Tag Archives: Tax Balance

IRS Tax Tips – Tax Help – Retirement Plan Changes for 2012

Posted on by

The best way to avoid incurring an outstanding tax debt is to avoid owing the taxes in the first place. That being the case, contributing to a retirement plan is often one of the easiest and most effective ways of accomplishing this. In addition to allowing for the accumulation of retirement benefits, retirement plan contributions can provide taxpayers with a variety of tax saving opportunities including tax credits, tax deductions and a reduction in taxable income.

To maximize available tax and retirement benefits, taxpayers should be aware of some significant changes that will affect retirement plan contributions for the current tax year.

The following changes have already been initiated or are expected to occur during 2012:

• Increase in Contribution Limits
The contribution limit for 401(k) and 403(b) plans as well as the Federal Government’s Thrift Savings Plan has been increased by $500. The new limit for each of these plans is $17,000 for taxpayers under age 50 and $22,500 for taxpayers age 50 and over.

 • Increase in Income Limits for Tax Deductions
The income limits for allowing a tax deduction for traditional IRA contributions have been increased by $2000. The new income limits provide that deductions will be phased out between $58,000 and $68,000 for single taxpayers and between $92,000 and $112,000 for married taxpayers filing jointly.

 • Increase in Income Limits for Roth IRA Contributions
The income limits for making Roth IRA contributions will increase by $3000 for single taxpayers and by $4000 for married taxpayers filing jointly. The new limits are between $110,000 and $125,000 for single taxpayers and between $173,000 and $183,000 for married couples.

 • Increase in Income Limits for Receiving the Saver’s Tax Credit
The new limits provide a $1000 tax credit for single taxpayers with an adjusted gross income of up to $28,000 and a $2000 tax credit for married couples with an adjusted gross income of up to $57,500 when they contribute to a qualified retirement plan.

• Increase in Plan Transparency
Effective May 31, 2012, a Department of Labor regulation will increase retirement plan transparency by requiring that 401(k) plans disclose to plan participants the fees associated with participating in the plan as well as the cost of each investment option.

• Reinstatement of Matching Contributions by Employers
Employers are expected to continue reinstating matching 401(k) contributions.

If you are an individual or a small business looking for help with tax preparation, tax planning or tax debt resolution, visit us today at www.professionaltaxresolution.com to learn about our full range of tax and accounting services. Contact us by phone at (877) 889-6527 or by email at info@protaxres.com to receive a free, no obligation consultation.

Have IRS Tax Debt? Need a New Passport? The GAO wants to know.

Posted on by

As of the end of fiscal 2010, the balance of reported unpaid federal taxes was about $330 billion according to the IRS. This is a huge amount and as we have written about in the past, the enforcement of the tax laws and the tax code is on Government Accountability Office’s list of high-risk areas.  The deficit being what it is it may come as no surprise that the GAO was asked to investigate, by cross referencing unpaid federal taxes and passport issuance, the magnitude of known unpaid federal taxes for individuals who were issued passports.  Selecting a past year, the GAO did a study for the fiscal year 2008 to identify examples of passport recipients who had known unpaid federal taxes.

They study discovered that individual states issued passports to about 16 million individuals during fiscal year 2008 and that of these, over 224,000 individuals (over 1 percent) owed more than $5.8 billion in unpaid federal taxes. That is JUST those individuals who got new passports in 2008 – not all passport holders.

Does that come as a surprise? Currently each state is not authorized to restrict the issuance of a passport to an individual because they owe federal taxes. In addition, federal law does not permit the IRS to disclose taxpayer information, including unpaid federal taxes to State officials unless the taxpayer consents. The reason this is at least somewhat surprising is that in contrast, federal law does permit certain other restrictions on the issuance of passports to individuals, such as for those individuals owing child support debts over $2,500.

Really, the problem is likely far greater than 1% of the newly issued passport holding population.  In addition to the obvious population balance of all valid passport holders for the studied year of 2008, the estimated amount of unpaid federal taxes was actually likely understated because it excluded individuals who had not yet filed tax returns or who had underreported income.

Making matters harder, individual States currently cannot compel a passport applicant to provide a Social Security Number (SSN). Because the IRS uses the SSN to identify each taxpayer, without an SSN you cannot match an individual back to their IRS data.

This study had produced such alarming results already and the GAO wanted to know a bit more. They took the 2008 study and dug deeper into the backgrounds of a very small group of just 25 passport recipients. Clearly this is a tiny study and cannot be reflective of the population as a whole. That said, some pretty interesting things were discovered.  When investigating for abuse related to the federal tax system or criminal activity, of these 25 cases, at least 10 passport recipients had been indicted or convicted of federal laws! In addition, the IRS had assessed trust fund recovery penalties on several passport recipients; a penalty which is applied when an individual does not remit payroll taxes to the federal government.  How does someone fall behind on Payroll taxes?  Instead of acting appropriately as the trustee of an individual employee’s withholding and forwarding it onto IRS, they divert the money for other purposes. Using payroll taxes is a big crime; in fact the willful failure to remit payroll taxes is a felony underU.S.law.

In this smaller study of the 2008, of those 25 new passport holders, some had accumulated substantial wealth and assets, including million-dollar houses and luxury vehicles, all while failing to pay their federal taxes. In fact, of the 25, at least 16 passport recipients traveled outside the country all while owing federal taxes and another 4 passport recipients actually resided in another country at the time! Worse yet, two individuals used the identities of deceased people to fraudulently obtain passports in the first place and then used the passports to travel toMexico,France, and Africa. Ironically in one case, the unpaid tax debt belonged to a deceased individual and in the other; the debt was actually incurred by the imposter.

If this small study is any indication, there appears to be a big opportunity to crack down on passport issuance for those who owe federal tax debt. Although nothing official has been implemented to date, Congress could pursue policy to link federal tax debt collection and passport issuance by enabling States to screen and prevent individuals who owe federal taxes from receiving passports.  This would require transparency and more communication between the IRS and the individual States, but it seems that the opportunity to collect unpaid tax debt would be greatly improved as a result.

 

If you have an unresolved tax debt, visit us today at www.professionaltaxresolution.com for more information about our customized tax settlement assistance. The CPAs and tax professionals at Professional Tax Resolution use their extensive knowledge of the tax code to provide taxpayers with the best settlement option available. Contact us by phone at (877) 889-6527 or by email at info@protaxres.com to learn more about our services and to receive a free, no obligation consultation.

IRS Math Error Adjustments -The Debate and Your Rights

Posted on by

A report from the Treasury Inspector General for Tax Administration published earlier this month gives an unfavorable evaluation of the timeliness and accuracy of IRS responses to taxpayer complaints about math adjustments. The IRS has the authority to adjust taxpayer returns for over 400 math error conditions. These conditions, which can be adjusted by the IRS without performing an audit, include arithmetic errors, missing documentation and missing or incorrect social security numbers, among other things. A taxpayer can accept or reject a math error adjustment once they have received an official IRS Notice informing them that one exists.

The complaint highlighted in the recent TIGTA report is that taxpayers who dispute math adjustments often experience delays in receiving a response form the IRS. Such delays either result in the taxpayer not receiving benefits to which they are entitled or a loss of revenue to the federal government, depending on how the appeal is decided. Since both of these results are negative to one of the parties involved, TIGTA has made recommendations to the IRS to remedy the situation. In response to the TIGTA suggestions, the IRS has agreed to make their responses to taxpayer math error disputes more thorough and accurate. They did not, however, agree to the other TIGTA requests which were to monitor the timeliness of their responses and to prioritize the responses related to earned income.

The most important thing to take away from this is that if you revieve an official notice from the IRS regarding a math error adjustment, you should not ignore it. The professional help of a qualified Certified Public Accountant to evaluate your options in dermining your responce to this notification is often well worth the investment.

Click the “Learn More Link” or Call (949) 596-4143 to have one of our CPA’s provide a Free IRS or State Tax Notice Review and Consultation.

Don’t Bounce Your Tax Check!

Posted on by

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.

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

Posted on by

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.