It does not hurt to have a checklist that you can use as a guide when you are gathering everything you require to make sure that you will have no issues when tax time does come around. The process will be less troublesome and a lot simpler because you can effectively handle the trouble of filing your taxes by following these steps.
Filing taxes is serious business that needs plenty of focus. Getting distracted would cause an IRS problem. At least schedule specific tasks to help you focus if you are not doing your taxes in one go.
The next step after you focus is to start the task at hand. Most people get everything ready. They can get everything done, except the most essential thing - their tax returns. An essay due the next day is the best way to get college students to tidy their room. The same thing occurs to many adults when it comes time to file their taxes. They'll get other things prepared, and then procrastinate until they end up filing an extension. The problem that many people face is that when they actually start doing their taxes, everything moves quite slowly. You'll be breezing through those tax forms eventually, though, because this will not last long. Just start.
You're fortunate if you don't have too many income streams or assets because your taxes will be quite easy. You're all set because all you need to do is fill out a W-2 form and a 1040EZ. You seriously should get organized if your finances are a bit more complex. Not only will filing your taxes be easier, you can also defend yourself in an audit without showing up with a box full of receipts.
It is always best to be informed with the recent changes in the tax code. You may be able to maximize your deductions because the latest guidelines might pertain to your situation. You can keep informed by reading the free 298-page IRS Publication 17, or read up on updates online. To help you out, you can also hire a tax professional.
Monday, June 30, 2008
Friday, June 27, 2008
The IRS Cannot Collect If You are Bankrupt!
Many people owe money because of problems financially. To collect tax debts, the IRS uses certain tactics, making it the most unforgiving of creditors. You can get the IRS off your case with the protection offered by a bankruptcy claim.
Bankruptcy is usually misunderstood by taxpayers. It's viewed as an easy method to get out of debts. Bankruptcy is not a simple escape. Bankruptcy lets people search for relief from debt legally, including tax debt. There is a considerable chance that your tax debts, along with your regular debts, can be erased if you file for Chapter 7 bankruptcy. There is no guarantee that tax debt will be included, but this can occur. Anybody filing a Chapter 11, 12, or 13 bankruptcy has the chance to solve their IRS issue through an installment option.
Filing for bankruptcy legally protects you from all actions from the IRS and other creditors against you with an 'automatic stay'. The only way for the automatic stay to be lifted is when creditors apply to the bankruptcy court. However, this occurs quite rarely. For an automatic stay to be lifted, the IRS and other creditors should be able to give evidence of fraud in the bankruptcy claim. A more serious IRS issue is likely if fraud is found.
However, one of the negative factors of filing for bankruptcy is that it definitely prolongs the statute of limitations on any tax debt. Basically, the 'clock' stops until the bankruptcy is either discharged or dismissed. The clock continues from that point forward if it's dismissed.
Filing a Chapter 7 bankruptcy is the only form of bankruptcy that will effectively clear any tax debts. For tax debts to be eligible for discharge in a Chapter 7 bankruptcy claim, certain conditions should be accomplished. During the bankruptcy proceeding, the three-year rule have to be satisfied, for instance. The three-year rule says that any tax debts must come from a tax return that was filed no less than three years before the year you file for bankruptcy. This includes extensions, although usually pertaining to April 15 of the year the return was filed.
There's also the 2-year rule which includes taxes filed two years prior to bankruptcy. Taxes assessed 240 days prior to filing the bankruptcy claim is applicable in the 240-day rule.
But there are also significant loopholes that will still enable the IRS to collect the tax bill, even if a Chapter 7 bankruptcy is filed and discharged. The IRS has first rights to any property if they recorded a tax lien before the bankruptcy was filed. The main advantage of Chapter 11, 12, and 13 bankruptcies being re-organization bankruptcies is to allow the taxpayer to buy time to settle their IRS issue.
Bankruptcy is usually misunderstood by taxpayers. It's viewed as an easy method to get out of debts. Bankruptcy is not a simple escape. Bankruptcy lets people search for relief from debt legally, including tax debt. There is a considerable chance that your tax debts, along with your regular debts, can be erased if you file for Chapter 7 bankruptcy. There is no guarantee that tax debt will be included, but this can occur. Anybody filing a Chapter 11, 12, or 13 bankruptcy has the chance to solve their IRS issue through an installment option.
Filing for bankruptcy legally protects you from all actions from the IRS and other creditors against you with an 'automatic stay'. The only way for the automatic stay to be lifted is when creditors apply to the bankruptcy court. However, this occurs quite rarely. For an automatic stay to be lifted, the IRS and other creditors should be able to give evidence of fraud in the bankruptcy claim. A more serious IRS issue is likely if fraud is found.
However, one of the negative factors of filing for bankruptcy is that it definitely prolongs the statute of limitations on any tax debt. Basically, the 'clock' stops until the bankruptcy is either discharged or dismissed. The clock continues from that point forward if it's dismissed.
Filing a Chapter 7 bankruptcy is the only form of bankruptcy that will effectively clear any tax debts. For tax debts to be eligible for discharge in a Chapter 7 bankruptcy claim, certain conditions should be accomplished. During the bankruptcy proceeding, the three-year rule have to be satisfied, for instance. The three-year rule says that any tax debts must come from a tax return that was filed no less than three years before the year you file for bankruptcy. This includes extensions, although usually pertaining to April 15 of the year the return was filed.
There's also the 2-year rule which includes taxes filed two years prior to bankruptcy. Taxes assessed 240 days prior to filing the bankruptcy claim is applicable in the 240-day rule.
But there are also significant loopholes that will still enable the IRS to collect the tax bill, even if a Chapter 7 bankruptcy is filed and discharged. The IRS has first rights to any property if they recorded a tax lien before the bankruptcy was filed. The main advantage of Chapter 11, 12, and 13 bankruptcies being re-organization bankruptcies is to allow the taxpayer to buy time to settle their IRS issue.
Tuesday, June 24, 2008
How to File Back Taxes
People don’t file their taxes for many reasons. The inconvenient reality, however, is that the IRS still requires the filing of late and back taxes even though some of the reasons for doing otherwise are acceptable. To classify, late taxes cover those returns that should have been filed for a single year while back taxes are the tax dues dating as early as the mid 1980’s. The best part of doing this is avoiding possible problems that you may have with the IRS.
There might be occasions when all tax records are not available. This occurs in cases of fire, flood and other natural calamities when all of a person’s belongings, including tax records, are destroyed. Good thing that tax attorneys or accountants are around to help clients reconstruct or retrace their tax records dating as far back as 15 to 20 years ago. These alternatives make the arena of back taxes clearer.
Some people would have liked to dutifully pay for their taxes had it not been for certain situations, such as not having enough money to pay the amount due on their returns. Fortunately, they are provided with the choice of filing a missing return or back taxes. Its major benefits include not being imposed with the substantial penalty of 25%, the fee for late filing. In some states, failing to do this legal obligation further penalizes you with even more substantial fees even if you actually don’t owe them anything.
If you are able to keep all of your tax information from previous years, a great deal of time and effort can be saved. What you just need to do now is prepare your tax returns. This is the stage though when you need professional help the most. Not knowing whether or not you owe back taxes, or knowing that you haven’t settled these can be a burden. This is why some clients feel that merely setting up an appointment with a tax professional to help them through the maze of forms and procedures is utterly consoling already.
People must, on the other hand, recognize that they cannot file back taxes through e-file or other electronic filing methods. These must be hand-delivered or sent through mail. When they are mailed, they must be sent using certified mail in order to document that the IRS received your tax returns.
Those who are aware that they owe the IRS some amount of money will most likely be required to pay interest and other applicable penalties. If this is the case, the IRS can aid in the setting up of a payment plan.
Filing for back taxes can actually be a relatively quick and easy process. What would make matters complicated is if you will refuse to immediately deal with the issue and file or pay back taxes. At worst, these IRS issues may cause you to owe significant amounts of money and face more severe consequences.
There might be occasions when all tax records are not available. This occurs in cases of fire, flood and other natural calamities when all of a person’s belongings, including tax records, are destroyed. Good thing that tax attorneys or accountants are around to help clients reconstruct or retrace their tax records dating as far back as 15 to 20 years ago. These alternatives make the arena of back taxes clearer.
Some people would have liked to dutifully pay for their taxes had it not been for certain situations, such as not having enough money to pay the amount due on their returns. Fortunately, they are provided with the choice of filing a missing return or back taxes. Its major benefits include not being imposed with the substantial penalty of 25%, the fee for late filing. In some states, failing to do this legal obligation further penalizes you with even more substantial fees even if you actually don’t owe them anything.
If you are able to keep all of your tax information from previous years, a great deal of time and effort can be saved. What you just need to do now is prepare your tax returns. This is the stage though when you need professional help the most. Not knowing whether or not you owe back taxes, or knowing that you haven’t settled these can be a burden. This is why some clients feel that merely setting up an appointment with a tax professional to help them through the maze of forms and procedures is utterly consoling already.
People must, on the other hand, recognize that they cannot file back taxes through e-file or other electronic filing methods. These must be hand-delivered or sent through mail. When they are mailed, they must be sent using certified mail in order to document that the IRS received your tax returns.
Those who are aware that they owe the IRS some amount of money will most likely be required to pay interest and other applicable penalties. If this is the case, the IRS can aid in the setting up of a payment plan.
Filing for back taxes can actually be a relatively quick and easy process. What would make matters complicated is if you will refuse to immediately deal with the issue and file or pay back taxes. At worst, these IRS issues may cause you to owe significant amounts of money and face more severe consequences.
Saturday, June 21, 2008
Filing for an Alimony Adjustment in Your Withholding Tax
In almost all of life’s changes, the IRS will make sure that it is part of it. Whether you get married, get divorced, give birth, get a new job, buy a house or purchase an energy-efficient car, you will always have tax implications for these actions. The effects of alimony on your withholding tax and the forms of IRS assistance on this matter will be discussed in this write-up.
Paying federal income taxes can be done through any of the two: estimated tax or withholding tax. The self-employed usually utilize the estimated tax. “Estimated tax is used to pay not only income tax, but self-employment tax and alternative minimum tax as well,” describes the IRS. Withholding tax, however is most useful to employees, where their respective employers automatically take a certain chunk of their salaries as income tax. Whether taxes are taken from your job or other types of income like pensions, gambling winnings, bonuses and commission, they will always be reflected under your name.
How much you make and specific data in your W-4 influence the amount that is withheld from your pay. The latter includes details on whether you are withholding at the single rate or the lesser married rate, how many withholding allowances you can claim, and whether you want any additional income withheld. For assistance in the estimation of your withholdings, you can use the Withholding Calculator.
Alimony adjustment, among others, is one way of changing your withholdings. How should you go about this method? You can simply accomplish a new W-4 and submit it to your employer to avail of adjustments in your withholding taxes.
Alimony payments are taxable, hence tax reduction can’t be a result of such form of income. If are receiving these, it is a good idea to accomplish a new W-4 to effect an increase in your income. If you do this, you do not end up owing more taxes at the end of the year.
On the other hand, being the one to pay for the alimony entitles you for a tax deduction. But, it should be paid through the following: in cash, through a check or through money order. Arrangements like directly paying certain bills for an ex-spouse are not considered alimony. A newly accomplished W4 is sufficient to record requests for tax deductions gained from paying alimony.
Your life changes ---- and some circumstances change more drastically in the course of a year. When they do come your way, don’t forget to adjust the amount of income you have withheld from your pay.
Paying federal income taxes can be done through any of the two: estimated tax or withholding tax. The self-employed usually utilize the estimated tax. “Estimated tax is used to pay not only income tax, but self-employment tax and alternative minimum tax as well,” describes the IRS. Withholding tax, however is most useful to employees, where their respective employers automatically take a certain chunk of their salaries as income tax. Whether taxes are taken from your job or other types of income like pensions, gambling winnings, bonuses and commission, they will always be reflected under your name.
How much you make and specific data in your W-4 influence the amount that is withheld from your pay. The latter includes details on whether you are withholding at the single rate or the lesser married rate, how many withholding allowances you can claim, and whether you want any additional income withheld. For assistance in the estimation of your withholdings, you can use the Withholding Calculator.
Alimony adjustment, among others, is one way of changing your withholdings. How should you go about this method? You can simply accomplish a new W-4 and submit it to your employer to avail of adjustments in your withholding taxes.
Alimony payments are taxable, hence tax reduction can’t be a result of such form of income. If are receiving these, it is a good idea to accomplish a new W-4 to effect an increase in your income. If you do this, you do not end up owing more taxes at the end of the year.
On the other hand, being the one to pay for the alimony entitles you for a tax deduction. But, it should be paid through the following: in cash, through a check or through money order. Arrangements like directly paying certain bills for an ex-spouse are not considered alimony. A newly accomplished W4 is sufficient to record requests for tax deductions gained from paying alimony.
Your life changes ---- and some circumstances change more drastically in the course of a year. When they do come your way, don’t forget to adjust the amount of income you have withheld from your pay.
Wednesday, June 18, 2008
Dealing with IRS Collections Procedures
The very first step of the IRS collections process begins when you file your tax return without putting in the amount due yet. The IRS will then send you a bill for the amount owed. This first bill will just bear the explanations behind your amount due and the need for you to make a full payment. If you don’t pay attention to this notice, another one will be sent to you making reference to the dates of coverage and amount due as well as any applicable penalties. Continuing to ignore what the IRS sends you would result to the receipt of notices that are more threatening in nature. These notices, on the other hand, follow a specific format and are sent in a particular order. Looking them up from the IRS will provide you more information and help you understand what each notice implies. In general, receiving a number of notices clearly states that you have an IRS problem.
If you believe that there were wrong entries in your payables, you can send a letter to or call the IRS. You can then have a discussion to straighten out issues and request for necessary adjustments. For example, if you continue to receive notices even if you have already settled your dues, you may give them photocopies of your proofs of payment. Just remember that you should keep the original documents for future reference.
In the case where you feel you cannot afford to pay for the full amount of your taxes, certain payment options are available. You may request for an arrangement of an installment payment plan. In this agreement, you pay for your taxes over a lengthened period, you incur the applicable interest for the unpaid balance, and still are penalized until you have completely settled the full amount.
If you really find it difficult to pay even a partial amount, options are still available. Upon request, the IRS may defer their collection efforts for a certain period and consider you as currently not collective. The downside of this option, however, is this still causes you to be fined with penalties and interests that will most likely accrue making your IRS problems even worse.
OIC, or Offer in Compromise, is a solution most sought after by tax payers. When given, this allows you to pay only a percentage of the total amount due and the rest of the debt is forgiven. Although the chances of getting an approval for this are slim, it is always worth the while as this effectively ends your IRS problem, at least until the next year.
There are many cases when all it requires to settle an IRS tax issue is to simply contact your local IRS office. There is also a significant number of incidents when it is wise to refer to a professional tax attorney or accountant for advice on dealing with any IRS collections method. Even though you are indebted, the fact still remains that you need to be treated fairly and justly. Just remember that it is in your best interest to respond to any IRS notice. Doing otherwise results to the enforcement of more threatening and more invasive collections procedures.
If you believe that there were wrong entries in your payables, you can send a letter to or call the IRS. You can then have a discussion to straighten out issues and request for necessary adjustments. For example, if you continue to receive notices even if you have already settled your dues, you may give them photocopies of your proofs of payment. Just remember that you should keep the original documents for future reference.
In the case where you feel you cannot afford to pay for the full amount of your taxes, certain payment options are available. You may request for an arrangement of an installment payment plan. In this agreement, you pay for your taxes over a lengthened period, you incur the applicable interest for the unpaid balance, and still are penalized until you have completely settled the full amount.
If you really find it difficult to pay even a partial amount, options are still available. Upon request, the IRS may defer their collection efforts for a certain period and consider you as currently not collective. The downside of this option, however, is this still causes you to be fined with penalties and interests that will most likely accrue making your IRS problems even worse.
OIC, or Offer in Compromise, is a solution most sought after by tax payers. When given, this allows you to pay only a percentage of the total amount due and the rest of the debt is forgiven. Although the chances of getting an approval for this are slim, it is always worth the while as this effectively ends your IRS problem, at least until the next year.
There are many cases when all it requires to settle an IRS tax issue is to simply contact your local IRS office. There is also a significant number of incidents when it is wise to refer to a professional tax attorney or accountant for advice on dealing with any IRS collections method. Even though you are indebted, the fact still remains that you need to be treated fairly and justly. Just remember that it is in your best interest to respond to any IRS notice. Doing otherwise results to the enforcement of more threatening and more invasive collections procedures.
Sunday, June 15, 2008
How Do You Prevent an IRS Audit?
In general, a tax audit is feared by many people. Although there are several horror stories out there from people who have been through tax audits, an unfortunate fact is that many of them are factual. At any point, the Internal Revenue Service can audit individual taxpayers or businesses. Luckily, only approximately 1.5% of all of the tax returns in the United States are ever audited on an annual basis, and there are, in fact, steps and precautions you can take to reduce your chances of being one of the unfortunate people selected by the IRS.
The most important thing to remember is to report all of your income completely, regardless of where you get it from. No matter if you are an employee, an independent contractor or a business owner, the IRS guidelines clearly indicate what is required to be reported in a tax return. The simple earnings such as tips also have to be declared in your tax return to avoid IRS problems.
Another great tip is to ensure that you have the needed documentation available. Employers, in general, are obliged to provide you a W-2 or a 1099 that reports the amount you earn from the previous year during the time spent working there. The numbers on your W-2 should always match what is on your tax return. It is always a bright idea to keep the paperwork and have it readily available so that you have the ability to prove everything that you have listed on your tax return.
Ensuring that there are no mathematical errors in your tax return is another simple yet equally important tip. The IRS will without a doubt, notice this kind of errors as they are very easy to check. Make sure that the lines on the tax form contain the correct entries. To the IRS, being sloppy in doing the math implies being sloppy in all other areas of the tax return.
Several business owners and independent contractors make the mistake of thinking that their home offices are used strictly for business. Because certain guidelines pertaining to home offices are outlined, simply claiming your house as a home office causes problems. The guidelines include not keeping personal possessions and not conducting personal activities in the home office. Also, you must not declare more than 20% of your home as home office.
Although it may seem that the government is against you and you can’t adequately battle an audit, certain precautions are available to avoid one. Another important thing to take note is to remain composed and keep in mind that there are precautions you can take to protect yourself. After all, no one wants to turn a tiny glitch in the tax return into a big IRS issue.
The most important thing to remember is to report all of your income completely, regardless of where you get it from. No matter if you are an employee, an independent contractor or a business owner, the IRS guidelines clearly indicate what is required to be reported in a tax return. The simple earnings such as tips also have to be declared in your tax return to avoid IRS problems.
Another great tip is to ensure that you have the needed documentation available. Employers, in general, are obliged to provide you a W-2 or a 1099 that reports the amount you earn from the previous year during the time spent working there. The numbers on your W-2 should always match what is on your tax return. It is always a bright idea to keep the paperwork and have it readily available so that you have the ability to prove everything that you have listed on your tax return.
Ensuring that there are no mathematical errors in your tax return is another simple yet equally important tip. The IRS will without a doubt, notice this kind of errors as they are very easy to check. Make sure that the lines on the tax form contain the correct entries. To the IRS, being sloppy in doing the math implies being sloppy in all other areas of the tax return.
Several business owners and independent contractors make the mistake of thinking that their home offices are used strictly for business. Because certain guidelines pertaining to home offices are outlined, simply claiming your house as a home office causes problems. The guidelines include not keeping personal possessions and not conducting personal activities in the home office. Also, you must not declare more than 20% of your home as home office.
Although it may seem that the government is against you and you can’t adequately battle an audit, certain precautions are available to avoid one. Another important thing to take note is to remain composed and keep in mind that there are precautions you can take to protect yourself. After all, no one wants to turn a tiny glitch in the tax return into a big IRS issue.
Thursday, June 12, 2008
What You Need to Know About Offer in Compromise
You are actually looking for the probability of the elimination of your tax debt when you submit an application for an Offer in Compromise or OIC. This compromise implies that the two parties have decided that the agreement is in their best interest. The parties involved are you, as the taxpayer and the government who is represented by the IRS.
The IRS receives Offer in Compromise for the intention of settling unpaid tax dues at a lesser amount. A key consideration in accepting applications of this kind is the taxpayer’s capacity to pay the entire amount. In this process, the taxpayer provides an amount that he feels he can afford to pay but this should be a practical one. For instance, if the probability of collecting that amount is higher, then a higher amount should be declared in the OIC. If the reverse is true, then he/she should put a lesser amount.
If you would like to apply for an Offer in Compromise, it is a requisite that you have filed all of your tax returns for the applicable years you wish to compromise on for the debt. The government may have its own accrual of your taxable earnings but it will not consider your OIC until you present your official tax returns. You also need to provide the figures that you believe to have earned during those years. Again, it is essential to keep that we should diligently file our tax returns to avoid IRS problems, including imprisonment. However, the possibility of being imprisoned as a result of tax issues is still a present in some instances.
The belief that the OIC is mainly about how much taxes you owe is a fallacy. In fact, an Offer in Compromise is essentially about how much the IRS believes they will be able to collect from you. Applicants of this said option should demonstrate that they will no longer be able to pay more than the figures indicated in the OIC. The possibility of getting an approval for this request increases when the requirements are conscientiously followed.
On the other hand, the IRS will still attempt to collect money from you while your OIC is still being processed. Actions such as wage garnishments, tax liens or levies will be enacted all in an effort to collect your tax dues as soon as possible. The bright side is, you have the option to appeal to any of these collection methods by undergoing a process called the Collection Due Process Appeal. At the time of the actual appeal hearing, you will be able to offer an installment agreement and payment plan, or your Offer in Compromise. These two are considered substitutes to the ones enforced upon you by the IRS.
To conclude, remember that tax debts will be settled eventually. Even if the IRS deems that you are capable of paying the entire amount, if you can adequately demonstrate otherwise, you will still be able to put an end to these tax problems. As long as the IRS believes that tax settlement lowers overhead costs, it would agree to come up with one because such is important in keeping tax administration effective.
The IRS receives Offer in Compromise for the intention of settling unpaid tax dues at a lesser amount. A key consideration in accepting applications of this kind is the taxpayer’s capacity to pay the entire amount. In this process, the taxpayer provides an amount that he feels he can afford to pay but this should be a practical one. For instance, if the probability of collecting that amount is higher, then a higher amount should be declared in the OIC. If the reverse is true, then he/she should put a lesser amount.
If you would like to apply for an Offer in Compromise, it is a requisite that you have filed all of your tax returns for the applicable years you wish to compromise on for the debt. The government may have its own accrual of your taxable earnings but it will not consider your OIC until you present your official tax returns. You also need to provide the figures that you believe to have earned during those years. Again, it is essential to keep that we should diligently file our tax returns to avoid IRS problems, including imprisonment. However, the possibility of being imprisoned as a result of tax issues is still a present in some instances.
The belief that the OIC is mainly about how much taxes you owe is a fallacy. In fact, an Offer in Compromise is essentially about how much the IRS believes they will be able to collect from you. Applicants of this said option should demonstrate that they will no longer be able to pay more than the figures indicated in the OIC. The possibility of getting an approval for this request increases when the requirements are conscientiously followed.
On the other hand, the IRS will still attempt to collect money from you while your OIC is still being processed. Actions such as wage garnishments, tax liens or levies will be enacted all in an effort to collect your tax dues as soon as possible. The bright side is, you have the option to appeal to any of these collection methods by undergoing a process called the Collection Due Process Appeal. At the time of the actual appeal hearing, you will be able to offer an installment agreement and payment plan, or your Offer in Compromise. These two are considered substitutes to the ones enforced upon you by the IRS.
To conclude, remember that tax debts will be settled eventually. Even if the IRS deems that you are capable of paying the entire amount, if you can adequately demonstrate otherwise, you will still be able to put an end to these tax problems. As long as the IRS believes that tax settlement lowers overhead costs, it would agree to come up with one because such is important in keeping tax administration effective.
Monday, June 9, 2008
Information about the Federal Tax Levy
There are two primary procedures that the IRS uses in order to collect tax debts from taxpayers: wage levies and bank account levies. No matter which technique the IRS chooses to implement, both indicate that you have a very serious IRS problem.
The IRS has the right to levy or garnish your wages when you owe them a certain amount of money. Other sources of income such as retirement income, social security benefits and bonuses may also be garnished. It is imperative to remember that the IRS is not the same as other creditors as the former can immediately garnish your wages without having to sue you. They simply deliver a notification or serve the wage garnishment to the company you work for and tell them that they are now required to transfer a considerable amount of your paycheck to the IRS instead of you directly. They are ordered to do this until your tax debt is eventually paid off or until you have obtained a wage levy release, which liberates you from this particular IRS problem.
In the case of independent contractors and the self-employed, the IRS can actually, in fact obligate the clients to pay a certain amount of money to them. Although some amount will still be given to the contractors, this is substantially less than the normal checks they receive. The IRS Publication 1494 contains all the answers to any questions regarding this matter.
The IRS may also issue a bank account levy and this allows them to take all of the money in any of the bank accounts under your name. Because this is a government mandate, the banks will comply with this notice and it would be useless to argue with them. Recognize, however, that the IRS can only take the funds that are in your bank account the day the levy is received. For example, if you deposit a check on Friday and the bank got a levy notice on Tuesday, only funds present on Tuesday will be given to the IRS. Funds from Wednesday to Friday can only be garnished when another levy is issued.
You are provided with 21 days to get a levy release if the IRS imposes a bank account levy on you. If no effort is exerted to get a levy release, the bank will automatically send your funds to the IRS. They may transfer up to the actual amount that is owed from the IRS. The Internal Revenue Service can also take more money from any of your accounts by simply issuing other bank levies.
Wage and bank account levies are only two of the collection methods used by the IRS. In rare cases, they can also levy your personal belongings like jewelry, house, insurance policies and collectables. To avoid getting to this point, pay the IRS what you owe them as a tax levy is a serious IRS problem that doesn’t simply go away.
As vividly pointed out in this write-up, a Federal tax levy is a serious issue in all respects. Thus, it is imperative for people who have tax debts to settle them promptly and not wait for the government to impose more threatening collection techniques like tax levies.
The IRS has the right to levy or garnish your wages when you owe them a certain amount of money. Other sources of income such as retirement income, social security benefits and bonuses may also be garnished. It is imperative to remember that the IRS is not the same as other creditors as the former can immediately garnish your wages without having to sue you. They simply deliver a notification or serve the wage garnishment to the company you work for and tell them that they are now required to transfer a considerable amount of your paycheck to the IRS instead of you directly. They are ordered to do this until your tax debt is eventually paid off or until you have obtained a wage levy release, which liberates you from this particular IRS problem.
In the case of independent contractors and the self-employed, the IRS can actually, in fact obligate the clients to pay a certain amount of money to them. Although some amount will still be given to the contractors, this is substantially less than the normal checks they receive. The IRS Publication 1494 contains all the answers to any questions regarding this matter.
The IRS may also issue a bank account levy and this allows them to take all of the money in any of the bank accounts under your name. Because this is a government mandate, the banks will comply with this notice and it would be useless to argue with them. Recognize, however, that the IRS can only take the funds that are in your bank account the day the levy is received. For example, if you deposit a check on Friday and the bank got a levy notice on Tuesday, only funds present on Tuesday will be given to the IRS. Funds from Wednesday to Friday can only be garnished when another levy is issued.
You are provided with 21 days to get a levy release if the IRS imposes a bank account levy on you. If no effort is exerted to get a levy release, the bank will automatically send your funds to the IRS. They may transfer up to the actual amount that is owed from the IRS. The Internal Revenue Service can also take more money from any of your accounts by simply issuing other bank levies.
Wage and bank account levies are only two of the collection methods used by the IRS. In rare cases, they can also levy your personal belongings like jewelry, house, insurance policies and collectables. To avoid getting to this point, pay the IRS what you owe them as a tax levy is a serious IRS problem that doesn’t simply go away.
As vividly pointed out in this write-up, a Federal tax levy is a serious issue in all respects. Thus, it is imperative for people who have tax debts to settle them promptly and not wait for the government to impose more threatening collection techniques like tax levies.
Friday, June 6, 2008
How To File for an Amended Tax Return
Naturally, you do not want the IRS to find some discrepancies in your tax returns because this can lead to a serious problem in the future. Hence, if you discovered some errors on your tax return, may it be last year’s or the one you recently sent, it is always in your best interest to file an amended tax return. If the errors are simply a result of miscalculations, there is no need to file an amendment as the IRS will take care of correcting and informing you about this. However, certain circumstances require that you file an amended tax return as doing otherwise could cause you problems.
The most common errors are related to your deductions or credits, your total income, dependents and filing status. When you send a corrected tax return to the IRS, you may even be able to receive a refund. But if the error you made doesn’t lead to you receiving more money, and in fact incurs any penalties, it is good to own up to that mistake as well.
The form you will want to use to file a corrected or amended tax return is Form 1040X, Amended U.S. Individual Income Tax Return. This, in effect, corrects the discrepancies filed under Forms 1040EZ, 1040A, or 1040 Amended tax returns should always be sent through the mail. The IRS’ e-file systems are not yet capable of receiving electronic 1040x forms. Essentially, the 1040X simply asks for any data that need to be corrected and the reasons for the adjustments to your original tax return figures.
The usual reasons to filing for amended tax returns include a correction in filing status. Usually, taxpayers need to change from a single filer to a head of household filer. Changing this information in your tax returns entitles you to a refund as there is a substantial difference in the deduction available to those who qualify as head of household.
You have the chance to file an amended return anytime within the three years following that specific tax return’s filing date. This three year grace period is only available to those who paid all of their tax bills on the applicable tax return. If the tax bill was not fully paid, then the grace period is decreased to only two years.
If you’ve recently filed and you have discovered an error, you may want to wait until you receive your refund and all of the paperwork for that tax return has been processed before filing an amended tax return. This eliminates the possibilities of confusion regarding tax records and duplication of paperwork, which generally, pose a serious IRS problem.
On the other side, there are instances when additional costs are incurred when filing for an amended tax return. No matter how tempting the choice of simply running away is, honesty and filing for an amended tax return will always pay off in the long run. This frees you from future problems because the IRS will soon find out about this error. Also, there is also a good chance that the IRS will charge lesser fees to mistakes brought to their attention.
The most common errors are related to your deductions or credits, your total income, dependents and filing status. When you send a corrected tax return to the IRS, you may even be able to receive a refund. But if the error you made doesn’t lead to you receiving more money, and in fact incurs any penalties, it is good to own up to that mistake as well.
The form you will want to use to file a corrected or amended tax return is Form 1040X, Amended U.S. Individual Income Tax Return. This, in effect, corrects the discrepancies filed under Forms 1040EZ, 1040A, or 1040 Amended tax returns should always be sent through the mail. The IRS’ e-file systems are not yet capable of receiving electronic 1040x forms. Essentially, the 1040X simply asks for any data that need to be corrected and the reasons for the adjustments to your original tax return figures.
The usual reasons to filing for amended tax returns include a correction in filing status. Usually, taxpayers need to change from a single filer to a head of household filer. Changing this information in your tax returns entitles you to a refund as there is a substantial difference in the deduction available to those who qualify as head of household.
You have the chance to file an amended return anytime within the three years following that specific tax return’s filing date. This three year grace period is only available to those who paid all of their tax bills on the applicable tax return. If the tax bill was not fully paid, then the grace period is decreased to only two years.
If you’ve recently filed and you have discovered an error, you may want to wait until you receive your refund and all of the paperwork for that tax return has been processed before filing an amended tax return. This eliminates the possibilities of confusion regarding tax records and duplication of paperwork, which generally, pose a serious IRS problem.
On the other side, there are instances when additional costs are incurred when filing for an amended tax return. No matter how tempting the choice of simply running away is, honesty and filing for an amended tax return will always pay off in the long run. This frees you from future problems because the IRS will soon find out about this error. Also, there is also a good chance that the IRS will charge lesser fees to mistakes brought to their attention.
Tuesday, June 3, 2008
The Nature of IRS Penalties
Feelings of anxiety when talking about IRS penalties and back taxes are normal and valid. Fortunately, guidelines and processes directed to providing regular taxpayers some recourse when faced with IRS issues are available. Taxpayers can ultimately be released from back taxes and other penalties through negotiations and installment plans.
To review, circumstances like not filing tax returns, incorrectly filing of taxes, misleading the IRS and not paying quarterly taxes endanger taxpayers for penalties. For information on the complete list of penalties, including the processes on penalty abatement and assessment, you may refer to the Penalty Handbook. It becomes clear then that aside from the regular collection of taxes, the government also earns through the interests collected from delinquent taxpayers.
Fortunately, the government wants to ascertain that the IRS evaluates penalties correctly, thus, they have made several options available for taxpayers. With the recent changes on IRS policies, the process of dismissing tax levies is now relatively easy. While it is still slightly difficult in comparison to the nearly impossible battle it once was, times have changed significantly.
The IRS Penalties Handbook provides taxpayers with the opportunity to know more about interest, levies and abatement of penalties. When taxpayers exert the effort to educate themselves on how IRS penalties work, they considerably lessen their chances of being subjected to these consequences.
The IRS Penalty Policy Statement implies that penalties are in principle, no longer automatic. If you can prove that your actions were done in good faith, you may be eligible for the cancellation of some or all of your penalties or IRS abatement of penalties.
The IRS actually makes as much as $15 billion, on the average, on collection from penalties alone. While this is a good thing because this is a substantial source of income for the IRS, this is also too heavy on the part of the taxpayers.
What makes matters worse for some taxpayers is the accumulation of their original tax due and the applicable penalties. Occasionally, because interests are accrued on the new, larger sum, total amount due is doubled or tripled in just a few months. This results to difficulty in paying off the full amount.
When you are issued a notice that states that you are being penalized for owing the IRS money, one of the first courses of action to take is to respond to the IRS in writing and make a request for a cancellation of penalties. This is the initial step in the abatement process, which all taxpayers are entitled to. Provisions of all IRS penalties contain a “good faith exception.” This clause provides the IRS with the capacity to legally cancel your penalty if they decide that you did not intentionally attempt to defraud or mislead the IRS. Again, for many, IRS penalties may spell danger but alternatives and resources provided make this matter easier to confront.
To review, circumstances like not filing tax returns, incorrectly filing of taxes, misleading the IRS and not paying quarterly taxes endanger taxpayers for penalties. For information on the complete list of penalties, including the processes on penalty abatement and assessment, you may refer to the Penalty Handbook. It becomes clear then that aside from the regular collection of taxes, the government also earns through the interests collected from delinquent taxpayers.
Fortunately, the government wants to ascertain that the IRS evaluates penalties correctly, thus, they have made several options available for taxpayers. With the recent changes on IRS policies, the process of dismissing tax levies is now relatively easy. While it is still slightly difficult in comparison to the nearly impossible battle it once was, times have changed significantly.
The IRS Penalties Handbook provides taxpayers with the opportunity to know more about interest, levies and abatement of penalties. When taxpayers exert the effort to educate themselves on how IRS penalties work, they considerably lessen their chances of being subjected to these consequences.
The IRS Penalty Policy Statement implies that penalties are in principle, no longer automatic. If you can prove that your actions were done in good faith, you may be eligible for the cancellation of some or all of your penalties or IRS abatement of penalties.
The IRS actually makes as much as $15 billion, on the average, on collection from penalties alone. While this is a good thing because this is a substantial source of income for the IRS, this is also too heavy on the part of the taxpayers.
What makes matters worse for some taxpayers is the accumulation of their original tax due and the applicable penalties. Occasionally, because interests are accrued on the new, larger sum, total amount due is doubled or tripled in just a few months. This results to difficulty in paying off the full amount.
When you are issued a notice that states that you are being penalized for owing the IRS money, one of the first courses of action to take is to respond to the IRS in writing and make a request for a cancellation of penalties. This is the initial step in the abatement process, which all taxpayers are entitled to. Provisions of all IRS penalties contain a “good faith exception.” This clause provides the IRS with the capacity to legally cancel your penalty if they decide that you did not intentionally attempt to defraud or mislead the IRS. Again, for many, IRS penalties may spell danger but alternatives and resources provided make this matter easier to confront.
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