3 Essential Steps To Prepare for Tax Season and Avoid Tax Trouble
Taxes are one of those topics people hate to talk about or even think about, especially if they end up owing money in back taxes every year. That's why many taxpayers wait until the very last moment to prepare for tax season. It’s also why nearly 14 million Americans find themselves receiving threatening letters from the IRS and in some sort of collection proceedings.
With the new Biden administration taking office in 2021, more tax changes are almost certain. COVID relief is another factor to account for, and things are changing almost daily. So it's never too early to start preparing for tax season.
Our firm specializes in helping people with back tax debt settle with the IRS, but often, the best tax resolution is simply doing it right ahead of time.
In order to help you minimize your tax headache, we wrote this article to help you before you find yourself in tax trouble. Here are three simple steps to start preparing now for tax season.
Note: If you already have outstanding tax debt and owe more than $10k to the IRS or state but can’t pay in full, contact our firm today. We help people find tax relief, file years of unfiled tax returns, and sometimes settle their tax debt for a fraction of what’s owed.
With that said, let's jump into the article on how to prepare for tax season.
1. Get Your Paperwork Organized
If you're rushing around at the last minute to find all of the paperwork that you need for filing your taxes, you're making tax season harder on yourself than it needs to be.
Start organizing all of the financial information you may need in order to file your taxes this year. It’s best to do this throughout the year rather than at the last minute to ensure that you don't miss anything.
We suggest making a checklist of all the documents you’ll need to gather such as;
- Income from your salary/main job via a W2
- 1099 income you might have earned throughout the year on any side gigs or one-off projects
- Cryptocurrency account statements
- Brokerage accounts
- Savings account that earn interest
- Any asset sales
- A list of qualifying expenses and deductions you think you qualify for with proper documentation. Contact your tax expert for a list of expenses and deductions you can take.
Failing to report income or having questionable expenses are two of the biggest pitfalls we see with taxpayers who find themselves in tax debt or getting audited. Make sure you have documentation for everything.
Another factor that’s changing things for the 2020 tax season is COVID. Make sure to document your financial situation and how it was affected by COVID, this could lead you to find tax relief as things continue to evolve in 2021.
2. Evaluate Your Tax Obligations, Filings And Compliance
As a small business owner, it's essential to start working on your tax obligation management early on. You’re likely spinning a ton of plates and taxes are likely on the backburner, yet there are so many little things that can fall through the cracks. At this time, you should also consider income taxes, employment taxes, self-employment taxes, sales tax, and local taxes.
You should have already had your employees fill out new W-4 forms and have all your contractors turn in their W-9’s so you can provide them with 1099’s, but there's a chance they may not have turned them in yet. Ensure that this is taken care of as early as possible.
If you find yourself behind on your payroll taxes or other business tax problems, contact our firm now. We help business owners negotiate with the IRS or state and find tax relief.
3. Ask Questions and Be Proactive
This step is necessary, but you may not feel comfortable doing it. It's essential to ask the basic questions from your tax professional. What types of receipts should you be saving? What will happen if I hire additional employees this year? What if I owe back taxes and can’t pay? Your tax professional should do more than just take the information that you provide them and file your taxes. If you owe back taxes and know you won’t be able to pay, and if your tax professional doesn’t have good answers, it could be time to consult a professional tax relief firm like ours.
A tax resolution firm like ours has years of experience helping taxpayers just like you resolve IRS and State tax problems and negotiating the best deal on your behalf. If you’ll owe the IRS money for 2020 or prior years, contact us now for a consultation to learn about your options.
The good news is the IRS has several debt settlement options including their Fresh Start Initiative and is generally willing to settle with taxpayers who have been blindsided by a surprise tax bill and can’t pay it off in full.
Hopefully, tax filing season will bring the big fat refund you are expecting, but it is important to be prepared for the unexpected. The new tax bill has unleashed a host of unintended consequences, including smaller refunds and surprise tax bills. By being prepared, you can reduce the pain of a surprise tax bill, so you can get on with the rest of your life.
7 Tips to Reduce Your Chances of Falling Victim to Tax Identity Theft
Tax identity theft occurs when identity thieves obtain your Social Security number and file a fraudulent tax return on your behalf.
According to the Federal Trade Commission, tax identity theft is the most common form of identity theft. The FTC estimates that it costs taxpayers over $5 billion a year.
Consumer advocates believe that since Social Security numbers are so readily available on the dark web, a majority of Americans are at risk.
Unfortunately, most tax identity fraud victims don't realize that they have fallen victim until they try to file their return. Luckily, there are some important tips that you can follow to reduce your chances of falling victim to tax identity theft.
Our firm specializes in negotiation with the IRS on behalf of taxpayers and settling back taxes, often for a fraction of what you owe. In the case of tax identity theft, the IRS has protocols on how to handle this and our firm can help. If you find yourself the victim of tax identity theft, reach out to our firm and schedule a consultation today.
1.) File Your Taxes as Soon as Possible
According to the FTC, tax identity thieves file their fraudulent returns early because they know that most taxpayers wait to file their return later in the tax season. Therefore, you should file your tax return as early as possible to lower the chances that a scammer will file your return fraudulently.
2.) Monitor Your Credit Report
Your annual credit report will tell you the different times your Social Security number was used throughout the year. Therefore, if you notice that someone else has used your Social Security number to obtain employment, there is a good chance that you are currently (or about to become) a victim of tax identity theft. You will need to contact the IRS immediately to report the suspected fraud.
3.) Safeguard Your Personal Information
You need to have a safe place to securely store personal information. For example, you might consider a safe or a bank deposit box. You must never leave paperwork with personal information on it just lying around your house where it would be easy for a visitor to swipe it. Also, never throw away documents with confidential information on them without shredding them first. Identity thieves will often go through trash looking for paperwork with personal information on it.
4.) Review Your Annual Social Security Earnings Statement
The Social Security Administration provides taxpayers with an annual earnings statement. You can find yours by registering an account on the SSA website. Review your earnings statement carefully. If you notice a discrepancy in your reported earnings, contact the SSA and the IRS.
5.) Never Share Personal Information
Don't share your Social Security number when you don't have to. For example, if a company asks for your Social Security number, ask them why it's necessary for them to have it. Unfortunately, you will have to give your number to financial companies and utilities. However, most businesses don't need it. Also, don't give out your birthday unless absolutely required to by law. If identity thieves can match your Social Security number to your birthday, you are a prime candidate for identity theft.
6.) Install Comprehensive Internet Security Software
All of your computing devices should have antivirus software and a firewall to prevent hackers from stealing your personal data. Many devices come with built-in virus and malware protection. For example, computers running on Microsoft come with Windows Defender and the Windows Firewall. Chromebooks receive security software updates for five years after their manufacturing date. You can also purchase third-party antivirus software if you aren't satisfied with what is installed on your device.
7.) Regularly Change Online Passwords
Finally, you can cut your risk of falling victim to tax identity theft by regularly changing the passwords to your online accounts. For example, if the password for your online bank account became compromised, a hacker could steal your Social Security number. Just make it a habit to change your password every 90 days (which is what cybersecurity experts recommend).
In short, there are (currently) no full-proof ways to prevent tax identity theft. However, you can dramatically reduce your risks of falling victim by filing your tax return as early as you can.
You should also monitor your credit report and protect your personal information. Review your Social Security earnings to ensure an identity thief isn't using your Social Security number to report earnings. Never give out personal information that you don't have to. Don't use any computing devices without internet security software and a firewall, and protect your personal data held in online accounts by changing your passwords often.
OWE BACK TAXES OR HAVE TAX PROBLEMS?
It’s important to note that only experienced firms like ours are able to handle tax debt cases and tax identity theft cases since negotiating with the IRS requires specialized skills that often fall outside of the scope of most conventional accounting, tax, and tax law firms.
Our firm specializes in tax problem resolution. We have CPAs, EAs and attorneys who can represent you before the IRS. We serve clients virtually so don’t hesitate to reach out. If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm and we’ll schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax problem.
Filing Your Taxes When You Know You'll Owe Money to The IRS
As we wrap up the year the last thing most people are thinking about is their taxes. But planning ahead can have a serious impact on your tax bill next year, especially if you know you’ll owe taxes.
In this article, we’ll talk about some steps you must take if you know you’ll be owing taxes to the IRS or state.
Note: If you already have tax troubles or owe more than $10k to the IRS or state but can’t pay in full, contact our firm today. We help people find tax relief, file years of unfiled tax returns, and sometimes settle their tax debt for a fraction of what’s owed.
Report All Your Income
One of the biggest reasons people get in trouble with the IRS is their failure to report income. Oftentimes it’s an honest mistake and they simply forget about income they’ve made throughout the year.
Did you take on a consulting gig? Your client might have filed a 1099 reporting your income.
Did your savings and investments earn interest? You’ll likely need to report that income as well.
The stock market has been on a wild ride, and breaking records despite COVID-19. If you sold stock and cashed on on the gains, these gains are reported to the IRS and it means that a lot of Americans might get an unexpected tax bill.
As the year wraps up, it’s wise to take inventory of where your income came from this year so you can stay on top of any tax forms you might get outside of your normal W2.
Run The Numbers Ahead of Time
Some people like surprises but when it comes to taxes, it’s best to avoid them.
You do not have to wait for tax filing season to estimate how much you might owe. Be proactive about consulting with your tax advisor and estimate your tax liability based on how you did for the year.
They’ll be able to suggest tax strategies before the year ends that can save you thousands of dollars on your tax bill.
Set Money Aside to Pay Your Taxes.
Taxes are inevitable. If you know for certain you’ll owe money to the IRS but don’t have the money to pay all of it up front, it’s best to set at least some money aside early so you can pay as much of your tax bill upfront as possible.
The IRS can be more lenient if they see you’re trying to honor your responsibilities and settle your tax debt.
Learn About Tax Relief Options
The IRS has the authority to levy your bank account, garnish your paycheck and seize your assets if it has to, but they also have many tax relief options to help taxpayers in need.
Things like settling your tax debt for a fraction of what you owe, installment plans, penalty abatements, and more, can all be viable tax relief options depending on your situation.
If you owe money to the IRS and can’t afford to pay, you have options. It’s best to reach out to a tax relief firm like ours to learn more about them.
Don’t talk to the IRS, talk to us first.
If you do get hit with a surprise tax bill and lack the money to pay it, you need to settle your tax problem as soon as possible. The IRS wants their money, and they have unbridled authority to get it, so simply avoiding the tax bill will not make it go away, but make it worse. A lot worse.
However, dealing with the IRS is often intimidating for most taxpayers. Talking to the IRS and trying to resolve your own tax problem is like going to court without a lawyer, you’ll most likely get crushed.
A tax resolution firm like ours has years of experience helping taxpayers just like you resolve IRS and State tax problems and negotiating the best deal on your behalf. If you owe the IRS money either for 2019 or prior years, contact us now for a consultation to learn about your options.
The good news is the IRS has several debt settlement options including their Fresh Start Initiative and is generally willing to settle with taxpayers who have been blindsided by a surprise tax bill and can’t pay it off in full.
Hopefully, tax filing season will bring the big fat refund you are expecting, but it is important to be prepared for the unexpected. The new tax bill has unleashed a host of unintended consequences, including smaller refunds and surprise tax bills. By being prepared, you can reduce the pain of a surprise tax bill, so you can get on with the rest of your life.
Do You Need A Tax Attorney if You Owe Back Taxes?
If you owe back taxes you might think you need a tax attorney, but that’s not necessarily always the case. Just like hiring a traditional accountant to try to resolve your tax debt might not be the best choice, hiring a tax attorney, who doesn’t specialize in tax resolution might be the same thing.
When you owe the IRS back taxes, it’s best to have the right tax relief firm representing you so you can get the best result possible. Don’t try to face the most brutal collection agency on the planet alone. You’ll be sorry you did.
In this article we talk about some of the differences between a tax attorney and someone who specializes in tax relief and IRS negotiation.
Note: If you already have a tax problem and owe more than $10k to the IRS or state but can’t pay in full, contact our firm today. We help people find tax relief, file years of unfiled tax returns, and sometimes settle their tax debt for a fraction of what’s owed.
What Do Tax Attorneys Do?
Tax lawyers help businesses and taxpayers with a number of tax related issues such as;
- Legal issues pertaining to taxes
- Corporate tax matters
- Starting up a business and entity formation
- Taxable estate matters
- Tax controversy and tax negotiation (only if a tax resolution specialist too)
Tax attorneys work on both the state level and the federal level. Though some tax attorneys might be able to negotiate with the IRS to settle your tax debt, not all tax attorneys specialize in tax controversy and resolution, nor do they have the experience to do so.
The biggest and most important difference between a regular tax attorney and someone who is a tax resolution specialist, (who’s a CPA, Enrolled Agent or attorney), is regular tax attorneys specialize in transactional tax planning. Their work generally includes minimizing taxes on a go-forward basis. A tax resolution specialist is someone who can help resolve your back tax issues on amounts already owed, or will be owing, to the IRS/State.
It’s important to ask what type of tax matters they handle before engaging a tax attorney to solve your tax debt. Most CPAs and Enrolled Agents, who are tax resolution specialists too, can be just as effective as an attorney that has experience in tax resolution matters.
Are tax attorneys accountants?
The short answer is no.
They both work with taxes, yes, and they both have a background education in accounting, but tax attorneys focus on the legalities of taxes, and their goal is to help you understand and navigate legal matters as they relate to taxes.
They do not generally help you to prepare your tax returns unless they specialize in tax relief and specifically help you catch up on years of unfiled tax returns.
Additionally, while tax lawyers are always legally bound by confidentiality policies, accountants and CPAs are not bound by the same rules because they are not all subject under the same laws.
Common Reasons for Hiring a Tax Attorney
Common reasons why people seek out the assistance of these professionals include when:
- They need legal tax advice for business purposes
- They are faced with complex or criminal IRS matters.
- They are dealing with estate-related issues.
- They need to file a suit against the IRS.
You can consult a tax attorney either before you run into any problems in order to avoid any potential problems in the future, after a problem has already arisen, in which case they will help you to sort things out and get you back on the right track and where you need to be.
OWE BACK TAXES?
It’s important to note that only experienced firms like ours are able to handle tax debt cases since negotiating with the IRS requires specialized skills that often fall outside of the scope of most conventional firms.
Our firm specializes in tax problem resolution. We have CPAs, EAs and attorneys who can represent you before the IRS. We serve clients virtually so don’t hesitate to reach out. If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm and we’ll schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax problem.
Did You Know You Might Owe Taxes On Debt That's Forgiven? Here’s How It Works.
When you owe creditors money that you can't afford to repay, sometimes you may be able to get the debt forgiven or otherwise canceled. When this happens, you no longer owe your creditors the money that you used to owe them.
The IRS, however, usually treats such canceled debt as income that you've received. Income that you could owe taxes on. If you fail to report it or fail to pay your taxes on the cancelled debt, you’ll end up owing penalties and interest and over time, that could be just as big of a hassle as your original debt.
Note: If you have any tax trouble or owe more than $10k to the IRS or state but can’t pay in full, contact our firm today. We help people find tax relief, file years of unfiled tax returns, and sometimes settle their tax debt for a fraction of what’s owed.
When Do I Not Owe Taxes On Forgiven Debt?
In some cases, you may get an exemption and there are some circumstances in which you won't owe taxes.
Your debt is discharged through bankruptcy proceedings:
If you are in serious financial trouble, you may file for bankruptcy and have your debts discharged by the court. Such debts, while they are forgiven, are not considered taxable.
You're insolvent:
When you are able to settle with a creditor by paying them less than you owe them, your financial situation may be bad enough that you owe, in general, more than you own. If you are considered financially insolvent in this way by the IRS, you may have either part or all of your debt excluded from taxation. If you believe that you may qualify for insolvency exemption, you should hire a tax resolution professional to help make sure.
A canceled debt from friends or family:
If you borrow from friends or family and have them forgive the debt, the money forgiven is considered a gift, and is not taxable income.
Tax-deductible interest:
If debt that is forgiven includes interest that is tax-deductible, the interest component does not need to be reported as taxable income. Discharged student loans are also usually exempt from taxation.
Including the forgiven debt in your tax return
If you don’t tell your tax professional about the forgiven debt, in most cases, you won't know about paying taxes on forgiven debt until you receive a notice in the mail about it. Usually, a creditor who forgives you over $600 sends you a 1099-C form stating the amount forgiven. If the debt forgiven is exempt, you may need to fill out a Form 982 to state how much should be exempt, and why.
What do you do if you pay taxes on forgiven debt that should be excluded?
If debt forgiven is actually exempt from taxes, but you still pay, you're allowed to amend your tax return for three years. You simply need to file Form 1040X, and mention your exemption on Form 982.
Working with forgiven debt can be complex. It is usually a good idea to hire a tax resolution professional to work out the details.
OWE BACK TAXES?
Our firm specializes in tax problem resolution. We serve clients virtually so don’t hesitate to reach out. If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm and we’ll schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax problem.
Did You Make Money with Cryptocurrency? How to Get Right with the IRS
For early adopters of Bitcoin, Ethereum and other popular cryptocurrencies, the profit potential has been simply stunning. While there have been some heart stopping moments and frightening ups and downs, the clear long-term trajectory has been upward.
If you are one of those early adopters who profited from the rise in cryptocurrency values, you are probably feeling pretty good about your decision. But your good fortune could soon take a dark turn, one that could leave you in hot water with the IRS.
After many years of taking a hands-off approach to cryptocurrency investments, the IRS is now making up for lost time. At first, the tax agency seemed unsure how to calculate virtual profits or tax cryptocurrency gains, but now the rules are largely in place, and it is time for those who profited to pay up.
There has already been some movement on the cryptocurrency taxation front, and it is only a matter of time before the IRS takes notice of your holdings - and your profits. The tax agency has recently obtained data from major cryptocurrency exchanges, and letters are going out to large holders of these virtual currencies. But you should not simply wait for the IRS to contact you. The best approach is to do your homework now and make your plans for paying what you owe. Here are some simple tips to help you get right with the IRS.
Note: If you already have tax troubles or owe more than $10k to the IRS or state but can’t pay in full, contact our firm today. We help people find tax relief, file years of unfiled tax returns, and sometimes settle their tax debt for a fraction of what’s owed.
Learn the Rules
There has been a lot of confusion over how cryptocurrencies were to be taxed, and the IRS itself has issued a number of different rulings in that regard. With so much conflicting information, it is no wonder so many cryptocurrency investors chose to avoid the whole thing.
Studies suggest that only a small percentage of cryptocurrency investors have reported their holdings to the IRS. Some holders of cryptocurrency did not believe they were required to report their investments, while others assumed their transactions were anonymous. Now that the IRS has proven that neither contention is correct, it is time to learn the rules and follow the reporting requirements.
The IRS may have been slow to categorize cryptocurrencies, but the tax agency now has firm rules in place. If you hold cryptocurrency or have profited in the past, now is the time to learn the rules. Whether you do your own homework or seek out expert advice, the more you know the better off you will be.
Estimate Your Gains
Once you know the rules, the next step is to estimate your potential gains. The rules governing cryptocurrency profits are complex, but you should still be able to estimate the possible tax hit.
It may take some time to reconstruct the purchases and sales you made along the way, so take your time and gather as much information as you can. If you are missing some information, you may be able to find what you need through your favorite cryptocurrency exchange. Many major exchanges keep detailed records of purchases, sales and other cryptocurrency transactions. Once you know how much you made on those cryptocurrency transactions, you can work to calculate the taxes you might owe.
Work with a Cryptocurrency Tax Relief Expert
Tax calculations are not for the faint of heart, and it is easy to make a mistake. If you want to avoid problems with the IRS and head off any penalties and interest, you will need expert help and guidance.
The cryptocurrency market is still relatively new, and the current IRS tax treatment of these virtual assets is even newer. Even so, some tax experts have already started to specialize in these alternative investments, and seeking their expertise could help you pay what you owe while avoiding penalties and interest.
If you already have a tax preparer, start by asking about their experience with cryptocurrency investments. If your current tax advisor is not a cryptocurrency expert, it is time to shop around for someone who understands these unique assets and how they are taxed. It may take some time, but it is important to find an expert you can trust.
The IRS may have ignored the early days of the cryptocurrency revolution, but the tax agency is making up for lost time. Some early adopters have already received notices from the IRS, while others are scrambling to calculate their profits and pay what they owe. The tips listed above can help you develop a payment plan, so you can get right with the IRS before it is too late.
OWE BACK TAXES?
Our firm specializes in tax problem resolution. We serve clients virtually so don’t hesitate to reach out. If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm and we’ll schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax problem.
Avoid These 5 Common Tax Filing Mistakes That Can Get You In Tax Trouble
Whether you file the simple 1040EZ or a complex 1040 and a raft of schedules, making a mistake on your tax form could lead to big tax trouble. Something as simple as a math error or unsigned form could invite extra attention from the IRS.
The tax agency sees those mistakes every year, and IRS representatives warn taxpayers to be careful when filling out their forms. Even if you think you have everything filled out perfectly, it never hurts to double-check and look for these common tax day errors.
#1 - Assuming Your Tax Pro Prepared Your Taxes Properly
Blindly trusting your accountant or tax preparer to file your taxes correctly can be costly. Of course you want to assume they do a great job, and most tax professionals do, but letting them file without your thorough review is a mistake.
We resolve back tax problems for people, and often what gets people in trouble is a simple mistake; like forgetting to report income, missing deductions, or taking too many deductions.
These are sometimes honest mistakes that if not caught early, can trigger red flags and have the IRS sending you letters of balances due.
No one knows your financial situation better than you do so it’s important you double check your return so you’re not blindsided with an unwanted surprise.
#2 - Waiting Until the Last Minute
Filing taxes is stressful enough. You do not need to make things worse by waiting until midnight on April 15 to get your return in the mail. Give yourself plenty of time to gather all the necessary documents and complete your return.
Keep in mind that unexpected problems could interfere with your last-minute tax filing plans. Getting your taxes done early is the only way to protect yourself from unforeseen circumstances that can delay your tax filing.
#3 - Failing to File on Time
If you cannot file your return on time, you can ask for an extension by filling out a single form. Even if your documents are in disarray, there is no excuse for not filing on time. Filing an extension gives you six more months to get everything in order and complete your return.
Keep in mind that you will still need to estimate the tax you owe and make your payment, even if you file an extension. Filing an extension extends the amount of time you have to get your return to the IRS, but it does not provide a reprieve from your tax debt. If you wait to make your tax payment, you will get hit with penalties and interest.
#4 - Not Making a Backup or Keeping Good Records
Making backup copies of your tax returns, income documents and schedules is an essential part of tax planning and preparation. Set up a folder or file box and use it to store your tax documents as they come in, and then scan each one before you put it away.
Once you have completed your return, be sure to make copies of every document, including your W-2 form and tax schedules, before sending the return to the IRS. If you file electronically, be sure to save a PDF copy of your return before completing the final step. Save all of those electronic tax documents on your computer or cloud storage device. Ordering a lost copy of a past year's return from the IRS is time-consuming and expensive. You can save time and money by making your own backup copies. If the IRS audits you or requests more information from you, all your records will be extremely helpful in the process.
#5 - Ignoring Letters From The IRS After You File Your Taxes.
Sometimes the IRS will send follow up correspondence, especially if you owe money to the IRS. It can be easy to ignore the first few letters. Even if you have the intention of paying your taxes soon you should still take action and either get on an installment agreement or reach out to a tax relief firm if your financial situation requires it.
OWE BACK TAXES?
Our firm specializes in tax problem resolution. We serve clients virtually so don’t hesitate to reach out. If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm and we’ll schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax problem.
What is a Levy? IRS and Other Asset Levies Explained
Falling behind on your debts is never a fun place to be. It’s less fun when a levy is placed on your assets. In this article, we take a look at what an IRS levy is, why it happens, and what you can do about it.
Note: If you have any tax trouble or owe more than $10k to the IRS or state but can’t pay in full, contact our firm today. We help people find tax relief. Often, we can resolve your IRS levy without you having to talk to the IRS. Call today.
What is an IRS Levy?
Simply put, if you owe back taxes and you ignore the IRS, the IRS can seize your property, take money from your bank accounts, or sell your assets in order to satisfy the balance due.
The IRS will give you plenty of notices via mail before they take this step. If you do not satisfy the debt or make payment arrangements by the specified date, the IRS will attempt to take the amount of the levy directly out of your bank account.
Other types of levies
Private creditors may issue a levy against your bank account with a court order. Court orders are not required for levies by government agencies. The creditor must notify you of the upcoming levy at least 21 days before removing any funds from your account. You may not withdraw money or close the account during this waiting period.
Funds earned from child support, social security, unemployment, workers' compensation settlements and certain other types of government agency payments are exempt from levy. You must request the exemption and offer proof of the source of the funds.
Wage Garnishments
Government agencies may also garnish an employee's wages for back taxes, child support and other delinquent payments required by law.
The IRS has the authority to levy up to 85 percent of the employee's paycheck. The levy notice will be sent to your company's payroll or human resources department. You must then withhold the appropriate amount of money from the employee's paycheck and send it to the IRS or state tax board. The employee must provide a wage garnishment release if he is able to work out a payment arrangement.
If you are behind on your taxes, the IRS may levy most payments from federal agencies. This includes railroad retirement benefits, Medicare supplier and provider payments, payments on contracts between your company and a government agency, federal retirement annuities and travel reimbursements.
You may apply for a hardship exemption if the levy will cause your company undue financial distress. Companies going through bankruptcy proceedings are automatically exempt from IRS levies.
Seizing Your Assets
The IRS may also seize your real estate and personal property such as a car or boat. You will receive a 30-day notice indicating that seizures will follow if you do not pay your outstanding taxes or contact the IRS to make payment arrangements. This authority also extends to property and money you own that are being held by another party, such as life insurance cash value. The government sells its seized property at auction to recover some of the funds owed by delinquent taxpayers.
What To Do If You Have An IRS Levy
Back taxes don’t just disappear if you ignore them long enough. Putting your head in the sand will cause the problem to get worse.
If you have back tax debt, we highly recommend you reach out to our firm first. Our clients never have to talk to the IRS, and tax resolution through our firm can save you money and time in the long run. You might also be eligible for other IRS relief programs or get your penalties reduced or removed. Reach out to our firm today for a consultation.
Think Tax Filing Season is Over? Why You May Need to File an Amended Return
Few people look forward to tax filing season. Unless you are an accountant who loves tax season, you probably dread this time of year, and you are thrilled when your return is in and your refund is on the way or your tax debt is all paid off.
When you sign your tax return and send it in, you may think that tax filing season is finally over, and that the IRS will not be bugging you for another year. That’s unfortunately not the case. Millions of Americans get letters from the IRS stating they owe more money or asking for more information. So there are times when you may need to revisit your old return and file an amended one.
NOTE: If you have back tax debt, are under audit, or have multiple years of unfiled tax returns, we highly recommend readers to reach out to our firm first. Our clients never have to talk to the IRS, and tax resolution through our firm can save you money and time in the long run. You might also be eligible for other IRS relief programs or get your penalties reduced or removed. Reach out to our firm today for a consultation.
So, when should you file an amended return, and how do you go about it? Here are some key things you need to know.
You Forgot to Report All Your Income
If you neglected to report all of your income, it is only a matter of time until the IRS finds out, and when they do you could be on the wrong side of a big bill. So instead of waiting for the IRS to catch up, fess up by filing an amended return.
Be sure to gather up all of your documents and compare the income you reported to the new total you have now calculated. If you owe any additional tax, you will want to pay it right away to avoid interest and penalties.
Brokerage Forms are Sometimes Late
If you have stock market holdings and own mutual funds, you will be receiving forms from the brokerage firms that hold those accounts. Those forms will provide details of the dividend income and capital gains you received, so you can provide accurate filings to the IRS.
What you may not know is that those brokerage and mutual fund statements are sometimes sent out late. Worse yet, the numbers are often updated after the fact, meaning the information you filed on your original return may no longer be accurate.
If you receive an updated 1099 from your brokerage firm or mutual fund company, you may need to file an amended return to account for the discrepancy. If you fail to update your own numbers, the IRS could come after you for additional taxes and penalties.
You Got a Tax Bill But You Know You Don’t Owe It
This can be tricky and it’s best to have representation from a tax resolution firm like ours. If the IRS is sending you letters claiming you owe money, but you’re certain you don’t owe, then filing an amended return can sometimes do the trick.
Another thing to note is that the IRS makes mistakes. So having an IRS Relief firm like ours on your side can help clear these mistakes and settle your tax debt.
You Forgot to Claim a Legitimate Credit or Deduction
Sometimes an amended return can reduce the amount you owe if you forgot to claim a legitimate tax credit or deduction.
Even if you have already filed your return, you can still go back and claim any credits or deductions you may have missed.
File Your Amended Return Within Three Years
You only have a limited amount of time to file an amended return, so you need to act quickly. In most cases you will need to file your amended return within three years, and if you miss the deadline you could be out of luck.
If you think you need to file an amended return, check out your tax records for the last three years. If you identify any potential issues, or overlooked credits and deductions, it is time to file your amended return.
Tax filing season may be over, but you can always file an amended return. As long as you are within the allowable time period, you can adjust your already filed returns to reflect previous omissions, or take advantage of overlooked deductions.
OWE BACK TAXES?
Our firm specializes in tax resolution. We serve clients virtually so don’t hesitate to reach out. If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm and we’ll schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax problem.
Four Things Your Tax Preparer Won't Tell You (and How It Can Get You In Tax Trouble)
Tax time will be here (again) before you know it. If your tax return is a simple one, you may be up to filing the return yourself. But if your situation is somewhat complicated, seeking the help of a qualified professional is probably the best move.
Our firm specializes in helping people resolve their back tax problems such as filing years of unfiled returns, settling your back taxes with the IRS, or negotiating favorable payment plans often unknown to the common taxpayer.
There are millions of people getting threatening letters from the IRS every year and we can help. But how did these mostly honest people end up in trouble in the first place?
When you hire a professional to do your taxes, you assume that the person doing your taxes is an expert, with years of training, the right licenses and certifications and the expertise needed to do the job and do it right. In many cases, that blind trust is not too bad, but you cannot simply pick any old tax preparer.
The fact that the person you hire is allowed to do taxes is no guarantee of quality, or even of qualifications. Here are five things your tax preparer may not tell you, and how they can earn you with an unwanted tax bill at the end of the year.
Note: The COVID-19 tax relief, forgivable loan programs and stimulus checks all have different and unforeseen tax consequences that you’ll need to consider. If you have any tax trouble or owe more than $10k to the IRS or state but can’t pay in full, contact our firm today. We help people find tax relief.
#1. A Lot Of Tax Preparers Have No Tax-Specific Training or Expertise
The fact that an individual, or an employee of a large tax preparation company, is allowed to complete tax returns means almost nothing. The tax preparer is not required to have tax-specific training or expertise to obtain the paid preparer tax identification number (PTIN) they need. The only requirement for getting the required PTIN is the completion of a simple form - one that takes about 15 minutes to fill out.
Before you hire any tax professional, you should ask about their specific training, qualifications and expertise. Find out how long they have been doing taxes, ask about audits they have been involved in and share your personal tax situation. Above all, do not hire anyone until you feel comfortable with their ability to handle your tax return properly.
A CPA or Enrolled Agent licensed by the IRS is your best bet when looking for qualified tax professionals. We hear horror stories from our tax relief clients all the time where the tax preparer messed up something on their tax return or didn’t give the client the right tax strategy, so they ended up with a burdensome tax bill.
#2. They Won't Be Preparing Your Return
It is an open secret in the world of tax preparers that returns are prepared in stages. That means the owner of the firm or the most experienced professional will probably not be the one who initiates your return.
Instead, a junior associate will likely enter your income information and other relevant data, identify potential deductions and tax credits and give your return a quick review. Once that is done, a senior advisor or tax preparer should look at the return, verify that it is correct and sign off on it.
This can often cause a communication breakdown causing issues that could land you with a large tax debt. Most taxpayers blindly trust their tax pro and don’t thoroughly review the deductions and tax return draft.
If you are not comfortable about this multi-step process, it is important to share your concerns with your preparer. The sheer number of tax returns large firms handle during a busy season makes this multi-step process necessary, but it is important to know how things work and what you can do to ensure the right level of attention.
It’s also extremely important to review the return in full detail to avoid any unwanted surprises, audits, or unforeseen tax debt.
#3. I May Not Research Unusual Deductions and Tax Breaks
Professional tax preparers tend to be a pretty conservative bunch, and that is good news when it comes to your chances of being audited. It can be bad news, however, for your overall tax bill.
Your tax preparer will no doubt apply the most common deductions and tax credits to your return, things like the deduction for educational expenses and health care costs and the earned income and retirement tax credits. What they may not do is research more unusual tax credits and deductions, even if they could potentially save you money.
If these special circumstances apply to your return, you should discuss the situation with your tax preparer and look for ways to include them with your filing. You may need to pay an extra research fee or renegotiate the cost of preparing and filing your return, but the tax savings could be worth the extra cost.
#4. CPA Does Not Mean Tax Relief Pro
When clients get into tax trouble or get behind on paying their tax debt, they often turn to the very same tax pro that prepared the return. Unfortunately, most CPAs and tax preparers are not skilled in tax relief.
Tax relief means they know all the available programs the IRS has to settle your tax debt or give you favorable payment terms that don't drown you in penalties and interests. Even if they think they know, they often aren’t experienced in negotiating with the IRS on your behalf.
It is easy to assume that every CPA is a tax relief expert. After all, the CPA designation is one of the most difficult professional statuses to obtain, and only the most qualified accountants get to put the letters CPA on their business cards.
Even so, not all certified public accountants are tax relief experts, and many do not know any more about settling your tax debt than you do. Some CPA firms prepare tax returns for their clients as a courtesy, but their staffs may not have specific training or expertise in tax law, or tax relief negotiations.
If you have back tax debt, we highly recommend readers to reach out to our firm first. Our clients never have to talk to the IRS, and tax resolution through our firm can save you money and time in the long run. You might also be eligible for other IRS relief programs or get your penalties reduced or removed. Reach out to our firm today for a consultation.