by email at info@protaxres.com to receive a free, no obligation consultation.