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Now that you have filed your tax returns and have discovered that you owe the IRS, how do they collect the money? First the IRS will send you a bill with the tax owed based on your return and with any applicable penalties and interest. If you don’t pay the first bill, the IRS will send you a second bill.  If you agree with the amount there are several ways to pay: mail in a check with your voucher. These days, this is my least recommended way to pay because of the IRS mail back log. You can visit www.irs/gov/payments to consider online payment options. You can also create your own online account with the IRS and pay that way. This online portal can also allow you to see you past year tax returns and make estimated payments as well. Another way to pay is to set it up with us (if I am your tax preparer) or your current tax preparer to do direct debit of the tax owed when they submit your tax return. So, if you still do not pay after they send you your final bill, the IRS will start with collection action. The IRS has 10 years from the tax assessment date to collect the tax owed. That is a long time for you to be on the IRS’s radar. 

Here are some of the collection terms that are used within the IRS: 

Federal Tax Lien: A legal claim against all your current and future property. This lien automatically comes into existence when you don’t pay the tax on time after the first bill.

Notice of Federal Tax Lien: This is when the IRS sends out a notice to all creditors notifying them that you own the IRS. 

Notice of Intent to Levy: They send you a notice with the intent to Levy. If you don’t pay by the time given on this notice, they will start the Levy process.

Levy: They take the money from your bank accounts. This is a legal seizure of property and rights to property. They can also seize your assets and sell them. 

Seizure: Same as a levy

Next month, I’ll explain some of the types of notices. 

Also, look for my Facebook post with a downloadable PDF on “21 Ways to Get Help for Your IRS Tax Problem and Get Your IRS Debt Resolved, Reduced, or Forgiven.”

Ancient taxes from around the world

In 1705, Russian Emperor Peter the great placed a tax on beards, hoping to force men to adopt the clean-shaven look that was common in Western Europe. 

The French had a salt tax called the gabelle, which angered many and was one of the contributing factors to the French Revolution. It was adopted in the 14th century and had many revisions, lapses and reinstatements and finally abolished in 1946!!

In my previous blog, I talked about taxpayers who haven’t filed in a several years. Now you are ready to file only to find out that you have misplaced some of those tax documents, you can’t remember when the last time you filed last, or maybe you can’t locate the previous tax returns that you did file! Well, there is a solution to all that and more. Transcripts!!

I can log into the IRS databases, with a signed power of attorney and pull all that information for you. I can see what the IRS see’s and along with all the tax documents that were filed, when you filed last, any penalties and interest, refunds, taxes owed, assessments, upcoming audits and much, much more.

With these transcripts, I can help recreate the tax returns that need to be filed, see if you could qualify for penalty abatement and see what the best course of action will be going forward.

Upcoming Due Dates:

June 15th

• Second quarter estimated tax payment due.

Sept 15th

• Partnerships and S-Corps that were put on extension are now due.
• Third quarter estimated tax payment is due.

Oct 1st

• Estates/trusts that filed an extension are due.

Oct 15th

• Individual tax returns (Form 1040) are due for taxpayers who filed an extension.
• C-Corporation tax return is due for C-Corporations that filed an extension.

Ancient taxes from around the world

In Ancient Rome, it was not uncommon for slave owners to free their slaves after a certain number of years of work and/or the payment of a certain fee. Slaves could pay that fee because they had the opportunity to work in several places, and thus could earn the money used to obtain their freedom. The Roman government required the newly free slave to pay a tax on his/her freedom.

Something to ponder: If you are subjugated and separated from you family, forced to work, and possibly physically harmed (beaten/whipped), would you want to pay a tax??

I don’t have to file a tax return this year!  Sweet!!

My tax preparer said I don’t need to file a tax return this year, so why should I?  Some people don’t need to file because their income is lower than their standard deduction, but here are a few reasons why you should file for the current year.

1. Federal Income Tax Withheld: You should file to get money back if your employer withheld federal income tax from your pay, you made estimated tax payments, or had a prior year overpayment applied to this year’s tax.
2. Earned Income Tax Credit: You may qualify for EITC if you worked but did not earn a lot of money. EITC is a refundable tax credit, which means you could qualify for a tax refund. To get the credit, you must file a return and claim it.
3. Additional Child Tax Credit: This refundable credit may be available if you have at least one qualifying child and you did not get the full amount of the Child Tax Credit.
4. American Opportunity Credit: Students in their first four years of postsecondary education may qualify for as much as $2,500 through this credit. Forty percent (40%) of the credit is refundable so even those who owe no tax can get up to $1,000 of the credit as cash back for each eligible student.
5. Adoption Credit: You may be able to claim a refundable tax credit for qualified expenses you paid to adopt an eligible child.
6. Stimulus payment/ Economic Stimulus Payment (EIP): If you didn’t receive any or some of the 3 stimulus payments in 2020 and 2021, your maybe eligible if you file a tax return and you will get the stimulus money as a nontaxable tax refund.

Upcoming Due Dates:

June 15th

• Second quarter estimated tax payment due.

Sept 15th

• Partnerships and S-Corps that were put on extension are now due.
• Third quarter estimated tax payment is due.

Oct 1st

• Estates/trusts that filed an extension are due.

Oct 15th

• Individual tax returns (Form 1040) are due for taxpayers who filed an extension.
• C-Corporation tax return is due for C-Corporations that filed an extension.

Ancient taxes from around the world

Pecunia non olet is a Latin saying for “Money Doesn’t Stink!”. During the 1^st Century AD, Roman Emperor Vespasian placed a tax on urine!! The buyer of the urine paid the tax. The urine from the public urinals was sold as an essential ingredient for several chemical processes. It was used in leather tanning, wool production and by launderers as a source of ammonia to clean and whiten woolen togas.

I have a question for you! Who has not filed their taxes in a few years?

If you are thinking “ME!”, keep reading, because here are some reasons to file:

• If you need a bank loan, the bank will want to see previous year’s tax returns.
• If you have a refund due, you only have so much time to claim it on your tax return.
• You face steep penalties for not filing, up to 25% of what is owed!!
• It causes unwanted stress in your life.
• The IRS is using more technology than ever to track down taxpayers who have not filed taxes.

What do I do? Well, call me and I can file the unfiled tax returns. Some of the things we will look at are how many years need to be filed, filing married or separately, do state returns need to be filed and what happens after we file the returns.

Upcoming Important Due Dates:

June 15th

• Second quarter estimated tax payment due.

Sept 15th

• Partnerships and S-Corps that were put on extension are now due.
• Third quarter estimated tax payment is due.

Oct 1st

• Estates/trusts that filed an extension are due.

Oct 15th

• Individual tax returns (Form 1040) are due for taxpayers who filed an extension.

Hi Everyone,

Here is my first blog post with many more to come.

Did you know that there are more than 10 million taxpayers who have not filed their previous year’s tax returns in over a year?! That is right, some taxpayers have not filed their 2019 tax returns and previous years before that. We in the tax industry call them “non-filers”. The IRS is now using Artificial intelligence (AI) to find these “non-filers” and have them file the missing returns from prior years.

Why would you care about filing on time when you have a refund? Because you have the later of 3 years from the due date of the tax return to file and get your refund or you have 2 years from the date the tax was paid. If you wait past these dates, you lose your refund to the IRS.

If you have not filed in a few years, I can help you file all the past year tax returns and if you don’t have all your original tax documentation, I have ways to get copies of the tax forms.

Upcoming Due Dates:
03/15/21 – Last day for S-Corps, partnerships, multi member LLC’s to file business tax return.
04/15/21 – Last day to file C-Corp tax return or file for a 6-month extension.
04/15/21 – First quarter estimated taxes for 2021 due.
04/15/21 – Calendar year estate/trust tax returns due (15th day of fourth month for fiscal year).
05/17/21 – NEW DATE -Individual tax returns due and last day to file for a 6-month extension.
06/15/21 – Second quarter estimated tax payment due.

The Internal Revenue Service announced another expansion of its “Fresh Start” initiative by offering more flexible terms to its Offer in Compromise (OIC) program that will enable some of the most financially distressed taxpayers to clear up their tax problems and in many cases more quickly than in the past.

“This phase of Fresh Start will assist some taxpayers who have faced the most financial hardship in recent years,” said IRS Commissioner Doug Shulman. “It is part of our multiyear effort to help taxpayers who are struggling to make ends meet.”

This announcement focuses on the financial analysis used to determine which taxpayers qualify for an OIC. This announcement also enables some taxpayers to resolve their tax problems in as little as two years compared to four or five years in the past.

In certain circumstances, the changes announced today include:

• Revising the calculation for the taxpayer’s future income.
• Allowing taxpayers to repay their student loans.
• Allowing taxpayers to pay state and local delinquent taxes.
• Expanding the Allowable Living Expense allowance category and amount.

In general, an OIC is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. An OIC is generally not accepted if the IRS believes the liability can be paid in full as a lump sum or a through payment agreement. The IRS looks at the taxpayer’s income and assets to make a determination of the taxpayer’s reasonable collection potential. OICs are subject to acceptance on legal requirements.

The IRS recognizes that many taxpayers are still struggling to pay their bills so the agency has been working to put in place common-sense changes to the OIC program to more closely reflect real-world situations.

When the IRS calculates a taxpayer’s reasonable collection potential, it will now look at only one year of future income for offers paid in five or fewer months, down from four years, and two years of future income for offers paid in six to 24 months, down from five years. All offers must be fully paid within 24 months of the date the offer is accepted. The Form 656-B, Offer in Compromise Booklet, and Form 656, Offer in Compromise, has been revised to reflect the changes.

Other changes to the program include narrowed parameters and clarification of when a dissipated asset will be included in the calculation of reasonable collection potential. In addition, equity in income producing assets generally will not be included in the calculation of reasonable collection potential for on-going businesses.

Allowable Living Expenses

The Allowable Living Expense standards are used in cases requiring financial analysis to determine a taxpayer’s ability to pay. The standard allowances provide consistency and fairness in collection determinations by incorporating average expenditures for basic necessities for citizens in similar geographic areas. These standards are used when evaluating installment agreement and offer in compromise requests.

The National Standard miscellaneous allowance has been expanded to include additional items. Taxpayers can use the miscellaneous allowance for expenses such as credit card payments and bank fees and charges.

Guidance has also been clarified to allow payments for loans guaranteed by the federal government for the taxpayer’s post-high school education. In addition, payments for delinquent state and local taxes may be allowed based on percentage basis of tax owed to the state and IRS.

This is another in a series of steps to help struggling taxpayers under the Fresh Start initiative.

In 2008, IRS announced lien relief for taxpayers trying to refinance or sell a home. The IRS added new flexibility for taxpayers facing payment or collection problems in 2009. The IRS made changes to lien policies in 2011 and expanded the threshold for small businesses to resolve tax issues through installment agreements. And, earlier this year, the IRS increased the threshold for a streamlined installment agreement allowing individual taxpayers to set up an installment agreement without providing a significant amount of financial information.