advantagetaxdebthelp

This Is How We Do It

Mon, 07 Nov 2022 06:34:07 GMT

We can help you sort through your tax issues. This is how the process begins, we start by listening to your situation in it’s entirety. Then we give you options that you can live with. We then give you the cost associated with those options and let you decide. Advantage Tax Services, Inc. is a full-service tax and accounting corporation providing Tax Prep, Bookkeeping, IRS Tax Debt Relief, and IRS Audit Representation services and, Penalty Abatement. We are licensed tax professionals under the leadership of an Enrolled Agent from the Internal Revenue Service. We have over 20 years of experience in the tax industry. We take pride in providing excellent service to our clients and guarantee that clients receive the maximum refund allowed by the IRS, and the best available solutions to tax debt and audit issues. We are licensed to do business throughout the United States and provide year- round services. Visit our website and send us a message. We will have one of our agents contact you to discuss how we can best serve you.

https://www.advantagetaxdebthelp.com .

For immediate response call us at (888) 818-7219 .

Smart People

Mon, 07 Nov 2022 06:34:05 GMT

Smart people plan ahead. A lot of people react to situations instead of being proactive. I say this because a lot of my clients have the opportunity to utilize my tax plans but, don’t. They choose to come see me when they have a tax problem that they can no longer run from. I have the ability to resolve or prevent tax issues. Remember the saying “an ounce of prevention is worth a pound of cure”. Well, smart people see me when it cost them less. The latter group of people see me when it cost considerably more. Let me help you prevent a stressful one.

Call for a free consultation today.

(888) 818-7219 .

Ignoring the problem won’t make it go away

Mon, 07 Nov 2022 06:34:05 GMT

Have you ever known someone who gets bills or notices in the mail and make paper airplanes that touch down in the trash can? Well unfortunately, we have taken on many clients that have mastered that art form. They come to us and depend on us to bail them out of the consequences that follow from making paper planes of IRS notices. I have found that there are several consequences that lead to increased tax debt . Let me share some of those consequences.

The first consequence of ignoring the problem is, increased penalties and fees tacked onto the original debt.
The second consequence is the activation of the Automated Collection System (ACS). This system is activated in response to clients not responding to several notices sent from the IRS. ACS can freeze your assets, garnish your wages and, put liens on your home.
Another consequence is mounting penalties and interest.

The IRS charge a penalty of 0.5 percent/month on your unpaid balance.

The IRS have the power to double that penalty if they deem that they are being ignored.

The IRS charge interest of five percent annually on your outstanding tax balance.A new consequence in the works is losing passport privileges. The State Department can restrict your passport

There Is Still Time To Board The ERC Money Ship

Mon, 07 Nov 2022 06:34:05 GMT

The ERC Program is still at the dock. However, as we reach out to a lot of companies, we find that they know very little about it. The ERC stands for, Employee Retention Credit and, it is a payroll credit. Many companies are entitled to this federal grant and don’t have to pay it back. Here is one such example. If a restaurant lost worker’s due to the pandemic or had to make changes to the way they conduct business, such as closing their dine-in areas and only having pick-up orders, that would constitute a qualification for the ERC. These changes alone could add up to hundreds of thousands of dollars. There are stipulations for those who qualify but, these qualifications are very general. The key is to act now while the funds are still available and, be prepared to wait from four to six months before you receive your grant. This ship is sailing now.

Get onboard today.

Call (888) 818-7219

IRS Passes New COVID-19 Tax Provision to Assist Small Business and Self-Employed Tax Payers

Mon, 30 Nov 2020 06:34:05 GMT

COVID-19 has taken a toll on small business owners, as well as self-employed tax payers. Many have found themselves at the end of the rope, and without stimulus money from the government, may be forced to shut their doors. The IRS recognizes the financial hardship(s) that small businesses and self-employed tax payers suffer stemming from the COIVID-19 Pandemic, and has passed tax provisions designed to ease the pain. The self employed and small business tax payer may be able to take advantage of new COVID-19 related tax deductions.

The Families First Coronavirus Response Act (Pub. L. 116-127), also known as the Family First Act, provides paid sick leave and free coronavirus testing, expanded food assistance and unemployment benefits, and requires employers to provide additional protections for health care workers.

The law also provides the following four types of tax credits for employers and self-employed individuals:

(1) a payroll tax credit for required paid sick leave (¶106,410);

(2) a credit for sick leave for certain self-employed individuals (¶106,420);

(3) a payroll credit for required paid family leave (¶106,430); and

(4) a credit for family leave for certain self-employed individuals (¶106,440).

Some of the above credits may result in a refund. For example, pursuant to section 106,410.40 of the internal revenue code, if the amount of payroll credit for required paid sick leave is greater than limitations prescribed in section 106,410.30 for any calendar quarter, the excess amount could be treated as an overpayment that is refunded to the employer under Code Sec. 6402(a) and Code Sec. 6413(b) (Pub. L. 116-127, Sec. 7001(a)(4)). The self-employed, though not refundable may be eligible for tax credit equivalent to the following:

(1) the number of days during the tax year (but not more than the applicable number of days) that the individual is unable to perform services in any trade or business referred to in Code Sec. 1402 for a reason with respect to which such individual would be entitled to receive sick leave multiplied by

(2) the lesser of (i) $200 ($511 in the case of any day of paid sick time described in Pub. L. 116-127, Sec. 5102(a)(1), (2), or (3)) or (ii) 67 percent (100 percent in the case of any day of paid sick time described in Pub. L. 116-127, Sec. 5102(a)(1), (2), or (3)) of the average daily self-employment income of the individual for the tax year (Pub. L. 116-127, Sec. 7002(c)(1)). See ¶106,405 (“Tax Research Solutions – Parker Tax Publishing “, 2020).

For more information, or to see if you qualify for the aforementioned credit(s) please call Advantage Tax Services, Inc. today.

Office: (888) 818-7219 Fax: 770-679-8596 Website: www.advantagetaxdebthelp.com

Tax Debt Could Affect Your Ability to Travel

Sat, 18 May 2019 06:34:05 GMT

Many of you may recall the transportation bill signed into law by President Obama. Did you also know that there is a stipulation in that bill that requires the Internal Revenue Service (IRS) to refer seriously delinquent taxpayers to the U. S. State Department for denial or revocation of your passport. The Fixing America’s Surface Transportation Act (FAST Act), P.L. 114-94, added Sec. 7345, which authorizes the IRS to certify to the secretary of State that a taxpayer is seriously delinquent with his or her taxes. The State Department can then deny, revoke, or limit the taxpayer’s passport. To qualify as a seriously delinquent tax payer, the tax payer must have at least $50,000.00 dollars in outstanding tax debt including interest and penalties. In addition, a notice of a lien must have been filed and all administrative appeal rights exhausted or lapsed, or a notice of a levy filed. It is also required that both the notice alerting the tax payer to the filing of a tax lien, and the notice of the IRS intent to levy must include information relating to Sec. 7345, certification of seriously delinquent tax debt and the denial, revocation, or limitation of passports for individual with such tax liability. It is also required by the U.S. State Department that the Internal Revenue Service provide contemporaneous notice to the taxpayer. Once the State Department receives certification from the IRS, no passport will be issued, and those already issued could become limited or revoked. Under certain circumstances exceptions are made, but these exceptions are generally limited to emergency or humanitarian reasons. If the tax payer is already out of the country, the State Department will limit travel to the tax payers return to the United States. Taxpayers who meet the criteria of “seriously delinquent taxpayer” may be granted an exception if they meet one of the following:

They requested innocence spouse relief
Collection activity has been suspended due to a request for a “Due Process” hearing
They entered into an acceptable payment arrangement referred to as an Installment Agreement (IA)

Though Offer-In-Compromise (OIC) may be a suitable resolution and worth pursuing, waiting for the outcome of a submitted offer does not stop the State Department from affecting a seriously delinquent tax payer’s ability to travel. Unfortunately, the only way to reverse certification once it has been made is to resolve the outstanding debt either by paying the debt in full, entering into an Installment Agreement, being granted Innocent Spouse Relief, or successful Offer-In-Compromise. Even if you pay the debt down below the $50,000.00-dollar amount, the certification will remain in place until the debt has been paid-in-full. Once the tax liability has been resolved, the IRS must contact the State Department to withdraw the certification. Liens and Intent to levy notices sent prior to the effective date of the above bill (December 4, 2015) should not cause the taxpayer to become certifiable due to the lack of required language in notices sent. If you find yourself in the aforementioned situation, here is a few things you could do to help. Please note that nothing in this article in any way overrides the advice from a licensed tax professional. The first thing to consider is proper planning. This will help you stay current with your tax obligation(s), and avoid the situation before it gets out of hand. Secondly, if you can’t pay the balance in full try to get the balance below the $50,000.00-dollar mark before certification takes place. Remember, if the balance is below that amount you’re not in danger of being certified. It’s only after certification that reducing the balance has no affect. Next, you can avoid certification by entering into Installment Agreement, requesting innocent spouse relief, requesting “Due Process” hearing, and requesting an Offer-In-Compromise (OIC).

Kenyatta Patton, EA, MAMF

How To Settle 941Tax Debt

Sat, 18 May 2019 06:34:05 GMT

Many business owners focus on becoming as profitable as possible, however survival in a business is not necessarily contingent upon huge margins, or market notoriety. One of the most important aspects of being a successful entrepreneur is proper planning. Since one of the costliest expenditure business owners endure is taxes, it only makes sense to make payroll taxes, both 941 filing and remittance a top priority. A comprehensive tax plan will certainly help, however if you find yourself needing to file 941’s and owing payroll taxes this article is for you.

Payroll tax debt is number one on the list when it comes to IRS collection efforts regarding unpaid taxes. The IRS has the right to seize and sell your inventory and property, seize your accounts receivables, hold owners personally liable, and even force you to close your doors. As such, you need to take certain steps to ensure you afford yourself the best resolution option available. The first piece of advice is never ignore IRS notices. Generally, the IRS will provide you enough time to consult a professional or contact them to work through the problem. Remember, the IRS is the most powerful collection agency on the planet. They should never be feared, but they should be respected. Secondly, ensure that you are current on all payroll tax deposits, as well as unfiled tax returns. This shows that you intend to get back on track and stay in good standings after your tax debt issue has been resolved. The next step is to be prepared to provide the IRS current financial data. This will include financial statements from your business, and possibly financial information from anyone who could be held liable for the tax debt. Equally important, make sure that your personal tax situation is current. It could be difficult to settle your payroll tax debt if you have back taxes, and/or outstanding tax debt on the personal side. Make sure that you have adequate documentation to substantiate items on your financial statement. For example, if your profit and loss shows you spent $24k in rent for the year in question; make sure you can provide proof of payment. In most cases, bank statements or cancelled checks would be accepted as proof.

As a business owner, you are required to hold employee tax deposits in a trust until you make federal tax deposits in that amount. Congress enacted a law that allows the IRS, under IRC 6672 to access additional penalties known as Trust Fund Recovery Penalty (TFRP). “According to IRC 6672, the TFRP is equal to the total amount of tax evaded, not collected, or not accounted for and paid over. IRC 6672 applies to the employees’ portion of employment tax, namely, the withheld income tax and employee’s portion of FICA. It does not apply to the employers’ portion of employment taxes. The TFRP also applies to “collected” excise taxes” (IRS code section 8.25.1.2). This additional penalty may apply to you if you cannot pay the outstanding tax liability without delay.

If you have an accountant, bookkeeper, or someone else responsible for collecting, accounting for, and paying trust fund taxes; they could be held liable for the tax liability as well. However, there has to be a willfulness to avoid payment. For willfulness to be present the person(s) must have been, or should have been aware of the outstanding taxes and either intentionally ignored the law, or was otherwise indifferent to its requirements. No malicious intent is required. If a responsible party used available funds to pay other creditors and the business can’t pay employment taxes, this could be looked at as an indication of willfulness. Potential responsible parties will generally be subjected to an interview to determine that person(s) duties and responsibilities before the TFRP is accessed.

Make no mistake about it. If your business owes the IRS payroll taxes they will be very aggressive in their pursuit to collect. The reason for such aggression is the funds outstanding were supposed to be held in a fiduciary trust capacity on behalf of your employees. In other words, the funds should have never been available to spend in day to day operations to begin with. The IRS also has in place what’s known as the federal tax deposit system (FTD). Its sole purpose is to alert the IRS regarding businesses that owe payroll taxes.

Remember, every day that goes by without prompt attention being given to your tax liability is equivalent to opening up your assets, bank accounts, and account receivables for the taking. The IRS may also contact your customers and order them to send monies owed to you directly to them, or file a federal tax lien under the Uniform Commercial Code (UCC), in the state capital where your business is located. This outstanding tax debt could affect your credit, your ability to borrow, and prevent prospective customers from doing business with you. It is a given that small business owners struggle with capital needs to maintain and grow the business, and owing these taxes is in no way indicative of trying to evade paying your tax obligation. With that being understood, please know that by not making your payroll tax obligation you subject yourself to huge IRS problems. It not a matter of if the IRS comes knocking, it’s a matter of when.

The good news is help is available. If your struggling financially in your business this could also indicate you’re a good candidate for Offer-In-Compromise (OIC), Installment Agreement (IA), or many other resolution options that may be available to you. I know it takes all you have just to maintain your business day-to-day. Dealing with long hold times and understanding the IRC, as it relates to your particular situation can seem overwhelming. Please do yourself a favor and take the time to contact a licensed tax professional to further discuss options that may assist you in resolving your payroll tax liability.

Taxes Burden Small Business Owners

Sat, 18 May 2019 06:34:05 GMT

If you’re a small business owner I’m sure you had a distinct business plan when you started your business. Even if it was only in your head. The problem is you didn’t develop a tax plan to accommodate it.

With taxes being one of the biggest expenses for small businesses not having a tax strategy in place continues to cost owners thousands of tax dollars that could otherwise be used to buy equipment, expand operations, or even take that long overdue vacation. Unfortunately, most tax preparers spend very little time, if any helping their clients avoid paying taxes. Every tax season it’s the same routine, you send over tax forms (1099’s, etc.), receipts, and any other relevant documentation just to receive in return a reconciliation of that year’s revenues, expenses, and taxes due. Though this process is a very necessary one, it does absolutely nothing to help you save tax dollars. When was the last time your tax professional said to you, “I have a way for you to save thousands in taxes”? Even worse, some tax preparers on the web would have you believe that filing your taxes and maximizing your tax credits and deductions is as simple as pressing a button. This is ridiculous when you consider that between tax laws, regulations, tax law changes and tax court case clarifications the code is approximated to span around 70,000 pages. It’s impossible, without careful review to know if your tax benefits are being maximized. Do yourself a favor. Spend the money to hire a tax professional who is qualified to provide you with a comprehensive tax plan.

Why? Because time is money and every second a tax pro spends figuring out tables and trying to translate the “lawyer-language” in tax forms, and applying regulations and codes to your specific tax situation could save you thousands in unnecessary tax liability. Not to mention the peace of mind you get from knowing that you have truly maximized your credits and deductions. Don’t let the complexity of tax laws, sales hype from preparers, and simply a lack of time to properly analyze and research your tax situation continue to cost you thousands.

Retired Chief Justice William H. Rehnquist, “There is nothing wrong with a strategy to avoid the payment of taxes. The Internal Revenue Code doesn’t prevent that.” Smart man. Please take his advice. Get your comprehensive tax plan today.

For a tax planning consultation please contact Advantage Tax Services, Inc. @ (888) 818-7219 . You will be assigned to a licensed tax professional qualified to assist you with your tax needs.

Tax Court Sides with Salon Owner

Sat, 18 May 2019 06:34:05 GMT

Keeping meticulous records is one of the most important aspects of small business operations. Particularly when it comes to taking deductions for expenses incurred in a business considered to be a hobby by the IRS. This was certainly the case for the owner of a hair salon.

In most cases, tax deductions for hobbies are limited to the amount of income from the hobby. This means that you can’t deduct a loss from a hobby, even though business losses may be allowed as deductions. As you might imagine, the characterization of borderline activities is frequently contested in the courts, especially when there’s an element of recreation or personal enjoyment involved. The controlling test is whether the taxpayer exhibits a bona fide motive of turning a profit. Under often-cited regulations (Reg. Sec. 1.183-2(b)), nine factors are examined to determine if a profit motive exists (see below).

1. The manner in which the taxpayer carries on the activity.
The expertise of the taxpayer or his or her advisers.
The time and effort expended by the taxpayer in carrying on the activity.
The expectation that assets used in the activity may appreciate in value.
The success of the taxpayer in carrying on other similar or dissimilar activities.
The taxpayer’s history of income or losses with respect to the activity.
The amount of occasional profits, if any, which are earned by the taxpayer.
The financial status of the taxpayer.
Any elements of personal pleasure or recreation.

No single variable is decisive, however the IRS may give certain variables more consideration than others. Here are the facts of the case in question. The taxpayer opened a hair-braiding salon in a shopping mall. She made reasonable, albeit somewhat limited, efforts to grow her business, such as taking out Yellowbook ads, creating brochures and advertising fliers and maintaining a website. The taxpayer kept distinct business records for the salon, including spreadsheets showing income and expenses and hard copies of some expense receipts. She also maintained a separate bank account for the salon, but eventually closed that account in a cost-cutting move. In 2011, the taxpayer started a full-time job as an event planner, but still spent most weekends at the salon in the hope of attracting walk-in customers, as well as meeting scheduled customers for weekday evening appointments. The salon had fewer than 15 customers during 2011. The taxpayer closed the salon in 2012. The taxpayer never reported a profit from her hair salon business during the eight tax years in question. For 2011, the last year of the business, she reported gross receipts of only $325, while claiming $16,131 in expenses, consisting of $13,000 in rent, $590 of hair products, $909 for a landline phone service, $600 for website maintenance, $552 for cellphone expenses and $480 for supplies. The IRS denied the loss. The Tax Court sided with the taxpayer. It said that she had conducted her hair-braiding business with an actual objective of making a profit and had taken reasonable steps to grow the business. The salon was not a source of great personal pleasure or recreation, nor was it a hobby (Berry, K., 2016). Though the tax court found in the owners favor, there were still penalties accessed due to issued related to the 2011 tax return.

If you find yourself in a situation similar to the above, or if you suspect there could be issues please contact Ken Patton, a licensed Enrolled Agent with the United States Treasury IRS for a free consultation.

Tax Increase Prevention Act

Sat, 18 May 2019 06:34:05 GMT

As the 2014 tax season begins early this year millions of families and businesses alike faced an increase in taxes, but the 113th congress passing of H.R. 5771, Tax Increase Prevention Act of 2014 has extended many tax breaks previously set to expire. Title I: Certain Expiring Provisions- Amends the Internal Revenue Code to extend certain expiring tax provisions relating to individuals, businesses, and the energy sector.

A few of the tax extenders for individuals, business, and the energy sector follows: Subtitle A: Individual Tax Extenders – Extends through 2014:

the tax deduction of expenses of elementary and secondary school teachers;
the tax exclusion of imputed income from the discharge of indebtedness for a principal residence;
the equalization of the tax exclusion for employer-provided commuter transit and parking benefits;
the tax deduction of mortgage insurance premiums;
the tax deduction of state and local general sales taxes in lieu of state and local income taxes;

Subtitle B: Business Tax Extenders – Extends through 2014:

the tax credit for increasing research activities;
the low-income housing tax credit rate for newly constructed non-federally subsidized buildings;
the Indian employment tax credit;
the new markets tax credit;
the tax credit for qualified railroad track maintenance expenditures;
the tax credit for mine rescue team training expenses;

Subtitle C: Energy Tax Extenders – Extends through 2014:

the tax credit for residential energy efficiency improvements;
the tax credit for second generation biofuel production;
the income and excise tax credits for biodiesel and renewable diesel fuel mixtures;
the tax credit for producing electricity using Indian coal facilities placed in service before 2009;
the tax credit for producing electricity using wind, biomass, geothermal, landfill gas, trash, hydropower, and marine and hydrokinetic renewable energy facilities;

Subtitle D: Extenders Relating to Multi-employer Defined Benefit Pension Plans – Extends through 2015 the automatic extensions of amortization periods for multi-employer defined benefit pension plans and for multi-employer funding rules under the Pension Protection Act of 2006.

For a more detailed list of extenders, as well as technical corrections referred to as “deadwood” please visit www.jct.gov Should you have additional questions or require assistance with a tax issue please respond in the comment section or call (888) 818-7219 . You will be connected to a licensed tax professional who can assist you.

The Difference between Injured Spouse and Innocent Spouse

Sat, 18 May 2019 06:34:05 GMT

With the rise in divorce and an increase in the number of people who have past-due tax liabilities, more taxpayers are seeking relief. Knowing the difference between injured spouse and innocent spouse could be very beneficial when trying to understand what options are available when you’re being penalized for a tax debt that’s not your responsibility. Here’s some distinct characteristics between the two.

There are basically three types of relief :

Innocent Spouse Relief. By requesting innocent spouse relief, you can be relieved of responsibility for paying tax, interest, and penalties if your spouse did something wrong on your tax return (IRS, 2014).

Relief by Separation of Liability. Under this type of relief, you allocate (divide) the understatement of tax (plus interest and penalties) on your joint return between you and your spouse (or former spouse) (IRS, 2014) .

Equitable Relief. If you do not qualify for innocent spouse relief or separation of liability, you may still be relieved of responsibility for tax, interest, and penalties through equitable relief (IRS, 2014).

If you can answer yes to the following questions there’s a really good chance you may qualify for relief.

– Did you file a joint return and your refund was taken to satisfy your spouse’s or former spouse’s past due tax, child support, state tax liability, or non-tax debt like student loans?

-Did you personally report income on the jointly filed tax return?

-Did you make and report payments such as income tax withheld from wages or estimated tax payments, claim EIC, or other refundable credit on a joint return?

If you think you qualify and would like to further explore your relief options with a tax professional, please call Advantage Tax Services, Inc. You will be connected with a tax professional who will work specifically on your situation to provide the answers you desire and the best program available through the IRS for resolving your tax debt issue. (IRS, 2014) (888) 818-7219

Tax Debt and Filing Bankruptcy

Sat, 18 May 2019 06:34:05 GMT

In most cases, when you have an IRS tax debt liability, you have a limited amount of options. You can do the obvious, which is paying the full amount you owe, enter into a payment arrangement, attempt to settle the debt (Offer-In-Compromise), or presuming what you owe has been outstanding long enough to meet the criteria for being discharged, file bankruptcy. Recently, a Federal District Court for Northern California District over ruled a previous bankruptcy court ruling, adding a new twist to getting tax liabilities discharged in bankruptcy.

Generally, for tax debt to be dischargeable in bankruptcy, a return has to be filed before the petition is filed and the tax debt has to be at least 3 years old with timely returns filed each year. In addition, the return that generated the tax liability must have been filed at least two years before filing the petition in bankruptcy court in regards to a late filed return. This is after meeting the criteria of the first rule; and at least 240 days of assessment has passed on an audit assessment while considering the first two rules.

“In re Martin Smith, Debtor, 2014-1 U.S.T.C. ¶50,274 (Apr. 29, 2014), the Federal District Court for the Northern California determined that a taxpayer’s late filed return did not qualify as a return for purposes of discharge and the exceptions found in 11 U.S.C. §523 caused a taxpayer’s tax liability to be excepted from discharge. In this case, Smith failed to timely file his 2001 Form 1040 for income tax purposes. In 2006, the IRS assessed against Smith a tax liability preparing a return for him under their Substitute for Return (“SFR”) process and began proceedings to collect the assessed tax. In 2009, Smith prepared and filed his 2001 income tax return reporting more tax owing than the IRS determined to be owing under its SFR assessment. In 2011, Smith filed bankruptcy and the Bankruptcy Court issued an order of discharge as the late filed return had been filed more than two years prior to the petition in bankruptcy being filed” (Federal District Court for the Northern California District, 2014).

Put simply the tax payer in the above case was found to not be in compliance with self-assessment and tax payment obligations until years after IRS collection action had ensued, and the IRS had created substitute returns. The court found the tax payers handling of the outstanding liability was not done in accordance with what the courts consider a sincere and practical try at complying with tax law. This does not mean that tax payers can’t file late returns or replacement returns for substitutes that’s been prepared by the IRS. Just that the tax liability derived from a tax year which a returned was not filed timely thus rendering the tax debt non-dischargeable. Of course, each case stands on its own merits so if you need help with filing a bankruptcy due to a tax debt, by all means contact a bankruptcy attorney.

The point here is always file your taxes in a timely fashion, even if you can’t pay the tax liability. Not only could you be inadvertently extended the statute of limitations for collecting what’s owed, you could miss the chance to have your tax debt discharged in bankruptcy.

Should you need assistance with back taxes or resolving a tax debt issue, contact Advantage Tax Services, Inc. at (888) 818-7219 . You will be connected with a licensed professional who can assist you with your specific situation.

The New Tax Payer’s Bill of Rights

Sat, 18 May 2019 06:34:05 GMT

Recently, the IRS implemented the new tax payer’s bill of rights. This is a great step in helping to eradicate the inherent fear that seems to plague an overwhelming amount of taxpayers. For years, the mystic that the IRS operates like some private army; taking whatever steps they want to force tax payers to pay past due tax without giving consideration to tax payer rights. Though the IRS can and will enforce action to collect taxes due, they have always had a “bill of rights” in place to protect tax payers. In other words, the bill of rights is not new, nor is there any new enforcement mechanism in place to ensure tax payer rights are respected. The action is purely symbolic and seeks, in my opinion to close the gap between fact(s) and myth(s), as it relates to tax payer interaction with the IRS.

Perhaps, even more important is the impact experienced by IRS employees. The mere mentioning of increased focus in this area may instruct better customer service in terms of call handling, response to inquiry, and other widely mentioned areas of tax payer abuse. This could be seen as a defining moment in redefining IRS culture. Employees tend to behave congruent to their environment’s tolerances. I think it’s wonderful that the IRS has taken this opportunity to reiterate the importance of treating tax payers with respect and dignity.

Obviously, gaining a complete understanding of exactly how tax payer bill of rights may affect certain tax payer issues is beyond the scope of this article; however you would be well served to read over the bill of rights to familiarize yourself with them. At least you will know which direction to take in terms of inquiry with tax professionals, as well as IRS Representatives. Sometimes, knowing what to ask saves a lot of time and unintended ambiguity.

What Your IRS Tax Notice Really Means

Sat, 18 May 2019 06:34:05 GMT

If you’ve received a notice from the IRS it could mean a myriad of things from a miscalculated credit to notice of intent to take further collection action. Generally, IRS notices have a number in the right hand corner that may start with the letters CP. This is the first indicator of what the letter is in regards to.

Often, receipt of an IRS notice can be resolved without taking much action at all. In most cases the letter will outline necessary steps required to address the outstanding issue. The worst thing to do is ignore the notice. This could cause an undue escalation in the nature of your tax problem(s), as well as expose you to potential fees that could otherwise be avoided.

If you what like an in-depth explanation of a letter you recently received from the IRS, please click the link below. If after learning of your tax matter you require additional assistance, contact Advantage Tax Services, Inc. at (888) 818-7219 . You will be connected with a licensed tax professional that can further assist you. IRS Notices and Letters

Things to Know if You’re In IRS Collections

Sat, 18 May 2019 06:34:05 GMT

If you have an outstanding balance with the IRS chances are you’ve been entered into the IRS Collection system. The IRS is under a mandate to follow a specific process when attempting to collect past due taxes from tax payers. Being informed about how the IRS Collection system works could save you a lot of undue heartache.

The IRS uses a collection system called Automated Collection System (ACS). This system is completely automated and sends letters, notices, and files tax liens. The second component in this part of the system is the call center. If you’ve ever been subject to collection calls from third party agencies, the IRS collection call center, though governed differently works in similar ways. Generally, IRS representatives have strict guidelines that must be followed. They don’t have the ability to work outside of rules that have been pre-established. This could leave you wanting if you need first hand advice regarding a complex tax topic.

In addition to the IRS Collection system are collection Field Agents. Field Agents, often referred to as Revenue Officers are assigned geographical locations throughout the United States. They are responsible for many things related to the collection process to include on sight visits, collection of vital information, and verification of reported tax payer information. For example, if you’re hiding an asset somewhere the Revenue Officer would most likely be the person to discover and report it. Their job is to resolve the tax liability using all means afforded to them by law, and they take their jobs very seriously.

As I’ve stated a hundred times over, the worst thing to do is nothing. Below is a list of things that Revenue Officers look for while performing their job duties.

Does the tax payer have outstanding tax returns due? Make sure all back taxes have been filed. The IRS will not consider payment arrangement, settlements, or any other potential resolution unless you are tax compliant.
Has the tax payer incurred any new tax debt? Ensure that you make timely payments regarding any new taxes such as estimated taxes due, or employment tax.
Has the tax payer provided all relevant sources of income, assets, expenses, and other debts (i.e. State tax owed)? Based on examination of the above information, further collection action could be implemented or deferred.
Has the tax payer applied for the best possible resolution available given the situation? If you haven’t done so, it would be prudent to do so as soon as possible. This provides you protection from garnishments, levies, and other harsh collection tactics available to the IRS.
Has additional tax debt accrued since entering into an agreement or settlement? Make sure that once your agreement is in place you don’t incur additional tax debt. If you find yourself in this situation pay as much of it as possible and consult a tax pro for further assistance.
If a business is involved, who in the business could be held liable for Trust Fund Recovery Penalties? Anyone in a business with both access and knowledge of payments due could be held personally liable for TFRP.
Has all deadlines been meant? Notices are sent for a reason. Most notices provide amble time to respond. Failure to respond to IRS notices is a sure way to escalate the problem.

Should you require additional help with your tax issue call Advantage Tax Services, Inc. (888) 818-7219 , Inc. You will be connected to a licensed representative who will provide the guidance you need.

The IRS Innocent Spouse Rule

Sat, 18 May 2019 06:34:05 GMT

The Internal Revenue Service recognizes that sometimes, when a joint return is filed, both parties may not be responsible for a resulting tax liability. However, when a tax liability exist, either party can be held jointly and severally liable. This means that either spouse could be held responsible for entire tax liability. The Internal Revenue Service provides 3 types of relief Innocent spouse relief, separation of liability, and equitable relief. Often, innocent spouse relief is thought to be the same as injured spouse relief. Though similarities exist, injured spouse relief applies to actual or probable loss of overpayment (refund) due to one spouse having delinquent student loans, child support, federal or state tax liability, or other issues that causes a refund off-set (refund allocated to tax debt).

To qualify for innocent spouse relief the tax payer must have filed a joint return, show that when return was signed you didn’t know, and had no reason to know that the understated tax occurred, have an understated tax that’s due to inaccurate item (i.e. unreported income, misstated deduction, basis, or credit), and facts reveal unfairness to hold spouse responsible. “Innocent spouse relief will not be granted if the IRS proves that you and your spouse (or former spouse) transferred property to one another as part of a fraudulent scheme” (irs.gov pub. 971). Separation of liability allocates tax liability plus penalties and interest resulting from a filed joint return between each spouse. Allocation is based on taxes, penalties, and interest each spouse would ordinarily be responsible for if taxes were filed separate from their spouse. Other requirements include tax payer seeking relief had a separate residence during the 12-month period ending on the date relief request is submitted, and you are no longer married or legally separated from the spouse you filed joint return with. If you do not qualify for innocent spouse relief, or separation of liability, you may still be able to obtain relief. The IRS could grant equitable relief under the following conditions. You don’t qualify for innocent spouse relief, or separation of liability, you file the proper form at the proper time, you filed a joint return for the year in question, no assets where fraudulently transferred to defraud the IRS, creditor, or business partner, and your spouse transferred no assets to you for tax avoidance purposes. Remember, in all instances the Internal Revenue Service will check to see if you are tax compliant in the year or years following the tax year or years relevant to your request for relief. If you need assistance with applying for Innocent Spouse Relief, Separation of Liability, Equitable Relief, or Injured Spouse Relief. Call Advantage Tax Services, Inc. now. You will be connected to a licensed tax professional with the experience to rendered the best resolution offered by the Internal Revenue Service. To contact call or email us at (888) 818-7219

IRS Tax Debt to be collected by Third Party Agencies

Sat, 18 May 2019 06:34:05 GMT

If you currently owe the IRS back taxes, now would be a good time to contact a tax professional to determine if you qualify for the IRS fresh start program. Recently, the IRS released information pertaining to their decision to enlist the assistance of four third party collection firms to assist in the recovery of approximately $138 billion dollars in tax debt. What this could mean for tax payers who owe is the beginning of multiple phone calls, harassing letters, and less time to financially prepare for repayment due to faster collection enforcement technique.

This is not the first time the IRS has implemented such a program. According to the New York Times, “Twice before, in 1996 and 2006, the I.R.S. has tried to farm out some of its collection duties. Both times, the programs were shut down and deemed failures”. However, not before causing significant stress to millions of tax payers. Most famous was the elderly couple that received over 150 calls in less than a month.

The IRS currently offers resolution programs that could assist tax payers resolve outstanding tax liability without exposure to harsh collection practices conducted by third party agencies. To ignore the opportunity to protect yourself and possibly resolve your tax issue for less than what is expected (Offer-In-Compromise), is the same as staying in a house that’s on fire. No one in their right mind would do that…right?

Don’t ignore the time given to secure your opportunity to resolve your tax debt issue without additional unwanted harassment. Contact your tax professional today. If you don’t have a tax professional you may contact Advantage Tax Services, Inc. at (888) 818-7219 .

Understanding the Audit Process

Sat, 18 May 2019 06:34:05 GMT

If you’ve received a notice of audit from the IRS, here’s a few things you should know to ensure that your experience is as painless as possible. The last thing you want to do is ignore the request for documentation. Even if you don’t have what’s being requested, you can avoid further problems and unnecessary expense by making contact with the examiner and requesting additional time to comply.

Be mindful that just because you’ve been selected for an audit does not automatically mean you’ve done something wrong. Tax returns are selected a number of ways to include random computer selection, document matching, or related examinations. The IRS protects taxpayers by providing certain rights, as it relates to audits. The first being, “the right to professional and courteous treatment by IRS employees, a right to privacy and confidentiality about tax matters, a right to know why the IRS is asking for information, how the IRS will use it and what will happen if the requested information is not provided, a right to representation, by oneself or an authorized representative, a right to appeal disagreements, both within the IRS and before the courts” (Irs.gov/pub 1). If you experience an issue regarding your rights as a taxpayer you may contact the taxpayer advocacy for assistance. The possibility of being audited is one reason why it is important to retain records in support of your credits and deductions for three years from the date of your return(s). One of the most difficult aspects of going through an audit is having to gather required documents to substantiate your position. Remember, audits are conducted to document what’s on your return with proof. Not having needed records could result in adverse or otherwise unwarranted outcomes that could cost you money.

Generally, audits are conducted by phone or in person at your local IRS office, your home or office, or your tax professional’s office depending on your situation. The IRS will send audit notification by phone or mail, providing ample time for you to prepare. If your audit results in changes made to your return, said changes will be thoroughly explained and you will be provided instructions should you choose to appeal IRS findings. If you agree with IRS audit findings you will be asked to sign the examination report, or similar form. If you find yourself with a tax liability after being audited and cannot make full payment, the IRS offers several payment options designed to assist tax payers with financial hardships. Please refer to Publication 594 at irs.gov for more information on the collection process. Remember, don’t fear the IRS respect them. In most cases, negative outcomes derive from ignoring notices and/or failing to ask for help when you need it.

If you find yourself in need of audit representation, or facing any other tax issue please call Advantage Tax Services, Inc. at (888) 818-7219

The Difference Between 1099-C Cancelled Debt Exclusions and Exceptions

Sat, 18 May 2019 06:34:05 GMT

Whether you received a 1099-C or not outstanding debt that’s been cancelled has to be reported as income. The good news is you may qualify for special exceptions, and/or exclusions that could eliminate negative tax consequence. Not understanding what’s available to you, as it relates to tax treatment of cancelled debt, could expose you to unwanted tax liability, interest and penalties.

The Internal Revenue Code (IRC) provides many exceptions to the rule that cancelled debt be included in income. In determining the amount of liability considered non-taxable you must first apply exceptions before exclusions. One of the reasons for this is that exclusions may require you to reduce your tax attributes and exceptions don’t. A tax attribute is one of a range of specific measures in the federal income tax calculation process that benefits the taxpayer. It’s relevant in cases when a taxpayer is insolvent or bankrupt. Generally, you will not have income from debt cancelled from gifts, devises, bequest, or inheritance. Also, according to IRC, “Student Loans Certain student loans provide that all or part of the debt incurred to attend a qualified educational institution will be canceled if the person who received the loan works for a certain period of time in certain professions for any of a broad class of employers. If your student loan is canceled as the result of this type of provision, the cancellation of this debt isn’t included in your gross income” (pup 4681, irs.gov). Certain criteria must be meant to qualify. Another exception is deductible debt If you use the cash method of accounting, you don’t realize income from the cancellation of debt if the payment of the debt would have been a deductible expense. Another exception is the “Price Reduced After Purchase” exception. If debt you owe the seller for the purchase of property is reduced by the seller at a time when you aren’t insolvent and the reduction doesn’t occur in a title 11 bankruptcy case, the reduction doesn’t result in cancellation of debt income. However, you must reduce your basis in the property by the amount of the reduction of your debt to the seller (pup 4681, irs.gov). In addition, though some debt cancellation resulting from home loan modification may result in the cancelled amount being included in income, you may be able to spread the amount cancelled over a three-year period. For more information, see www.irs.gov/ uac/PrincipalReductionAlternativeUndertheHomeAffordableModificationProgram and Revenue Procedure 2013-16 .

Exclusions include, but are not limited to bankruptcy, farm indebtness, qualified real property business indebtness, and qualified principle residence indebtness. Each of the aforementioned may have special rules that may limit the amount of debt excluded. Remember, determine exceptions first before applying any applicable exclusions. This will assist you in maximizing tax benefit, and provide the best opportunity to minimize any potential tax liability as a result of cancelled debt.

Understanding Your Tax Filing Requirements

Sat, 18 May 2019 06:34:05 GMT

Often, tax payer run into tax debt issues because they don’t understand filing requirements or how a lack of compliance could prove to be costly due to penalties and interest added to existing liabilities. The worst thing a tax payer can do is ignore the obligation to file. The IRS has ways of finding out exactly what you earned during a tax year. In addition, without giving consideration to possible credits and deductions you may qualify for; the IRS has authorization to file substitute returns on your behalf and pursue any outstanding tax liability resulting from the filing process.

Taxpayers who earn an income that equals or exceeds pre-determined threshold amount(s) are required to file a tax return. The threshold amounts are adjusted annually for inflation. For the year ending December 31, 2016, based on filing status, every taxpayer who earned amounts exceeding the following must file a tax return.

Head-of-Household – $13,250 (if 65 or older or blind – $14,500)
Single – $9,275 (if blind or 65 or older – $10,825)
Married filing separate – if neither spouse itemizes, a return must be filed if gross income equals or exceeds $4,050, regardless of age.
Married filing jointly – $18,500 (if one spouse is blind or 65 or older-$19,750; if both spouses are blind or 65 or older – $22,250
Surviving spouse – $18,550 (if 65 or older or blind – $19,800)
Dependents – every individual who may be claimed as a dependent of another must file a return for 2016 if he has either (x) unearned income in excess of $1,050 (plus any additional standard deduction if the individual is blind or 65 or older) or (y) total gross income that exceeds the sum of any additional standard deduction if the individual is blind or 65 or older plus the greater of (a) $1,050 or (b) the lesser of (i) $350 plus earned income, or (ii) $6,300 (IRS Secs. 6012(a), 63(c), 151;IR-2015-119).

Tax payers who qualify for additional deduction for blindness may be required to submit additional documentation to substantiate their entitlement to the additional standard deduction. Also, a tax payer with self-employment income must file a return if net self-employment income is $400.00 dollars or more. Anyone who worked and was subject to wage withholdings, but did not meet the above thresholds may choose to file a return if by doing so entitles them to a refund or other tax benefit. Please be mindful of the fact that even though you may not be required to file you would be required to file all back returns if you incur a tax debt that requires assistance (e.g. installment agreement, offer-in-compromise, etc.). So, it may be in your best interest to file every year that you have income or qualify for certain tax credits.

The Difference Between Payroll Tax and Estimated Taxes

Sat, 18 May 2019 06:34:05 GMT

Often tax payers find themselves owing the IRS even after they’ve paid taxes throughout the year. This has proven to be very confusing, as well as frustrating for many who already feel they pay way too much in taxes. In order to gain control over this tax issue, you first must understand what these taxes constitute and how they are calculated. Only then will you be able to instruct your tax payments in a way that produces your desired tax outcome.

If you work as a W-2 employee, then generally you are required to remit payroll taxes. These are taxes that are withheld from your check every pay day. Payroll taxes by definition are taxes both employer and employee are required to, and are calculated as a percentage of income paid by your employer. This tax is paid two different ways. The first way is taxes that employers are required to withhold from your paycheck. The money withheld is used to cover social security, Medicare, income tax, and different insurances (unemployment, and disability). Payroll tax deductions include the following:

Social Security Tax Withholding (6.2% until annual maximum is reached)
Medicare Tax (1.45%)
Federal Income Tax (Based on withholding tables see pub. 15, irs.gov.)
Additional Medicare Tax (0.9% for income over $200k)

The second way payroll tax is paid comes directly from the employer. Employers are required to pay an amount fixed or proportional to an employee’s pay. These amounts are also paid to help fund social security, as well as other insurance programs and include the same aggregate percentages that’s paid by employees. This is how Federal Insurance Contribution Act (FICA) taxes are paid. FICA is made up of social security and Medicare. The employee pays half and the employer pays half to reach 15.3% of wages tax obligation. If you’re a small business owner or work as an independent contractor, then you may be required to pay your Medicare and Social Security (Self-employment) tax obligation by making estimated tax payments throughout the year. The IRS states, “Taxes must be paid as you earn or receive income during the year, either through withholding or estimated tax payments. If the amount of income tax withheld from your salary or pension is not enough, or if you receive income such as interest, dividends, alimony, self-employment income, capital gains, prizes and awards, you may have to make estimated tax payments. If you are in business for yourself, you generally need to make estimated tax payments. Estimated tax is used to pay not only income tax, but other taxes such as self-employment tax and alternative minimum tax. If you don’t pay enough tax through withholding and estimated tax payments, you may be charged a penalty. You also may be charged a penalty if your estimated tax payments are late, even if you are due a refund when you file your tax return” (irs.gov., pub. 505, tax withholding and estimated taxes).

What to Do When You Owe the IRS

Sat, 18 May 2019 06:34:05 GMT

If you receive a tax bill this summer for outstanding taxes, you are expected to pay that bill in full including any penalties and interest. If you can’t pay the outstanding balance, it is sometimes prudent to get a loan to pay the bill in full rather than to make installment payments to the IRS. This is because acceptable Installment Agreements (IA’s) require approval by the IRS. Often, what the IRS approves could be beyond your capacity to pay. Any amount sent will be deducted from your balance, however you still could be vulnerable to collection enforcement action.

The Internal Revenue Service (IRS) is the world’s most powerful collection agency. Often, tax payers that owe taxes find themselves in difficult situations due to the harsh tactics used to collect. The IRS can levy your bank account, wages, investment(s), place liens on your property, and even destroy your credit.

The good news is the IRS also offers many different resolution options designed to assist tax payers who may not be able to pay their tax liability. The bad news is a very large percentage of tax payers that owe make the biggest mistake of all. They fail to respect the IRS instead of fearing them.

As such, the first thing to do is don’t ignore any notices you receive. Most notices provide amble opportunity for you to respond, or obtain additional time to respond if needed. Next, schedule a consultation with a licensed tax professional. Licensed tax pros have demonstrated proficiency at understanding how to apply the rules that govern various tax scenarios and compliance issues.

Another important step is to review the tax return(s) from which your tax liability derived. Simple mistakes, like claiming income or deductions twice could cause you to miss eligible deductions or increase your tax liability. This could be easily corrected by filing an amendment.

If your liability has been caused due to underpayment and you’re a W-2 employee, make changes to your withholding amount to ensure that you don’t create another tax bill moving forward. If you are an independent contractor who receives 1099’s, ensure that you make estimated tax payments moving forward. This will go a long to show that not only have you corrected the problem, but you plan to be compliant moving forward.

In addition, inquire as to how to minimize penalties and interest. Owing a tax liability can be challenging enough without added assessments that could increase your tax bill significantly. You may qualify for exceptions to underpayment of tax penalties, or penalty abatement. Finally, don’t panic. If you respond reasonably to notices and are honest with the IRS, they are not bad creditors to deal with. If all else fails and you can’t afford professional assistance, contact your local tax payer’s advocacy. You may qualify for free assistance.

How to Determine Your Tax Liability

Sat, 18 May 2019 06:34:05 GMT

Every year many tax payers have no idea whether they will owe taxes or not. Often, some tax payers feel that they may owe, but have no idea how much or why? Understanding how to determine your tax liability will not only help you make better decisions about the way you treat income, but it will go a long way to ease the stress that is often experienced when it’s time to file your tax return.

Obviously, the first variable in the tax formula is gross income. This is the aggregate of all earned and unearned income from various sources throughout the year. Income is either earned or unearned. Earned income is cash or in-kind benefits people receive in exchange for work or service, including employment and self-employment. Unearned income is cash or in-kind benefits that people receive without being required to perform work or service. Depending on the type of income you receive, as well as other variables your tax outcome could vary.

Next, certain deductions are subtracted from gross income. These deductions are referred to as above the line deductions, and are used to arrive at adjusted gross income or AGI. The name comes from their paperwork placement. They are found on page one of Form 1040, just above the line where adjusted gross income is tabulated. They include contributions to traditional IRA, alimony, moving expenses, and many others. For a complete list of “above the line” deductions please see irs.gov/pub. 17.

After you arrive at AGI, there’s another round of deductions known as personal and dependency exemptions. The personal exemption amount in 2016 is $4,050.00 dollars. The IRS allows every resident tax payer to deduct this amount from personal income. Dependency exemptions are personal exemptions allowed for tax payers who have qualified dependents. For example, if a tax payer filed married filing jointly, and they have 2 children; the number of personal exemptions would be 4. Please see IRC section 152 for additional information.

There are two types of additional deductions. One is called standard deduction, or tax payers may itemize deductions. Generally, a comparison is done to derive at which deduction type is most advantageous. The standard deduction is a pre-determined amount based on filing status. The standard deductions for year ending December 31, 2016 is the following:

Single – $6,300.00
Married Filing Jointly – $12,600.00
Married Filing Separate – $6,300.00
Head of Household – $9,300.00
Qualifying Surviving Spouse – $12,600.00

At this point, both personal exemptions and either standard or itemized deductions are subtracted from AGI to arrive at taxable income. To determine your tax rate, examine applicable tax tables at irs.gov.

Please be mindful of additional deductions (credits, prepayments toward tax, overpayments or credits from previous years, and tax withheld by an employer or previously made estimated tax payments) that are subtracted from your tax liability to determine net tax payable.

10 Things New Business Owners Must Know

Sat, 18 May 2019 06:34:05 GMT

Starting a business can be expensive and complex depending on what kind of business you start. A strategic business plan helps you address questions like, what are my capital resources, how will my product or service reach the market place, or how will I manage my day-to-day operations. These are very important issues for any start-up, and must be addressed, however there are other “must knows” that are just as critical to new business success.

The first, which is the proper business form to choose could have a significant impact on your bottom line. This is because different business forms are taxed differently. The various forms of business structures include sole proprietor, LLC, Partnership, S-Corporation, or C-Corporation. Each with their own set of rules, as it relates to how you pay taxes. The next consideration, whether you should get an Employer Identification Number (EIN) has been a popular topic among start-ups. Generally, regardless of your business form, applying and obtaining an EIN is a must. This is because during the course of conducting business you will most likely make certain payments that require information return(s). The forms used to report these payments must include the payee’s identification number.

Another important consideration is deciding on your tax year. A tax year usually consists of twelve months. The IRS allows two kinds of tax years. The first is Calendar Year, which starts January 1 and ends December 31 of every year. The second is Fiscal Year. “A fiscal tax year is 12 consecutive months ending on the last day of any month except December. A 52-53-week tax year is a fiscal tax year that varies from 52 to 53 weeks but does not have to end on the last day of a month” (irs pub 538). Though most start-ups choose the calendar year, it is good to understand the difference between the two. Once your business grows it may become prudent to switch to Fiscal Year due to many potential tax advantages they may avail themselves as a result.

The next three considerations include businesses owners knowing what type of federal and state tax they will be responsible to pay, which tax forms are you required to file, and how to properly account for employees, as it relates to taxes. The IRS requires different business forms to file different tax returns (Schedule C, 1120, 1102s, 1065) at different times during the filing period. In addition, depending on whether you have W-2 employees or independent contractor’s different type information return requirements will apply. You may also be faced with state and local sales tax payment and reporting requirements. It is also important because it has been argued to be one of the most troublesome areas for small business start-ups.

Finally, understanding the proper accounting method (cash vs. accrual), what business expenses are deductible, and which records to keep and for how long are the last three “must knows”. Depending on what accounting method you choose, you could be paying more in taxes than you should. Making this determination requires a good understanding of the accounting methods available and how those methods affect your specific situation. Understanding what expenses are deductible will assist you with proper record keeping, as well as help your tax professional maximize your credits and deductions. Remember, a tax pro generally is limited to information you provide. Tax professionals may understand the implications of certain deductions, but not know without your input that said deduction(s) apply.

Top 3 Tax Issues for Truckers

Sat, 18 May 2019 06:34:05 GMT

Every tax season thousands of truck drivers leave hundreds of thousands of dollars in tax deductions on the table. This is due in large part to inadequate planning and poor bookkeeping. In addition, many tax professionals do a poor job at properly informing truckers of the many different tax breaks available to them. Truck drivers have access to many different tax deductions and credit, however the three main areas that cause tax liabilities to occur include depreciation, per diem, and cash vs. accrual basis accounting.

Depreciation

Depreciation Generally, it requires a tremendous upfront investment to purchase or lease tractors and trailers. Often, owner/operator start-ups find solace in financing due to up to five-year lease terms which really helps control overhead and cash flow. The problem is that according to Internal Revenue Code (IRC) regarding depreciation, you only have three years on tractors and trailers. In other words, you can only claim depreciation for three years on tractors and five years for trailers. As a result, many owner operators end up paying on equipment long after tax deductions for depreciation is exhausted. Another challenge is how the Internal Revenue Service (IRS) figures depreciation. For example, if you buy a $50,000 tractor it is possible to write off $16,665 the first year, $22,225 the second year, $7,405 the third year, and only $3,705 the last year. This means your overall tax liability will increase significantly the third year you own the equipment. Often, tax professionals fail to inform owner/operators that their potential tax liability will increase dramatically in the third year. This leaves many with huge tax liabilities that they didn’t plan for and can’t afford to pay.

Cash vs. Accrual Basis

Did you know the IRS has special rules that allow trucking companies to be on a cash basis when other businesses would be required to be accrual? The difference between cash and accrual basis is cash basis requires taxes to be prepared based on monies received and spent during a given tax year. Accrual basis requires your taxes to be filed based on monies earned (whether you receive it or not) and expenses they incurred (whether or not you actually paid them). It’s advantageous to say the least, for trucking companies to be on a cash basis because most of a trucking company’s receivables outweigh their liabilities. Let’s look at a scenario. Generally, customers pay trucking companies thirty or more days out, but if you have employees you most likely pay them weekly. So in effect, you are paying expenses faster than you get paid yourself. If you are on an accrual basis, you are not taking advantage of the above mentioned special rules available.

Per Diem

Most of you already know that you work away from home you may be eligible for deductions related to meals and entertainment expenses. Generally, deductions are taking in one of two ways. One way is to keep up with all your receipts for meals and entertainment expenditures incurred during the year. The other way is to use the per diem method. Per Diem rates are set by fiscal year, effective October 1 each year. These rates vary depending on zip code ($89.00 dollars was standard for 2015-16) The IRS allows a certain amount per day to be deducted without you having to keep up with receipts. However, it would be prudent to keep your receipts anyway just in case you have to prove you were actually on the road during the time period being examined. Most tax payers can only deduct 50% of these expenses, whereas truck drivers subject to DOT Hour of Service Rules could deduct 80%. Please be mindful that situations vary. For example, if your company pays drivers a per diem then the driver can’t deduct the per diem too. Only the company would be eligible for the deduction in this case. In addition, as a result of the per diem deduction, your itemized deductions could be limited. The per diem deduction is most favorable when used by owner operators who can deduct these expenses on schedule C against their income.

Does your Small Business Owe Payroll Taxes?

Sat, 18 May 2019 06:34:05 GMT

Everyone knows it is best to pay your payroll taxes on time to avoid penalties and interest, however if you find yourself behind paying as soon as possible can assist you in avoiding unwanted additional fees. The goal should be to contact the IRS, or a tax professional as quickly as possible to discuss your options. Doing nothing is the most common and biggest mistake you can make.

Small businesses who qualify may be able to make monthly payments via installment agreement. Though interest and penalties may continue to accrue, an installment agreement may be your best option. In addition, if you’re small business is behind on payroll taxes, your company may qualify for an In-Business Trust Fund Express Installment Agreement. These agreements allow you to make monthly payments while avoiding the hassle of providing volumes of financial information. Also, since these agreements involve taxes withheld from your employee’s paychecks the IRS may implement additional procedures to ensure the ability to make Trust Fund Recovery Penalty assessments (TFRP). These assessments can be made against individuals within your business who carry the responsibility of paying payroll taxes, and have demonstrated an unwillingness