Tag Archives: back taxes

Wage Garnishment Process

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If you have back taxes from unfiled or late tax returns, you could be subject to wage garnishment. Under IRS wage garnishment, 70% or more of your wages can be legally seized by the federal government to pay your back taxes. If you do not respond to IRS notices about your back taxes, the IRS can contact your employer to withhold a percentage of your wages—your salary, tips, commissions, or bonuses—to be sent to the directly to the IRS. If you a business owner and your employee is facing wage garnishment, you must comply with the IRS, or you will be liable for the amount of wages that the IRS was to collect. The majority of your assets can be legally seized by the IRS if you fail to respond to repeated notices and demands for payment or settlement of back taxes owed to the IRS.

When would I be subject to IRS wage garnishments? By the time you receive an IRS intent to levy (legal property seizure to satisfy a tax debt), you should have already received multiple IRS letters and possibly phone calls regarding your unpaid taxes.  When these attempts to reach you go unanswered, the IRS will send a “Final Notice of intent to Levy.” Thirty days after you receive this notice, the IRS can start collections. They will analyze your financial status and determine the quickest way to be paid for your tax debt, which is usually wage garnishment. There are three requirements that IRS must pass before your wages can be garnished: 1)  the IRS must have assessed your tax liability and demanded that you pay it, 2) you have not paid the taxes that were demanded and you have not reached some other agreement with the IRS, 3) the IRS has sent the “Final Notice of Intent to Levy,” and it has been 30 days since you received it.

What should I do if I am facing wage garnishment? The best way to avoid wage garnishment is to pay your taxes on time. If you are financially unable to pay off your taxes in full, it is recommended that you have a tax specialist help you to come to an agreement with the IRS to pay in installments, or come up with a payment plan. A tax expert can also help you determine if the amount owed on the wage garnishment is accurate, or if the IRS has made a mistake. If you did not file taxes and the IRS completed a substitute return, the return they prepared will not likely have covered the deductions that are available to you. The IRS would rather come to agreement with you than bear the costs of imposing IRS wage garnishments or another IRS levy.

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 like wage garnishment, our experienced tax professionals can help you become tax compliant. For more information about our tax settlement services, visit 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.

 

Late Tax Return? What Happens Next

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It’s the day after taxes were due, April 18th, 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 Collection Financial Standards

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Are you delinquent on your taxes and can’t afford to pay your tax debt? The IRS released updated Collection Financial Standards on April 2, 2012, to help with calculating delinquent tax repayment of federal taxes. These standards help to define a taxpayer’s ability to pay a tax liability.

Standards include the following four categories of allowable living expenses:

Food, clothing, and other items Food, apparel and services, housekeeping supplies, personal care products and services, and miscellaneous (either living expenses that are not included in the former categories, or expenses in the former categories that exceed the standards)

Out-of-pocket health care expenses In addition to what is paid for health insurance, this includes medical services, prescription drugs, and medical supplies (such as vision care items like glasses and contacts)

Housing and utilities Rent or mortgage, property taxes, insurance, interest, and utilities such as gas, electric, water, garbage collection, landline and cellular phone, internet, and cable; calculated as a local standard according county US Census, American Community Survey, and BLS data, also takes into account how many persons are in the household

Transportation Monthly loan or lease payments as well as operating costs including maintenance, repairs, insurance, fuel, registration, licenses, inspections, parking, and tolls; public transportation alone or in combination with vehicle ownership; calculated as a local standard

The six-year rule for repayment of tax liability allows for payment of living expenses exceeding the Collection Financial Standards and other expenses like minimum payments on student loans and credit cards, as long as the liability can be paid in full within six years. This includes paying off the penalties and interest.

If you need help with delinquent taxes or have an unresolved tax liability, our tax resolution professionals can provide the tax settlement help you need. Visit professionaltaxresolution.com for more information about our tax settlement services. Our staff has the experience and expertise necessary to know which tax settlement option will most effectively resolve your specific back tax issues.  Contact us today at (877) 596-4143 or info@protaxres.com to receive a free, no obligation consultation. 

Tips for Taxes on Frequent Flier Miles

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Did you know that you could be taxed on your frequent flier miles? That’s what thousands of Citibank customers learned when they received a 1099-MISC from Citi, which reported their miles as income to the IRS. These miles would have to be reported on their tax  returns, or they could risk getting a notice from the IRS.

Understandably, some customers who were notified that 30,000 miles was considered $750 of income were furious and shocked that the bonus miles they earned from signing  up for a Citibank credit card could be taxable. Some even asked to have miles canceled and were told by Citibank that they should have asked before the end of 2011, even though customers were not aware of this tax liability until they received the form.

Frequent flier miles can be categorized in a six ways, but here is what it boils down to: rebates (not taxable), promotions (taxable), or prizes (taxable). Rebates aren’t taxable because they are seen as a purchase price reduction. However, promotions, such as those bonus miles for signing up for a card, and prizes, such as winning free miles from a sweepstakes, are considered income.

The IRS hasn’t given definitive rulings outlining how frequent flier miles should be treated, but here are some general guidelines from industry experts:

  • Miles earned from travel are considered a rebate.
  • Miles earned from purchases on a credit card are considered a rebate.
  • Miles earned from business travel are not taxable according to a 2002 IRS ruling.
  • Miles earned from opening a credit can be considered a taxable promotion.  However, some credit card companies consider it a rebate since there are spending requirements or annual fees associated with signing up.
  • Miles awarded for deposits to a mutual fund can be considered a promotion. While there is no definitive law, private-letter rulings have been found declaring that these miles are taxable.
  • Miles awarded from a sweepstakes are a taxable prize. Some winners have actually rejected their miles so they wouldn’t have to pay the taxes on them.

If you receive a tax form, it is very important to make sure that you take it into account when you are filing taxes, because this income has been reported to the IRS. Failure to do so could lead to tax debt, back taxes with interest, and penalties.

It can be confusing when you receive a surprise tax form. If you want to avoid mistakes while filing your return, or you have already filed and need an amended return, the tax professionals at professionaltaxresolution.com can help with your tax settlement. They have the expertise to help you navigate the intricacies of tax laws and regulations. If you need help with tax resolution, contact us at (877)-889-6527 or email info@protaxres.com to receive a free, no obligation consultation.

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

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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 15th 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.