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HOW DOES THE IRS CALCULATE PENALTIES AND INTEREST: TAX HELP FROM TRUE TAX RESOLUTIONS INC.
Late payment of employment taxes will trigger penalties and interest charges to the taxpayer. These notices, particularly from the IRS, are next to impossible to decipher. Here is a quick primer on how the IRS calculates penalties and interest.
Statute of Limitations
There is NO statute of limitations on the failure to file and report payroll taxes (Social Security, Medicare, Unemployment, withheld income taxes). There also is no statue of limitations on assessment of tax, penalties and interest when a false tax return is filed. Household employment taxes are remitted with the employer’s personal 1040 income tax return. Any household employer who did not pay these taxes has de jure submitted a false tax return.
Types of IRS Penalty Charges
Late Filing Penalties
If you owe tax and don’t file on time, according to IRS regulations, penalties are assessed and added to your bill. Penalties are in addition to BOTH the tax due and the interest on the past due tax. The total late–filing penalty is usually 5% of the tax owed for each month, or part of a month, that your return is late up to five months (25%). If your return is over 60 days late, the minimum penalty for late filing is the smaller of $100 or 100 percent of the tax owed.
Late Payment Penalties
If you file on time but don’t pay all amounts due on time, you’ll generally have to pay a late payment penalty of one–half of one percent (0.5%) of the actual tax owed for each month, or part of a month, that the tax remains unpaid from the due date, until the tax is paid in full. There is no maximum limit to the failure-to-pay penalty.
Authored by: Harold Pena-Hayes, E.A.
President of True Tax Resolutions Inc.
True Tax Resolutions is a company dedicated to providing the highest caliber of tax help services to the business and individual taxpayers of America. Whether your issue is with the IRS or the State we can help you. We help businesses and Individuals file current and past due tax returns. Additionally, we help clients with tax debt settlement, tax debt payment plans, wage garnishment removal, levy lifts, and obtaining hardship status. Go to http://truetaxresolutions.com or call 773–609–4TAX or email [email protected] for a free no obligation consultation with a tax professional. aditional information on this subject can be obtained from www.irs.gov
Who Can You Claim as a Dependent?
You won’t go very far into doing your own taxes without confronting this question. It’s central to your tax return, because for each dependent you can claim, you can get an exemption — a valuable chunk taken right off the top of taxable income. (Each taxpayer also gets their own exemption, of course.) But who can you rightfully claim as a dependent? Let’s break down the IRS requirements.
First and foremost, a dependent is someone you support. And support is the key requirement: You must have provided at least half of the person’s total support for the year — food, shelter, clothing, etc. If your adult daughter, for example, lived with you but provided at least half of her own support, you probably can’t claim her as a dependent.
Rules for All Dependents
Dependents are usually, but not always, a child or other relative. Qualifying children and qualifying relatives have their own additional requirements, but all dependents must meet these requirements:
Dependents can have their own tax returns, and even be married, but they must not have filed a joint tax return for the year unless it’s just to claim a refund.
They must be a U.S. citizen, U.S. national, or a resident alien.
They must have a taxpayer identification number. That’s usually a Social Security Number, but if the child doesn’t qualify for one, it can be an Individual Taxpayer Identification Number (ITIN) or an Adoption Taxpayer Identification Number (ATIN).
Rules for Claiming Children
When you’re claiming a dependent who is a child, there are further requirements:
The child has to have lived with you for at least half of the year.
The child has to be related to you as a son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of those.
The child must be 18 or younger at the end of the year, or under 24 if a student. To be a student, the child must have attended school full-time during at least five months of the year. The five months don’t have to be in a row.
The child must be younger than you (or your spouse, if married filing jointly), unless the child is disabled.
Rules for Claiming Other Relatives and Unrelated Persons
For a parent or other relative, there are different additional requirements:
The person cannot have a gross yearly income over $4,050. (That’s the amount for 2017 returns — it usually changes each year.)
The person can’t be a qualifying child dependent of you or another person. That means you can’t claim the person if someone else could.
The person must be either related to you or must have lived with you all year as a member of your household.
Harold Pena-Hayes, E.A.
President of True Tax Resolutions Inc.
TAX HELP: DEDUCTING MILEAGE FOR THE BUSINESS USE OF A CAR
Many of my clients have questions about writing off transportation costs while conducting business, so I hope people will find this article helpful.
When taxpayers need to figure out the deductible cost of operating a car for business purposes, there two ways to do it. You can deduct your actual car expenses or use the IRS’s Standard Mileage Rates for tax year 2017.
The Standard Mileage rates for 2017 are 53.5 cents per business mile driven. When it comes to driving for medical or moving purposes the rate is 17 cents per mile. If the miles driven are in the service of a charitable organization the rate is 14 cents per mile driven.
Now I must inform you, there are some rules when it comes to using the Standard Mileage Rate to deduct transportation cost. The first rule is, you cannot operate more than 5 cars or more at the same time. Secondly, you can only use straight line depreciation for the car.
Also keep in mind, per the IRS, you cannot claim a Section 179 or the Special Depreciation allowance on the car.
Now, let’s talk about how to file for these deductions on your Federal Tax Return.
The way mileage is deducted varies for individuals that are self-employed and employees. If you are self-employed or a business owner you make your transportation deductions on the Schedule C of the 1040 Federal Tax Return.
For individuals who are considered employees you must itemize your deductions on the Schedule A, and include an IRS Form 2106 with your 1040 Federal Tax Return.
Please keep in mind employee deductions are subject to the 2% Adjusted Gross income limit. All of the forms mentioned in this article the Schedule C, Schedule A, and the IRS Form 2106 are available for download at IRS. GOV this is the Internal Revenue Service website.
Authored by: Harold Pena-Hayes, E.A.
IRS TAX HELP: 5 Common Questions Taxpayers have about the Gift Tax
1. WHAT IS THE GIFT TAX?
Many taxpayers may not be aware that when you gift money or property to someone, that gift may be subject to the Gift Tax.
The Gift Tax, is a tax on the transfer of property and or money by one individual to another while receiving nothing, or less than the full value in return. Keep in mind, you must always take into consideration, that if you sell something at less than it’s full value or if you make an interest-free or reduced interest loan, this can also be considered a “gift”. The good news for most tax payers, is that you are allowed to gift up to over $5 million dollars tax-free within your lifetime.
2. WHO PAYS THE GIFT TAX?
The person giving away the property is responsible for paying the Gift Tax to the IRS. However, arrangements can be made so that the individual receiving the property pays the tax. The IRS recommends consulting a Tax Professional if you are considering this type of arrangement. If you have questions or need help regarding a gift tax, contact TRUE TAX RESOLUTIONS INC., by calling 773-609-4TAX or visiting http://truetaxresolutions.com.
3. WHAT IS CONSIDERED A GIFT?
The IRS may consider any transfer of property, where full consideration (measured in money) is not received in return.
4. WHAT CAN BE EXCLUDED FROM GIFTS?
The general rule is that any gift may be considered a taxable gift. However, the IRS does allow for some exceptions.
Here are some examples of those exceptions:
a) Gifts that are not more than the annual exclusion of $14,000 may be excluded.
b) Tuition or Medical expenses that you pay for someone else.
c) Gifts to your Spouse.
d) Gifts to political organizations
e) The value of gifts donated to qualifying charities.
5. MAY I DEDUCT GIFTS ON MY FEDERAL INCOME TAX RETURN?
Making a gift or leaving your estate to your heirs, usually does not affect your Federal Income Tax. Therefore you cannot deduct the value of the gifts you give, unless they were given to a qualifying charity.
If you have questions or need help regarding a gift tax, contact TRUE TAX RESOLUTIONS INC., by calling 773-609-4TAX or visiting http://truetaxresolutions.com.
5 Reasons to File Delinquent Tax Returns
1. If you have income, you should be filing a tax return
Not filing your tax returns is not just bad financial planning, it can be deemed a criminal act by the IRS. It is punishable by a year in jail and a $10,000 fine for each tax return that is not filed. Sure, you may think you’re getting away with not reporting your income, but think about. Chances are whoever you work for, or are doing business with is most likely reporting the money they give you as a business expense to the IRS. In fact, they usually let you of the amount they reported to the IRS in the form of a 1099 or W-2. Sometimes taxpayers don’t file because they no longer have income records for the delinquent tax years. If this is case, the feel free to call 773-609-4TAX or visit http://www.truetaxresolutions.com for a free no obligation consultation with licensed tax professional and we can go over your options for obtaining the financial records necessary to file your tax returns up to date.
2. Avoid extra penalties
When you do not file a tax return on time, you automatically open yourself up to additional penalties. A few of the penalties I most commonly see with clients who have not filed tax returns tax returns are late filing penalties, late payment penalties, and penalties for not pre-paying taxes. Bear in mind the penalty for not filing your tax return is 25%, and when you start tacking on additional penalties and interest you have the makings of a sizable tax debt. If you work or are in business for yourself I recommend you always file a tax return on time, even if you don’t have the cash on hand to pay the tax debt in full. When you file on time you will at least avoid the late filing penalty.
3. Do not let the IRS file your taxes for you
You may not be aware of this but if you do not file a tax return the IRS will sometimes file one on your behalf. This process is known as Substitute for Return. Although it may seem nice of them to file your tax return for you, please be advised they usually only do it to start the collections process. The reasoning behind this is since you did not file a tax return, there is technically no balance yet and therefore nothing for the IRS to collect on. So, by them filing the tax return for you, they create and balance that they can then collect on. There are several disadvantages to having the IRS file your taxes for you namely is that they do not consider such credits as the earned income credit, business expenses, marital status, and dependents among others. This often results in a higher amount owed in taxes.
4. You may be owed tax refund.
If you are a W-2 employee who has taxes withheld from your paycheck or a self-employed person who makes quarterly estimated tax payments, there is a chance you paid more taxes than you owe. If this is the case and you don’t file a tax return you are just leaving money on the table. Even if you have not filed a tax return in years you can recover tax refunds for up to three years back. If you are due tax refunds I recommend you visit http://www.truetaxresolutions.com or call 773-609-4TAX to get them filed as soon as possible.
5. Compliance is key
Filing any missing tax returns is usually the first step in fixing a tax problem The IRS and most states require all missing tax returns before they will consider entering an installment agreement or a tax debt settlement. Therefore, unless you a very low income, or only receive social security income you need to be filed up to date to enter any tax debt relief programs. If you need to file delinquent tax returns I recommend you don’t put it off any longer, in most cases ignoring a tax problem just leads to more penalties and interest.
Harold Pena-Hayes, E.A.
President of True Tax Resolutions Inc.
True Tax Resolutions is tax service dedicated to providing the highest caliber of tax help to the business and individual taxpayers of America. Whether you owe Federal Tax or the State Tax we can help you. We help businesses and Individuals with tax filing, including delinquent tax returns. Additionally, we help clients with tax refunds, tax extension, tax debt settlement, payment plans, wage garnishment removal, levy lifts, and obtaining hardship status. Call 773-609-4TAX for a free no obligation consultation with a licensed professional.
TOP 3 REASONS TAXPAYERS OWE THE IRS
1. W-2 Employees under withholding from their paycheck.
When a employee starts a new job. The Human Resources department of the company usually gives the new hire an IRS form W-4 to fill out. This form is basically lets the employer know how many exemptions the employee will be claiming on their federal tax return. Which in turn lets the the payroll department determine of much of your paycheck to send to the IRS and or state to cover your income taxes. So if you claim more exemptions than you are entitled to, You will in turn not be sending enough money to the IRS to cover the amount of taxes you will owe causing a Tax Debt.
2. Business Owner and other Self-Employed people not making the proper Estimated Quarterly Tax Payments.
When you are self-employed, unless you set up a corporation and pay yourself a salary. Chances are there are no taxes being withheld from your income. That means that the IRS expects you to send in the appropriate amount of money to pay your income tax every 3 months or on a quarterly basis. If you do not make these Estimated Quarterly Tax Payments it will lead to a tax debt. You will have a balance with the IRS for what is owed along with any appropriate penalties and interest.
3. IRA and 401k Distributions
Another common way tax payers end up needing help fixing a tax problem is due to withdrawing money from retirement accounts before actually retiring or being the proper age. There are times when unexpected expenses pop up, and it is natural for a taxpayer to think about all the accounts they can access to pay off bills. The problem is if the money comes from a IRA or 401k or other type of retirement account it can cause a tax debt. The is an issue because since the money goes into the retirement account tax free, it is taxed when it is withdrawn from the account.
In addition to owing a tax balance due to withdrawing the funds, if you under the age of 59 and a half you will receive an additional 10% penalty on top tax debt. The IRS imposes this penalty to discourage abuse of retirement accounts.
If you need help with a tax problem please reach out to Harold Pena-Hayes,E.A. the President of True Tax Resolutions at 773-609-4TAX or visit http://truetaxresolutions.com
Top 5 Ways to Fix a Tax Problem: Tax Debt Relief
1. File Missing Tax Returns The truth of the matter is, the IRS and most States require all missing tax returns to be filed before a taxpayer can be put into a tax resolution. So the first step in fixing many tax problems is to start with fulfilling any outstanding filing requirements. Once you are compliant with filing requirements you will know if you owe taxes, how much you owe , or if you are due a tax refund. If you need to file missing tax returns, or have questions about obtaining old income information to fix a tax problem
call True Tax Resolutions Inc. at 773-609-4TAX .
2. Tax Debt Settlement or Offer in Compromise In some cases, when a taxpayer cannot pay off a tax debt in full, The IRS and some States will allow a tax payer to pay less than what they owe, sometimes significantly less. The bulk of these programs are based on income and assets, and require extensive paperwork. If you need professional help go to http://truetaxresolutions.com for a free consultation.
3. Payment Plans or Installment Agreements If a tax payer does not have all the money on hand to pay off a tax debt in full, The IRS and most States allow for an agreement to be negotiated which allows for repayment of the tax debt in monthly installments.
4. Partial Payment Plans or Partial Payment Installment Agreements There are some instances where a taxpayer has the ability to pay back part of a tax debt, however not all of it. In these cases, the IRS and some States allow agreement to be negotiated where the taxpayer can make smaller payments on the tax debt in order to avoid things like wage garnishments, and bank levies. These payments will not pay off the balance in full, and that is the upside of these agreements.
5. Hardships The IRS and some States have programs available for taxpayers that have tax debts, but do not have the ability to pay back any of the tax debt. These programs are based on a taxpayer’s income and/or lack of assets to demonstrate an inability to pay. Once an inability to pay the tax debt has been established the IRS or state will cease most collection activities.
Authored by: Harold Pena-Hayes, E.A.
President of True Tax Resolutions Inc.
True Tax Resolutions is a company dedicated to providing the highest caliber of tax help services to the business and individual taxpayers of America. Whether your issue is with the IRS or the State we can help you. We help businesses and Individuals file current and past due tax returns. Additionally, we help clients with tax debt settlement, tax debt payment plans, wage garnishment removal, levy lifts, and obtaining hardship status. Go to http://truetaxresolutions.com Call 773-609-4TAX or email [email protected] for a free no obligation consultation with a tax professional.
TAX HELP: IRS DEBT SETTLEMENT
Many American Taxpayers are living today in the shadow of IRS Debt. Whether they have not filed
a tax return in years, or they have a balance that they try not to think about. The tough thing is, it's hard to put things like penalties, interest, bank levies, and wage garnishments out of mind. It is enough to give a taxpayer undue stress and worry.
The good news is the IRS allows you to obtain help from licensed professionals in order to streamline the Debt Settlement, Hardship, and Payment Plan process. If you need tax relief, feel free to contact True Tax Resolutions Inc. You can go to truetaxresolutions.com or call 773-609-4TAX for a free no obligation phone consultation with a licensed Enrolled Agent.
TRUE OR FALSE?
TRUE OR FALSE: I Can Qualify to Pay my Back Taxes in Monthly Installments?
June 20, 2016
TRUE! YOU CAN QUALIFY TO PAY YOUR BACK TAXES IN AFFORDABLE MONTHLY INSTALLMENTS.
It is not uncommon for the even the most financially responsible taxpayers to owe the IRS. In fact, it is common that most of these tax payers might not be able to pay their tax debt in full.
In these types of cases, the IRS will allow you to re-pay your debt in a monthly installment until the debt is paid in full.
Although the monthly installment option is basically the same for all taxpayers, we understand each individual's tax situation is different and should be assessed on a case-by- case basis. That is why we take the time to do a thorough review of your tax debt situation to come up with the resolution that works best for you.
If you discover that you owe the IRS for back taxes, no matter the amount you owe, True Tax Resolutions Inc. will work with you to determine a reasonable re-payment plan that you can afford.
As easy as this may sound, the IRS is quite strict when it comes to fulfilling your re-payment plan agreement. If you default or make your payment late- this can breach the payment arrangement- and leave your responsible to pay the entire amount in full immediately.
If this applies to you, the best thing to do is honor the monthly payment plan you arranged with the IRS. If you default the IRS will take aggressive actions to recoup.
In this case- WAGE GARNISHMENT is usually their next step. This is something you definitely want to avoid because by law, the IRS can garnish up to a certain percentage from you income regardless of how much or how little you make. Wage garnishment is bad news for taxpayers- and you do not want the IRS to take the maximum amount owed in order to clear the debt owed to them.
It may be possible to re-negotiate after your wages have been garnished. However if you have gotten to the point where your wages have been garnished - you have lost your credibility with the IRS.
They may no longer trust you and may decline to grant another payment arrangement.
The GOOD NEWS? The IRS will trust an Enrolled Agent Professional.
The IRS is more likely to negotiate with an Licensed Enrolled Agent because they understand the tax laws and how the IRS operates better than the average citizen. Enrolled Agents have gone to school to learn about the tax system and will also have the experience of resolving the most complex tax issues- making them the right professional to have in your corner.
Call Harold today at True Tax Resolutions and ask for a no obligation consultation- he will fix your IRS problems and give you the True Resolution you are looking for.
CALL NOW 773-609-4TAX