Tag Archives: Amend Returns

If You Have Unreported Income You May Get a Letter from the IRS

Posted on by

Understanding The IRS “Soft Notice” Pilot Program to Encourage Income Reporting Compliance

In 2007, the IRS launched a pilot program designed to decrease the tax gap by identifying unreported income. Under this pilot program, which is still in effect, IRS notices are issued to taxpayers when there is a discrepancy between the income reported on their tax returns and the income reported directly to the IRS by various financial institutions and employers. These “soft notices” do not identify specific discrepancies or calculate amounts due. They simply ask taxpayers to review their returns and to file amended returns if errors are found. 

In spite of the fact that these “soft notices” do not require any specific response or action on the part of the taxpayers who receive them, they should be taken seriously. The IRS designed these letters to encourage compliance through self-correction and should be considered as advanced notification that IRS software has picked up a disparity in reported income.

Although the “soft notice” pilot program collected more than one million dollars in its first year and it can be expected to continue for many more to come, the IRS has not collected enough data to determine its long term benefits.

If you received a letter from the IRS or an IRS Notice and are seeking guidance, call us toll free at (877) 889- 6527 for a free, no obligation consultation with a CPA.  Professional Tax Resolution Inc., is an honest firm with strong values. We want our clients to understand all of the options they have and never promise that we can do something we can’t.

Tax Settlement can be achieved though many methods but often the most effective way is by reducing how the liabilities were incurred at the time and avoiding them in the future.

Complicated Tax Settlements and Returns Are Our Specialty. We Found This Client $75,000!

Posted on by

There are many types of accounting, tax and tax settlement service providers. CPAs and accounting firms typically provide tax preparation services to businesses and individuals but rarely devote much effort to actual tax settlements. On the other hand, tax resolution and tax settlement firms focus mostly on settling outstanding tax debt without ensuring that all available tax code benefits have been used on the original tax filings. Professional Tax Resolution combines the expertise of tax settlement professionals and experienced, licensed tax preparers. The first step in any tax settlement case should be to confirm that the reported tax liability is correct and that all available tax code benefits have been utilized. Following that, a tax debt resolution plan can be mapped out.

Jeff F. came to us shortly before the April 15th filing deadline. A successful chiropractor, Jeff had made large tax payments for himself and his corporation for many years. However, he owed a large tax liability for the previous year and had failed to make estimated tax payments for the current year. We told Jeff that we would be happy to prepare his individual and corporate tax returns and suggest a tax settlement option for the balances owed. Although his original tax filings had been prepared by two well established CPA firms, we suggested that we would review them prior to recommending a tax settlement plan just to confirm that the balances owed were correct and that no tax code benefits had been missed.

After reviewing the most recent returns, it appeared that, as expected, the returns had been filed properly. However, one important tax benefit had been overlooked. Jeff’s business is located within an Enterprise Zone that offers specific state tax benefits for companies located within the zone. One of the benefits is a state hiring credit made available to employers meeting certain specific criteria. Companies who qualify but have failed to claim this credit are permitted to amend returns and claim missed credits providing the returns are filed within the statutory amendment period. The vouchering process to obtain these credits is fairly involved and takes several months to complete but we determined that the potential tax benefits were worth the time and expense.

After several months of reviewing employee qualifications we were able to obtain qualifying vouchers and identify over $75,000 in unclaimed state tax credits for prior year’s tax returns. The best news was that the returns fell within the statutory amendment period so the refunds could still be claimed. In addition, the credits would apply to subsequent years so the client would be able to claim as much as $15,000 in tax credits for each year going forward. While these refunds only applied to state tax balances, the client was able to use the past refunds to pay outstanding IRS balances.

Complicated tax settlements are what we do at Professional Tax Resolution. This is yet another example of how a qualified tax settlement firm can provide real solutions to taxpayers faced with a significant amount of IRS tax debt.