Tag Archives: back taxes

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

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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.

Back Taxes and Small Businesses -Tips to Avoid Tax Debt

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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.

IRS Itemized Deductions and Volunteer Work at Schools

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Interesting questions come up everyday at our tax firm.   On the mind of many parents particularly those with part time or full time self-employment, relates to how their volunteer work for their child’s school might affect them from a tax standpoint.  Now that is October, children have settled into their classrooms and many schools have begun requesting parent volunteers. This practice is becoming more and more common because schools face such large spending constraints.  School volunteers might be needed for sports programs, tutoring, maintenance, bulletins, books fairs, drama productions, bands, academic tournaments or even bake sales.

It doesn’t always occur to the parent, but there may be some tax benefits that follow as a result. The question we are asked about most often is the value of volunteered time. The IRS does not allow any charitable deduction for this and the principle is simple; charitable deductions are a donation of taxable income. Because the donated time didn’t create income, no deduction from income occurred.

That said, almost every voluntary effort incurs some cost for the individual volunteer. These out-of-pocket expenses related to volunteering for tax-exempt organizations are indeed tax deductions. A qualified CPA will know that these deductions are reported on Schedule A and are thus only available to taxpayers who itemize deductions.

Clearly in order to deduct costs incurred during volunteer work, the charitable organization must not reimburse the expenditures. In addition, the expenses must have a direct connection to volunteered services and have arisen due strictly to the volunteering. Taxpayers cannot deduct any expenses for personal or general living costs, such as meals eaten while conducting a volunteer service. However, something like buying pizza for the speech team during travel for a school event is in fact tax-deductible.

Likewise, supplies for school projects are tax-deductible along with items given as prizes or awards. Keeping copies of receipts to support any expenses related to volunteer activities is something we always recommend. In addition, we also document the nature of the school event for the deduction on the tax return itself.

One deduction opportunity many parents do not realize is that driving for charitable activities may also incur a tax deduction. It is important to keep a record of the date, travel purpose, and numbers of miles as these are requirements of the IRS. Each year there are standard IRS mileage rates established for using a personal vehicle to perform a charitable function which is then calculated on the return. A word of caution however, mileage driven to and from ballgames or performances doesn’t count as charitable; actual work as a volunteer is required.

Also not every school related purchase will qualify as a deduction.  Merchandise sold at school activities are not tax deductable so buying candy, popcorn, apparel with the school logo, and similar items will not qualify as a donation.

These tips are examples of the types of the proactive, year-round tax guidance we provide to our clients. At Professional Tax Resolution we often amend prior year returns and file back taxes for new clients, many of whom qualify for more deductions than they realize.  

If you have an IRS or State Tax problem, our experienced tax professionals can help you resolve the tax issue that caused it. For more information about our tax debt resolution services, visit us today at www.professionaltaxresolution.com. Contact us by phone at (949)-596-4143 or by email at info@protaxres.com to receive a free, no obligation consultation.
 

 

Business Tax Debt from Back Payroll Taxes is Devastating to Staff and Owners.

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In light of the current economic slowdown and the tightening of credit, it is more common than ever for employers find themselves burdened with unpaid payroll taxes. Business owners generally match the employment taxes withheld from their employees’ pay checks and remit those to the IRS along with the standard federal and state tax withholdings.  When times are tough, it is not uncommon for an employer to delay in paying its payroll tax withholdings in the hope of being able to send them later when circumstances have improved. (thereader.com)  A business owner may simply be waiting for a contractor or client to pay an invoice or for the bank to approve a short term loan. If one of these improvements doesn’t materialize, the business can unintentionally be left unable to pay the back payroll taxes and can suddenly face a very sizable and unexpected tax debt.

No matter what the cause, delinquent payroll tax returns and unpaid payroll taxes can cause a host of problems. Some portion of a company’s payroll taxes are amounts withheld from employees’ wages to pay their share of federal withholding taxes, Social Security and FICA.  In other words, a portion of the total amount owed is actually the employee’s money that the employer is holding in trust to remit to the IRS or State Tax Agency on the employee’s behalf.  If a company fails to file a payroll tax return or pay its payroll taxes, the employee’s IRS and State accounts will not be credited at tax filing time. 

Because payroll taxes include amounts withheld from an employee’s wages and held in trust by the employer, the IRS pursues collection of a payroll tax debt much more aggressively than it does other tax delinquencies. To encourage compliance with the timely payment of withheld income, employment and social security taxes, the IRS has created a unique and potentially devastating penalty called the Trust Fund Recovery Penalty.  This penalty can be assessed against any person responsible for remitting payroll tax payments and can be assessed whether or not the business continues to operate. Since the IRS defines a responsible person as any person or group of people who have the power to direct, collect, account for or pay trust fund taxes, that person may fit any one of the following descriptions:

  • A corporate director or shareholder
  • An employee or officer of the business or corporation
  • A partnership member or employee
  • A board member of a non-profit organization
  • Any other person with control or authority over the payment of the taxes

In addition to the steep Trust Fund Recovery Penalties, the collection process for payroll tax debt is accelerated and settlement agreements are much more difficult to obtain.

Due to the combined effect of the factors discussed in the previous paragraph, a payroll tax debt can potentially result in the downfall of an otherwise successful business. In light of this risk, our firm always advises financially troubled business owners to make every effort to comply with all payroll tax filing deadlines and to pay the related taxes in a timely fashion.  If a payroll tax debt already exists, we encourage prompt action as the best way to get control of the situation and obtain tax relief. Tax debts arising from unpaid payroll taxes can be very significant since they include the assessment of a substantial Trust Fund Recovery Penalty in addition to the standard failure to file penalties, late payment penalties and interest assessed on the unpaid balance.  Obviously the larger the tax debt, the more difficult it can be for a smaller company to recover and find tax relief.

If you are a business with a payroll tax debt, we can help you evaluate the available tax settlement options and resolve your payroll tax debt problem. Because we know the collection laws and have experience negotiating with the IRS, we are in a better position than an individual taxpayer to stop enforced collection activity and to arrive at a reasonable tax settlement with the IRS. For more information about our tax debt resolution services, visit us today at www.professionaltaxresolution.com. With over 16 years of experience, we will negotiate with the IRS on your behalf. Contact us by phone at (949)-596-4143 or by email at info@protaxres.com to receive a free, no obligation consultation.

 

He Owed the IRS $80,000 in Back Taxes. We Reduced His Tax Debt to Zero!

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Steve H. came to Professional Tax Resolution after receiving notice of a wage garnishment from his largest customer.  Steve, a technology consultant, had failed to file tax returns for six years and, according to IRS calculations, owed over $80,000 in back taxes, penalties and interest.  Tax settlement plans for taxpayers with numerous un-filed tax returns always begin with gathering the records necessary to prepare the un-filed tax returns. In this case, the taxpayer was able to gather some information from banking records and some from customers for which he had provided services. Fortunately for this taxpayer, his wife had worked for several years and had had federal and state taxes deducted from her paycheck. We were able to obtain and verify additional tax information by obtaining IRS wage and income transcripts.

After gathering all possible relevant information, we were able to prepare all of the outstanding tax returns.  While balances were due in some years, refunds were owed in others. We were able to request that the IRS apply refunds owed to years where balances were due such that the net result was an outstanding tax liability of zero. It is never advisable to wait for a wage garnishment, tax lien or tax levy to resolve an outstanding tax issue. However, even when a tax issue seems practically unsolvable, there are tax resolution options available.  Professional Tax Resolution always looks at all available tax settlement options and provides a tax debt resolution plan for even the most complicated cases.