Tag Archives: back taxes

Haven’t filed your taxes in years? Don’t give up! Some Back Tax Tips.

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Seeking Back Tax Help

Finding back tax help can be so confusing and stressful that some taxpayers simply give up. When attempting to resolve IRS issues, the help of a qualified professional can be invaluable. Yet finding the right person for the job can be a difficult task in itself.  Many types of companies advertise back tax help but some are made up of salespeople and marketing agents who know very little about negotiating with the IRS. Tax law is difficult to understand and the policies and procedures of the IRS are complex so it is important to find a tax professional that is not only honest and ethical but also experienced in providing back tax help. To insure that an individual meets these qualifications, it is a good idea to verify their current licensure with the state certification agency and the Better Business Bureau. A licensed tax professional that specializes in back tax help is required by their profession to meet stringent continuing education requirements in order to stay current with the never ending stream of changing tax regulations. Hiring a tax professional with verifiable credentials is really the only way that you can be sure of the qualifications of the professional you are hiring.

Let a Professional Do the Talking

Many taxpayers contact us only after they have made numerous attempts to resolve their back tax issues on their own.  Very often they seem surprised that the IRS was not very helpful in getting their back tax issue resolved.  While IRS employees are usually very knowledgeable, it is important to remember that it is the job of most IRS agents to collect the tax you owe. Also, the IRS is divided into many unconnected departments so there is a good chance that the person you are talking with does not even know how help you with your issue. At Professional Tax Resolution, we work with the IRS on a daily basis and are familiar with their policies and procedures.  We know how to communicate with them effectively and will negotiate with them on your behalf to resolve your back tax issues.

Avoid the Penalties and Interest

Many taxpayers are very slow to resolve you their back tax issues. If you are one of those people, it is important to remember that back tax balances continue to accrue penalties and interest until the balance is ether paid or a tax settlement is reached. It is not uncommon for penalties and interest to make up more than half of the total balance that a taxpayer owes.  An experienced tax professional will examine all of your tax settlement options including the waiver of penalties and interest and partial payment settlement options where the IRS accepts an amount that is significantly less than the amount actually owed.

Find the Right Professional

When you are in need of back tax help, probably the most important decision you will make is the selection of a tax professional.  At Professional Tax Resolution our CPAs and Enrolled Agents have many years of experience helping taxpayers resolve even the most complicated tax debt situations. Our process will always begin at the source of the problem and follow the solution through to a complete resolution. We encourage our customers to check our memberships, reviews and affiliations for verification of our credentials and our past successes.

IRS Tax Penalties Increased for Failure to File W-2s and 1099s. Yikes!

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When meeting with a new client regarding an outstanding tax debt we generally ask if all required W-2’s and 1099’s and have been filed.  It is not uncommon for the client to casually respond that they need file those also.  They are often surprised to hear of the substantial penalties that apply for the failure to file these information returns.  Since the IRS assesses these penalties on a per return basis the resulting penalties can be very significant when there are numerous documents that have not been submitted.

Under the Small Business Jobs Act, the IRS has implemented higher penalties for failure to file information returns such as a W-2’s or 1099’s. The new penalty structure is designed to encourage businesses to file these returns as soon as possible. The quicker the delinquent returns are filed, the smaller the penalty.

  • First tier penalties have been doubled from the previous amount to $30 per return. These penalties apply to any information return that is submitted after the filing deadline but within 30 days. The maximum penalty for a calendar year has been increased from $75,000 to $250,000 (from $25,000 to $75,000 for small filers).
  • Second tier penalties have been doubled from the previous amount to $60 per return. These penalties apply to any information return that is submitted more than 30 days after the filing deadline but before August 1st. The maximum penalty for a calendar year has been increased from $150,000 to $500,000 (from $50,000 to $200,000 for small filers).
  • Third tier penalties have been doubled from the previous amount to $100 per return. These penalties apply to any information return that is submitted after August 1st. The maximum penalty for a calendar year has been increased from $250,000 to $1.5 million (from $100,000 to $500,000 for small filers).
  • The penalty for intentional failure to file has been increased from $100 to $250 per return.

The new penalty structure applies to information returns that were required to be filed on or after January 1, 2011.

Consider Carrying Back a Net Operating Loss as a Tax Settlement Tool

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The Net Operating Loss Carry Back is a tax relief option that allows a taxpayer to reduce an existing tax liability by applying net operating losses for the current fiscal year against gains from previous years. In light of the recent economic downturn, is not uncommon for allowable deductions in any given year to exceed gross income, thus resulting in an operating loss. By the same token, it is a fairly common occurrence in the current economic environment for a taxpayer to have paid taxes on substantial net income in past years and yet have incurred financial losses for the current year. This is the set of financial circumstances for which the Net Operating Loss Carry Back provision was designed.

The Net Operating Loss Carry Back is dissimilar to several of the other tax settlement options offered by the IRS in that it is a tax relief alternative that is available to any taxpayer, regardless of their financial situation. Unlike the Offer in Compromise and the Partial Payment Installment Agreement, there are no specific qualifying criteria. Because of this difference, it is always advantageous to use the Net Operating Loss Carry Back option whenever the financial circumstances are such that there has been a financial loss in any given year following gains in previous years. In recognition of the current economic climate, the IRS has made the use of this carry back option even more attractive by instituting steps to accelerate the payment of any refunds generated by offsetting a prior year’s tax liability. For certain specific situations, the IRS has also extended the time period over which that loss can be offset.

Of course the use of Net Operating Loss Carry Back is subject to the same scrutiny as that of a regularly filed tax return. When this offset is requested, IRS will look carefully at the current year’s tax return together with returns that were filed during the carry back period. Great care should be exercised to make sure all of these returns have been filed correctly and any necessary amendments to previous returns have been submitted according to established IRS guidelines. As with any of the tax settlement options, enlisting the help of a qualified tax specialist to assist in this process might very well prove to be a worthwhile investment. Although the IRS has made changes to the Net Operating Loss Carry Back option in order better accommodate the needs of taxpayers in the current economic climate, it nevertheless has not compromised its existing requirements for thoroughness and accuracy.

Visit www.professionaltaxresolution.com for more information about customized tax debt relief assistance. With over 16 years of experience, we have a thorough understanding of tax law together with the experience to know which tax settlement option will best meet the specific needs of each of our clients. Contact us today at (949)-596-4143 or info@protaxres.com to receive a free, no obligation consultation.

Issues with tax debt? Check out the new Offer in Compromise guidelines.

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The break you’re in need of may be on its way if you’re struggling with back taxes. The Internal Revenue Service Commissioner announced an initiative to help taxpayers get a fresh start with their tax liabilities on February 24, 2011. One possible way of reducing your past tax liabilities and avoiding IRS tax liens is by applying for an Offer in Compromise (OIC).

An Offer in Compromise is an agreement made between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. Perhaps you were considering an Offer in Compromise but were unsure if you’d qualify. Maybe an offer you submitted was previously rejected. Under the new initiative, the IRS is now offering an expanded Streamlined Offer in Compromise Program.

The newly expanded OIC program will now allow taxpayers with annual income of up to $100K.The new program also doubles the allowable tax liability from $25K to $50K. Offers in Compromise are subject to IRS approval and they will analyze your income and assets.  Another perk of the expanded Streamlined OIC Program is the IRS will be making fewer requests for additional financial information. They will also offer the option to provide information by phone rather than by mail. Lastly, they will give more flexibility when considering a taxpayer’s ability to pay.  With the flexibility of the new program, more taxpayers will be able to get a “fresh start” in regards to their tax debts. However, the IRS still urges individuals to be aware of promoters who advertise that IRS debts can be settled for “Pennies on the dollar.” These promoters often charge high fees with little to no results.

Even if you feel you may not qualify for this tax settlement option, talk to one of our licensed tax experts at Professional Tax Resolution today. There are other tax settlement options, and we are glad to discuss them with you.

How We Reduced One Client’s Tax Debt from $40,000 to less than $1,000

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We were hired by the owner of a small mortgage company to resolve his tax debt. Our client had received a notice that his wages from a related company had been garnished by the state tax board and the federal government had issued an IRS notice of the intent to pursue a tax levy and tax lien. Both the state and the IRS were taking serious action and the client was understandably worried. At the time of the initial meeting the state tax board had already collected approximately $3,000 through wage garnishment which of course was a huge financial burden for his family.

What had gone wrong? The owner of the company admitted that he had actually not filed either his corporate or individual tax returns for five years. Why not? With the downturn in the economy, the company had lost money during that time and the owner figured it was not necessary to file his tax returns because he had made no profit.

Had he received any IRS Notices? Not only was the answer yes, he brought us a large stack of completely unopened IRS Notices and letters from the IRS. At Professional Tax Resolution Inc., we see this all too often. Clients paralyzed by fear have piles of unopened IRS Notices and Letters from the IRS. Why do you get so many letters? The reason is actually more logical than it may appear; the IRS generally has a 10 year statute of limitations for most tax debts so as an outstanding tax debt approaches the 10 year mark, the IRS collection efforts usually get more and more aggressive.

The first thing we did after our client hired us was determine which prior year tax returns had been not filed. We then did background research about beneficial tax codes so that when we filed his missed year returns, we could take all of the applicable benefits for our client. We know from our years of experience that the process of filing unfiled returns or correcting prior year returns is not only the right thing to do, it is far more productive than attempting to negotiate a settlement with the IRS for an amount less than the reported amount of the tax owed.

It turns out in the case of our mortgage company client, the IRS and state tax board had prepared estimated returns based on 1099 Forms provided to them by other taxpayers. When the IRS or State tax agency prepares an estimated or substitute return, they only include information that they have on file which traditionally only includes the income reported to them. The result is that all allowable expenses are generally not taken.

In this case we were able to contact the Internal Revenue Service and State Tax Board and obtain a 30 day collection hold to allow us the time we needed to file all of the outstanding returns. Using IRS transcripts, account information and our client’s company expense records we were able to actually prepare and file all of the outstanding individual and corporate tax returns. Once that work was completed and the returns were properly prepared, we ran a calculation and saw that the actual amount owed was now under $1,000! This was a huge reduction compared to the more than $40,000 the IRS and state tax boards indicated was owed just weeks before. We faxed the revised state tax returns to the state tax board and were able to stop the wage garnishments immediately and our client even receive a refund of the amounts the state had previously garnished!

We achieved great success in this case, reducing our client’s liability by over 97% because we correctly filed his outstanding returns. Had our client asked for advice years before, he might never had to face the burden of his large tax debt. Had he opened his IRS notices and called us for help earlier, he might have avoided a wage garnishment and tax lien. The lesson learned is simply that the worst course of action is no action at all.

For more information about how we can help you; call us at (949) 596-4143 and speak directly with a CPA today.