Tag Archives: IRS penalty

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.

Don’t Bounce Your Tax Check!

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Taxpayers beware! The penalties for bouncing a check to the U. S Treasury Department have recently been increased. Generally, if the IRS extends an existing tax credit or offers a new one, they will make a corresponding change in the tax code to “pay” for the credit. In this case penalties and fees on bad checks have been increased to cover the changes initiated by the Homebuyer Assistance and Improvement Act of 2010 which extended the closing date for home purchases eligible for the homebuyer tax credit.  

The new tax law imposes a 2% penalty on any disallowed check or money order payable to the U.S. Treasury for an amount over $1,250. For bounced payments under $1,250, the fee is the amount of the check or $25, whichever is less. These bad check fees have now been extended to cover electronic payments as well.

In addition to the new penalties which have been imposed on disallowed IRS payments, taxpayers are still subject to the normal penalties and interest that apply to any unpaid tax debt until the obligation is paid in full.  The sum total of interest and penalties owed to the IRS together with bad check fees charged by the issuing bank can turn out to be a significant dollar amount. 

Even with fees like this aside, there is no doubt that the IRS can be intimidating.  Let us help you with your tax problems; call Professional Tax Resolution today for a free no obligation consultation.  (949) 596-4143.

An Audit Reconsideration Success Story – A $26,000 Mistake Corrected Results in Zero Tax Liability

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Professional Tax Resolution has successfully helped many clients find tax relief. Here is the story of a client who came to us in March of 2011.

Mr. and Mrs. M lived, worked and paid taxes in the United States from 2008-2010. In early 2010 both Mr. and Mrs. M moved out of the country and despite leaving a forwarding address, never received a notice from the IRS asking for supplemental documentation related to a 2008 tax return. Unfortunately more than a year passed before the taxpayers became aware of the problem and once they were informed, the IRS had moved on from their initial request for supplemental information and had both audited their return and disallowed more than $26,000 in deductions taken on their 2008 taxes. The result of the audit was a notice of deficiency for a sizable tax liability.

Now aware of their problem, Mr. and Mrs. M came to us asking how we could help. By examining the tax code, we determined that the original deductions were legitimate and we developed a tax settlement action plan. Professional tax resolution was able to request an audit re-consideration with the IRS directly. The IRS granted our request and re-opened the audit. During the re-examination period, Professional Tax Resolution Inc. was able to defend Mr. and Mrs. M successfully by providing all of the necessary documentation and evidence of the legitimate deductions in question.

In April 2011, just a few weeks after Mr. and Mrs. M hired Professional Tax Resolution; the client received final notice from the IRS that all adjustments and balances owed were reversed. No petition to the US tax court was required and a final “No Change” letter was issued closing the case.

Not only was their audit re-considered but by providing the correct paperwork and documentation, their entire liability has been eliminated. Professional tax resolution has another satisfied client and achieved an amazing 100% reduction in tax debt liability.

Increased Funding for IRS Enforcement Means Avoiding the IRS Is Harder Than Ever

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More Funding on the Way to Collect Outstanding Tax Debt

If you have an outstanding tax liability and have managed to stay under the IRS radar so far, your time may very well be running out. The Obama administration has submitted a $13.3 billion budget request for the Internal Revenue Service for fiscal year 2012, a $1.1 billion increase over the agency’s 2010 budget. The largest portion of this increase ($339 million) and almost half (approximately $6 billion) of the total 2012 budget will go toward enforcement.

Although recently the overall goal of the government has been to cut spending, the reasoning behind requesting increased funds for the IRS is that the extra expenditure will more than pay for itself. Because the IRS is the government’s primary source of revenue, analysts project that increasing the IRS budget will actually reduce the budget deficit by increasing tax enforcement revenues. Economists generally agree that every dollar invested in tax enforcement nets three or four times that in revenue. This would mean that the proposed 2012 budget increase for enforcement initiatives will net over a billion dollars in revenue.

Although enforcement is not the only focus of the proposed IRS budget for fiscal year 2012, all of the recommended changes are aimed at beefing up and streamlining the tax collection process in one way or another. The main budget items in the 2012 budget are outlined below.

  • Enforcement The budget proposes to strengthen enforcement efforts by addressing offshore tax evasion, improving tax debt collection processes and enforcing the information reporting requirements for businesses that were approved by Congress in 2008.
  • Preparer Oversight The budget allocates funds for increasing the examination requirements for tax preparers, enforcing preparer compliance with IRS rules and procedures and pursuing those preparers who engage in unethical conduct or fraudulent behavior.
  • Taxpayer Service The budget requests resources to improve the IRS website and provide new and improved online services. It also requests funds to add additional staff to improve the level of telephone service.
  • System Modernization The budget allocates funds for continuing the implementation of the taxpayer account database and modernizing electronic filing and payment options.

Although the funding requested by the proposed 2012 budget may meet some resistance in Congress, the handwriting is on the wall. With more and more resources bring allocated to the IRS for enforcement and modernization, it is going to become more and more difficult for taxpayers who have not filed or already have an outstanding tax debt to remain under the IRS radar. Since it is always better to approach the IRS before they approach you, the clear message in all this for taxpayers is that they should take whatever steps are necessary to become income tax compliant.

If you have an outstanding tax liability, we can help you resolve it. For more information about our services, visit us today at www.professionaltaxresolution.com. 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 fit with your specific set of circumstances. Contact us today at (949)-596-4143 or info@protaxres.com to receive a free, no obligation consultation.

A Successful Offer In Compromise – $74,000 IRS Problem Settled at a 95% Discount.

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In February of 2011, Professional Tax Resolution finalized an Offer in Compromise agreement for a client who had initially contacted the firm in May of 2010. The taxpayer in question had an outstanding tax liability of over $74,000 which she was unable to pay. In this particular case, the debt was a combination of unpaid taxes, interest and penalties which had accumulated over a period of ten years. After verifying that the client met the IRS Offer in Compromise eligibility requirements, our firm initiated the settlement process by filing returns for tax years 2005 through 2009 which had never been filed. Once these returns had been finalized, we had an accurate assessment of the client’s total tax debt and were able to use this amount, together with her current financial information, to calculate a reasonable settlement offer. The completed Offer in Compromise application, including supporting documentation, was submitted to the IRS in July. Because the taxpayer’s eligibility had been well documented and established IRS filing guidelines had been adhered to throughout the application process, the initial settlement offer was accepted by the IRS without argument. The end result was the successful resolution of a $74,579 tax liability for $3785, just over 5% of the original debt!

The taxpayer whose settlement case is described in the preceding paragraph is a single mother who has struggled with chronic health problems for many years. From 1999 through 2009, a series of health-related setbacks resulted in periods of unemployment and accumulating tax liabilities. The client was hospitalized in January of 2010 in response some life threatening complications resulting from her health condition. She now receives state disability and is having trouble meeting her basic financial needs. Since it was very unlikely that this taxpayer would have been able to pay the full amount of her tax debt within a reasonable period of time, she was an ideal candidate for an IRS Offer in Compromise. Outlined below are the primary components necessary to obtain a successful Offer in Compromise settlement as they pertain to this specific set of circumstances.

• The taxpayer meets one of the three eligibility criteria (doubt as to liability, doubt as to collectability, tax settlement would promote effective tax resolution) specified by the IRS.

Professional Tax resolution determined that this client would be unable to pay the balance of her outstanding tax liability and therefore met the doubt as to liability standard for eligibility.

• The taxpayer’s eligibility can be adequately documented.

Professional Tax resolution submitted documentation for the client’s medications, outpatient medical treatment, hospitalization and disability claims.

• The total amount of the tax debt is accurate based on tax returns that have been checked, submitted and refilled when necessary.

Professional Tax Resolution filed a tax return for any year where a return had not been previously submitted and checked all other past tax returns for accuracy.

• The Offer in Compromise application and the necessary supporting documentation are submitted according to IRS guidelines.

Professional Tax Resolution has experience in submitting Offer in Compromise applications and adheres strictly to the established IRS policies and procedures.
While the offer in Compromise is an effective tax settlement option for a very specific group of taxpayers such as the candidate whose case is described above, it definitely does not represent a blanket solution for anyone with an outstanding tax liability. The acceptance criteria are very explicit and, since many applications are submitted that do not meet the published IRS guidelines, the rejection rate is high. The Offer in Compromise is an excellent tax settlement option only under certain very specific conditions and when submitted using the very strict guidelines set forth by the IRS.

Visit www.profesionaltaxresolution.com for more for more information about customized tax relief assistance. With over 16 years of experience, we have the can help you select the tax relief option that will best meet the specific needs of your tax debt situation. Contact us today at (949) 596-4143 or info@protaxres.com to receive a free, no obligation consultation.