Tag Archives: Help with Taxes

Gift and Estate Tax Changes Expected to Occur at the End of 2012

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The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act which was signed into law in 2010 increased the amounts of the estate, gift and generation skipping tax exemptions and, at the same time, lowered the tax rates for each of these taxes. However, unless Congress takes some action before the end of the year, the estate tax benefit benefits provided by this law will expire on December 31, 2012. The major provisions of the 2010 Tax Relief Act are outlined below together the changes that will take place on January 1, 2013 if Congress does not take further action.

Gift Tax

  • Current

The gift tax exemption is $13,000 per year for gifts made by any one person to any number of people. There is a lifetime gift tax exemption of $5,120,000 for gifts made above the $13,000 limit.

  • January 1, 2013

The gift tax exemption will remain at $13,000 per year (with a possible increase for inflation) for gifts made by any one person to any number of people. The lifetime gift tax exemption for gifts made above the $13,000 limit is scheduled to revert to $1,000,000.

Generation Skipping Tax

  • Current

The GST exemption is $5,120,000 with a tax rate of 35% on amounts above the exemption limit.

  • January 1, 2013

The GST exemption is scheduled revert to $1,390,000 per year (with a possible increase for inflation) with a tax rate of 55% on amounts above the exemption limit.

Estate Tax

  • Current

The estate tax exemption is $5,120,000 with a tax rate of 35% on amounts above the exemption limit. Portability of unused estate tax exemptions of one spouse to the surviving spouse is allowed.

  • January 1, 2013

The estate tax exemption is scheduled revert to $1,000,000 per year with a tax rate of 55% on amounts above the exemption limit. Portability of unused estate tax exemptions of one spouse to the surviving spouse will no longer be allowed.

With January 1, 2103 fast approaching, taxpayers are anxious to see what, if any, action will be taken by Congress. If Congress does nothing, the exemptions for gift, generation skipping and estate taxes will revert to their 2009 levels and the tax rates for amounts above the designated exemption levels will increase to 55%. On the other hand, if Congress votes to extend the Tax Relief Act, the exemption limit for these taxes will remain at $5,120,00 with a possible inflation adjustment and the tax rate for amounts above the exemption limits will be held at the current 35%. Barring a full repeal of the estate tax, the third alternative would be the passage of some sort of compromise law that would place exemption limits and tax rates somewhere in the middle of the 2009 levels and those set by the Tax Relief Act of 2010.

If you owe back taxes due to a gift or inheritance, we can help you determine whether the assessed amounts are accurate based on past and current estate tax laws. Very often, the process of accurately interpreting the law and making use of tax benefits the law provides can result in a significant reduction in the tax amount owed. Following this analysis, our experienced tax settlement professionals will resolve any existing tax debt in the most effective way available. 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.

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.

 

Tax Penalties: What is Failure to Pay?

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A tax penalty is assessed when a taxpayer fails to meet a tax filing deadline or fails to make a tax payment when it is due. The IRS and State Tax Agencies impose such penalties as a method of encouraging taxpayers to meet their tax obligations. Both the Failure to File Penalty and the Failure to Pay Penalty must be announced through formal written notification from the IRS or State Tax Agency. The written notice must state the reason the tax penalty is being assessed and must also include a full explanation of how it has been calculated. Because tax penalty notices are computer generated and often include errors, it is important for a taxpayer to verify that the reported tax penalty amounts are accurate before making payment.

With the economic climate what it is today, many taxpayers owe taxes that they are unable to pay. A taxpayer who is faced with this situation should be well aware that the worst response is to ignore the problem and hope that it will go away. The financial consequences of disregarding tax deadlines and tax payments accumulate rapidly over time and more drastic measures are eventually imposed when a tax debt is ignored. A taxpayer’s best approach is to always comply with tax filing deadlines to make tax payments when they are due. When sufficient funds are not available to pay the full amount of the debt, the taxpayer should make full use of one of the many tax settlement options offered by the collecting tax agency.

The Consequences of Not Paying Your Tax Bill 

  • When no tax return has been filed, the IRS or State Tax Agency has the authority create a Substitute for Return. This document is an educated guess as to how much a taxpayer owes based on information from other sources. Since the Substitute for Return does not include deductions and exemptions to which the taxpayer may be entitled, the estimated tax liability shown is usually greater than what is actually owed.
  • A taxpayer who fails to file a tax return can be assessed a Failure to File Penalty of 5% of the amount of tax due for each month that the return is overdue up to a maximum of 25% of the amount owed. In addition, although it is seldom invoked, a taxpayer who fails to file a tax return can be charged with a misdemeanor which can carry a fine of up to $25,000 and a one year prison term.
  • When a tax return has been filed but there is an outstanding tax amount due, a taxpayer can be assessed a monthly Failure to Pay Penalty of between 0.25% and 1.0% of outstanding tax balance. The Failure to Pay Penalty, which is normally set at 0.5 % per month, is assessed from the date the tax return was originally due until the full balance of the tax amount is paid or a tax settlement agreement has been negotiated with the collecting tax agency.
  • When tax penalties and interest are allowed to accumulate over time, the result is often a tax debt that is much more formidable than the original amount owed. In addition, the IRS or State Tax Agency will eventually resort to more aggressive techniques such as levies, liens, and wage garnishments when an outstanding tax obligation is left unresolved. These more drastic actions can have a lasting affect on a taxpayer’s credit rating and overall financial well-being.

If you have been assessed a tax penalty for failure to file a tax return or failure to pay a tax debt, we can help you determine whether the assessed tax penalty is accurate. Our experienced tax settlement professionals will carefully examine previously filed returns and file missing and amended returns when necessary. By identifying available tax benefits that have not been utilized, this process alone can often result in a significant reduction in the tax amount owed. If there is an outstanding tax liability, we can help you resolve it. 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. 

3 Ways to Start Eliminating Your Tax Debt

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If you have a large IRS tax debt, the amount you owe can be daunting. To avoid being charged additional fees and making the debt larger, it is important to act and begin the tax settlement process quickly. Even if you cannot pay it off all at once, there are options you can pursue to eliminate your tax debt. Here are three methods that can help you to settle or eliminate your tax debts.

Offer in Compromise It is possible to reach a tax settlement with the IRS that is less than the full amount you owe. This plan is called an Offer in Compromise. Although filing an Offer in Compromise can be time consuming and complicated because the qualifications are very specific, this is a powerful option because it allows for the resolution of all your outstanding tax balances at the same time, plus the suspension of collection activities while your offer is being considered.

Installment Agreements An Installment Agreement is a payment plan that is negotiated with the IRS or a State Tax Agency. Instead of paying one lump sum, the taxpayer agrees to pay a tax debt over a specified period of time. The terms of an agreement will be contingent on the tax liability amount and the taxpayer’s current and projected financial status (income and assets).

Uncollectible Status If you do not have sufficient income or assets to pay your tax debt, you may be eligible for the temporary designation of Uncollectible. If you have been granted this status, all collection activity stops until your situation is reevaluated, and the IRS determines that you have the ability to pay your debt. This can give you more time to work on paying off your debt without accruing additional fees and penalties.

Since the IRS prefers to receive the full amount of tax debt that you owe, they may not give you the best advice when you are seeking to use one of the tax debt elimination options above. A licensed tax professional can negotiate with the IRS on your behalf and help you to get reach the best possible tax settlement based on your situation.

If you need help with an outstanding tax debt, our experienced tax settlement professionals can help. We can also work with you if you need help filing 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

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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.