If you missed the filing deadline, don't panic. The IRS says the same thing. Just file the taxes as as you can. Plus below, you will find the announcement that the IRS released on the subject.
Missed the Income Tax Deadline – IRS Offers Help for Taxpayers
The IRS has some advice for taxpayers who missed the tax filing deadline.
Don’t panic but file as soon as possible. If you owe money the quicker you file your return, the less penalties and interest you will have to pay. Even if you have to mail us your return, the sooner we receive it, the better.
E-file is still your best option. IRS e-file programs are available for most taxpayers through the extension deadline – October 15, 2012.
Free File is still available. Check out IRS Free File at irs.gov/freefile. Taxpayers whose income is $57,000 or less will qualify to file their return for free through IRS Free File. For people who make more than $57,000 and who are comfortable preparing their own tax return, the IRS offers Free File Fillable Forms. There is no software assistance with Free File Fillable Forms, but it does the basic math calculations for you.
Pay as much as you are able. Taxpayers who owe tax should pay as much as they can when they file their tax return, even if it isn’t the total amount due, and then apply for an installment agreement to pay the remaining balance.
Installment Agreements are available. Request a payment agreement with the IRS. File Form 9465, Installment Agreement Request or apply online using the IRS Online Payment Agreement Application available at irs.gov.
Penalties and interest may be due. Taxpayers who missed the filing deadline may be charged a penalty for filing after the due date. Filing as soon as possible will keep this penalty to a minimum. And, taxpayers who did not pay their entire tax bill by the due date may be charged a late payment penalty. The best way to keep this penalty to a minimum is to pay as much as possible, as soon as possible.
Although it cannot waive interest charges, the IRS will consider reductions in these penalties if you can establish a reasonable cause for the late filing and payment. Information about penalties and interest can be found at Avoiding Penalties and the Tax Gap.
Refunds may be waiting. Taxpayers should file as soon as possible to get their refunds. Even if your income is below the normal filing requirement, you may be entitled to a refund of taxes that were withheld from your wages, quarterly estimated payments or other special credits. You will not be charged any penalties or interest for filing after the due date, but if your return is not filed within three years you could forfeit your right to the refund.
Thursday, April 19, 2012
Wednesday, April 18, 2012
When the IRS Sends You a Tax Bill - What to Do, and What Not to Do
If you filed your taxes, and was not able to pay the amount owed, the IRS will send you a tax bill. However, if you didn't file your tax return(s) and the IRS sends you a tax bill - you want to call a tax professional, immediately.
The IRS can legally prepare what they call a "Substitute Return" and they can then legally levy your bank account(s) or garnish your wages - based on the outcome of a "Substitute Return"
The problem is, when the IRS prepares a "Substitute Return" they do NOT include all of your expenses or exemptions. And how can they, they don't have direct access to this information.
Therefore, in order to get the amount owed, based on a "Substitute Return" you MUST file your own return. Below is a list of what you need to know about making Federal Tas Payments - Remember, if you forgot to file the tax return, contact a tax professional, immediately, if the IRS sent you a tax bill.
Everything You Need to Know About Making Federal Tax Payments
If you need to make a payment with your tax return this year, the IRS wants you to know about its payment options. Here are 10 important facts to help you make your tax payment correctly.
1. Never send cash!
2. If you file electronically, you can file and pay in a single step by authorizing an electronic funds withdrawal via tax preparation software or a tax professional.
3. Whether you file a paper return or electronically, you can pay by phone or online using a credit or debit card.
4. Electronic payment options provide an alternative to checks or money orders. You can pay taxes or user fees 24 hours a day, seven days a week. Visit the IRS website at www.irs.gov and search e-pay, or refer to Publication 3611, Electronic Payments for more details.
5. If you itemize, you may be able to deduct the convenience fee charged for paying individual income taxes with a credit or debit card as a miscellaneous itemized deduction on Form 1040, Schedule A, Itemized Deductions. The deduction is subject to the 2 percent limit.
6. If you file on paper, you can enclose your payment with your return but do not staple it to the form.
7. If you pay by check or money order, make sure it is payable to the “United States Treasury.”
8. Always provide on the front of your check or money order your correct name, address, Social Security number listed first on the tax form, daytime telephone number, tax year and form number.
9. Complete and include Form 1040-V, Payment Voucher, when mailing your payment to the IRS. Double-check the IRS mailing address. This will help the IRS process your payment accurately and efficiently.
10. For more information, call 800-829-4477 and select TeleTax Topic 158, Ensuring Proper Credit of Payments. You can also find out more in Publication 17, Your Federal Income Tax and Form 1040-V, both available at www.irs.gov or by calling 800-TAX-FORM (800-829-3676).
The IRS can legally prepare what they call a "Substitute Return" and they can then legally levy your bank account(s) or garnish your wages - based on the outcome of a "Substitute Return"
The problem is, when the IRS prepares a "Substitute Return" they do NOT include all of your expenses or exemptions. And how can they, they don't have direct access to this information.
Therefore, in order to get the amount owed, based on a "Substitute Return" you MUST file your own return. Below is a list of what you need to know about making Federal Tas Payments - Remember, if you forgot to file the tax return, contact a tax professional, immediately, if the IRS sent you a tax bill.
Everything You Need to Know About Making Federal Tax Payments
If you need to make a payment with your tax return this year, the IRS wants you to know about its payment options. Here are 10 important facts to help you make your tax payment correctly.
1. Never send cash!
2. If you file electronically, you can file and pay in a single step by authorizing an electronic funds withdrawal via tax preparation software or a tax professional.
3. Whether you file a paper return or electronically, you can pay by phone or online using a credit or debit card.
4. Electronic payment options provide an alternative to checks or money orders. You can pay taxes or user fees 24 hours a day, seven days a week. Visit the IRS website at www.irs.gov and search e-pay, or refer to Publication 3611, Electronic Payments for more details.
5. If you itemize, you may be able to deduct the convenience fee charged for paying individual income taxes with a credit or debit card as a miscellaneous itemized deduction on Form 1040, Schedule A, Itemized Deductions. The deduction is subject to the 2 percent limit.
6. If you file on paper, you can enclose your payment with your return but do not staple it to the form.
7. If you pay by check or money order, make sure it is payable to the “United States Treasury.”
8. Always provide on the front of your check or money order your correct name, address, Social Security number listed first on the tax form, daytime telephone number, tax year and form number.
9. Complete and include Form 1040-V, Payment Voucher, when mailing your payment to the IRS. Double-check the IRS mailing address. This will help the IRS process your payment accurately and efficiently.
10. For more information, call 800-829-4477 and select TeleTax Topic 158, Ensuring Proper Credit of Payments. You can also find out more in Publication 17, Your Federal Income Tax and Form 1040-V, both available at www.irs.gov or by calling 800-TAX-FORM (800-829-3676).
Tuesday, April 17, 2012
What to Do If Your Receive an IRS Letter or Notice
Below is a list of which the IRS prepared, telling taxpayers what to do if they receive an IRS Notice or Letter. The first thing to do, is to control any fear that you may have. Breath deep, take your time and "OPEN" the letter. Try not to run from the task of reading or responding to the letter or notice.
If you need help, click on the link above. There is always affordable help with IRS issues, if you know where to look. A tax professional works for you. Yes, they are bound by the tax code (law) however, there are procedures which can make things easier for the taxpayer. Don't be afraid to click your mouse and get the help you need to neturalize the IRS.
Eight Facts to Know if You Receive an IRS Letter or Notice
The IRS sends millions of letters and notices to taxpayers for a variety of reasons. Many of these letters and notices can be dealt with simply, without having to call or visit an IRS office.
Here are eight things to know about IRS notices and letters.
1. There are a number of reasons why the IRS might send you a notice. Notices may request payment, notify you of account changes, or request additional information. A notice normally covers a very specific issue about your account or tax return.
2. Each letter and notice offers specific instructions on what action you need to take.
3. If you receive a correction notice, you should review the correspondence and compare it with the information on your return.
4. If you agree with the correction to your account, then usually no reply is necessary unless a payment is due or the notice directs otherwise.
5. If you do not agree with the correction the IRS made, it is important to respond as requested. You should send a written explanation of why you disagree and include any documents and information you want the IRS to consider along with the bottom tear-off portion of the notice. Mail the information to the IRS address shown in the upper left of the notice. Allow at least 30 days for a response.
6. Most correspondence can be handled without calling or visiting an IRS office. However, if you have questions, call the telephone number in the upper right of the notice. Have a copy of your tax return and the correspondence available when you call to help the IRS respond to your inquiry.
7. It’s important to keep copies of any correspondence with your records.
8. IRS notices and letters are sent by mail. The IRS does not correspond by email about taxpayer accounts or tax returns.
For more information about IRS notices and bills, see Publication 594, The IRS Collection Process. Information about penalties and interest is available in Publication 17, Your Federal Income Tax (For Individuals). Both publications are available at www.irs.gov or by calling 800-TAX-FORM (800-829-3676).
If you need help, click on the link above. There is always affordable help with IRS issues, if you know where to look. A tax professional works for you. Yes, they are bound by the tax code (law) however, there are procedures which can make things easier for the taxpayer. Don't be afraid to click your mouse and get the help you need to neturalize the IRS.
Eight Facts to Know if You Receive an IRS Letter or Notice
The IRS sends millions of letters and notices to taxpayers for a variety of reasons. Many of these letters and notices can be dealt with simply, without having to call or visit an IRS office.
Here are eight things to know about IRS notices and letters.
1. There are a number of reasons why the IRS might send you a notice. Notices may request payment, notify you of account changes, or request additional information. A notice normally covers a very specific issue about your account or tax return.
2. Each letter and notice offers specific instructions on what action you need to take.
3. If you receive a correction notice, you should review the correspondence and compare it with the information on your return.
4. If you agree with the correction to your account, then usually no reply is necessary unless a payment is due or the notice directs otherwise.
5. If you do not agree with the correction the IRS made, it is important to respond as requested. You should send a written explanation of why you disagree and include any documents and information you want the IRS to consider along with the bottom tear-off portion of the notice. Mail the information to the IRS address shown in the upper left of the notice. Allow at least 30 days for a response.
6. Most correspondence can be handled without calling or visiting an IRS office. However, if you have questions, call the telephone number in the upper right of the notice. Have a copy of your tax return and the correspondence available when you call to help the IRS respond to your inquiry.
7. It’s important to keep copies of any correspondence with your records.
8. IRS notices and letters are sent by mail. The IRS does not correspond by email about taxpayer accounts or tax returns.
For more information about IRS notices and bills, see Publication 594, The IRS Collection Process. Information about penalties and interest is available in Publication 17, Your Federal Income Tax (For Individuals). Both publications are available at www.irs.gov or by calling 800-TAX-FORM (800-829-3676).
Wednesday, April 4, 2012
Estimated Taxes - Making Sure You Don't Have to Pay a Penalty
If you don't calculate your Estimated Payments correctly, you can end up paying a penality. The way to determine Estimate Payments is not that difficult, and the IRS has released tips on how and what to do if you have to pay Estimated Taxes.
Six Tips for People Who Pay Estimated Taxes
You may need to pay estimated taxes to the IRS during the year if you have income that is not subject to withholding. This depends on what you do for a living and the types of income you receive.
These six tips from the IRS explain estimated taxes and how to pay them.
1. If you have income from sources such as self-employment, interest, dividends, alimony, rent, gains from the sales of assets, prizes or awards, then you may have to pay estimated tax.
2. As a general rule, you must pay estimated taxes in 2012 if both of these statements apply: 1) You expect to owe at least $1,000 in tax after subtracting your tax withholding (if you have any) and tax credits, and 2) You expect your withholding and credits to be less than the smaller of 90 percent of your 2012 taxes or 100 percent of the tax on your 2011 return. Special rules apply for farmers, fishermen, certain household employers and certain higher income taxpayers.
3. For Sole Proprietors, Partners and S Corporation shareholders, you generally have to make estimated tax payments if you expect to owe $1,000 or more in tax when you file your return.
4. To figure your estimated tax, include your expected gross income, taxable income, taxes, deductions and credits for the year. Use the worksheet in Form 1040-ES, Estimated Tax for Individuals, for this. You want to be as accurate as possible to avoid penalties. Also, consider changes in your situation and recent tax law changes.
5. The year is divided into four payment periods, or due dates, for estimated tax purposes. Those dates generally are April 15, June 15, Sept. 15 and Jan. 15 of the next or following year.
6. Form 1040-ES, Estimated Tax for Individuals, has everything you need to pay estimated taxes. It includes instructions, worksheets, schedules and payment vouchers. However, the easiest way to pay estimated taxes is electronically through the Electronic Federal Tax Payment System, or EFTPS, at www.irs.gov. You can also pay estimated taxes by check or money order using the Estimated Tax Payment Voucher or by credit or debit card
Six Tips for People Who Pay Estimated Taxes
You may need to pay estimated taxes to the IRS during the year if you have income that is not subject to withholding. This depends on what you do for a living and the types of income you receive.
These six tips from the IRS explain estimated taxes and how to pay them.
1. If you have income from sources such as self-employment, interest, dividends, alimony, rent, gains from the sales of assets, prizes or awards, then you may have to pay estimated tax.
2. As a general rule, you must pay estimated taxes in 2012 if both of these statements apply: 1) You expect to owe at least $1,000 in tax after subtracting your tax withholding (if you have any) and tax credits, and 2) You expect your withholding and credits to be less than the smaller of 90 percent of your 2012 taxes or 100 percent of the tax on your 2011 return. Special rules apply for farmers, fishermen, certain household employers and certain higher income taxpayers.
3. For Sole Proprietors, Partners and S Corporation shareholders, you generally have to make estimated tax payments if you expect to owe $1,000 or more in tax when you file your return.
4. To figure your estimated tax, include your expected gross income, taxable income, taxes, deductions and credits for the year. Use the worksheet in Form 1040-ES, Estimated Tax for Individuals, for this. You want to be as accurate as possible to avoid penalties. Also, consider changes in your situation and recent tax law changes.
5. The year is divided into four payment periods, or due dates, for estimated tax purposes. Those dates generally are April 15, June 15, Sept. 15 and Jan. 15 of the next or following year.
6. Form 1040-ES, Estimated Tax for Individuals, has everything you need to pay estimated taxes. It includes instructions, worksheets, schedules and payment vouchers. However, the easiest way to pay estimated taxes is electronically through the Electronic Federal Tax Payment System, or EFTPS, at www.irs.gov. You can also pay estimated taxes by check or money order using the Estimated Tax Payment Voucher or by credit or debit card
Tuesday, April 3, 2012
The IRS Released This Press Release Today: "What to Do If You Can't File On Time"
WASHINGTON — The Internal Revenue Service today reminded taxpayers that quick and easy solutions are available if they can’t file their returns or pay their taxes on time, and they can even request relief online.
The IRS says don’t panic. Tax-filing extensions are available to taxpayers who need more time to finish their returns. Remember, this is an extension of time to file; not an extension of time to pay. However, taxpayers who are having trouble paying what they owe usually qualify for payment plans and other relief. Last month, for example, the IRS, as part of its Fresh Start initiative announced penalty relief for unemployed taxpayers and self-employed individuals whose income has dropped.
Either way, taxpayers will avoid stiff penalties if they file either a regular income tax return or a request for a tax-filing extension by this year’s April 17 deadline. Taxpayers should file, even if they can’t pay the full amount due.
Here are further details on the options available.
More Time to File
People who haven’t finished filling out their return can get an automatic six-month extension. The fastest and easiest way to get the extra time is through the Free File link on IRS.gov . In a matter of minutes, anyone, regardless of income, can use this free service to electronically request an automatic tax-filing extension on Form 4868.
Filing this form gives taxpayers until Oct. 15 to file a return. To get the extension, taxpayers must estimate their tax liability on this form and should also pay any amount due.
By properly filing this form, a taxpayer will avoid the late-filing penalty, normally five percent per month based on the unpaid balance, that applies to returns filed after the deadline. In addition, any payment made with an extension request will reduce or eliminate interest and late-payment penalties that apply to payments made after April 17. The current interest rate three percent per year, compounded daily, and the late-payment penalty is normally 0.5 percent per month.
Besides Free File, taxpayers can choose to request an extension through a paid tax preparer, using tax-preparation software or by filing a paper Form 4868, available on IRS.gov. Of the 10.5 million extension forms received by the IRS last year, about 4 million were filed electronically.
Some taxpayers get more time to file without having to ask for it. These include:
• Taxpayers abroad. U.S. citizens and resident aliens who live and work abroad, as well as members of the military on duty outside the U.S., have until June 15 to file. Tax payments are still due April 17.
• Members of the military and others serving in Iraq, Afghanistan or other combat zone localities. Typically, taxpayers can wait until at least 180 days after they leave the combat zone to file returns and pay any taxes due. For details, see Extensions of Deadlines in Publication 3 , Armed Forces Tax Guide.
• People affected by certain tornadoes, severe storms, floods and other recent natural disasters. Currently, parts of Indiana, Kentucky, Tennessee and West Virginia are covered by federal disaster declarations, and affected individuals and businesses in these areas have until May 31 to file and pay.
Easy Ways to E-Pay
Taxpayers with a balance due IRS now have several quick and easy ways to electronically pay what they owe. They include:
• Electronic Federal Tax Payment System (EFTPS). This free service gives taxpayers a safe and convenient way to pay individual and business taxes by phone or online. To enroll or for more information, call 800-316-6541 or visit www.eftps.gov.
• Electronic funds withdrawal. E-file and e-pay in a single step.
• Credit or debit card. Both paper and electronic filers can pay their taxes by phone or online through any of several authorized credit and debit card processors. Though the IRS does not charge a fee for this service, the card processors do. For taxpayers who itemize their deductions, these convenience fees can be claimed on Schedule A Line 23.
Taxpayers who choose to pay by check or money order should make the payment out to the “United States Treasury.” Write “2011 Form 1040,” name, address, daytime phone number and Social Security number on the front of the check or money order. To help insure that the payment is credited promptly, also enclose a Form 1040-V payment voucher.
More Time to Pay
Taxpayers who have finished their returns should file by the regular April 17 deadline, even if they can’t pay the full amount due. In many cases, those struggling with unpaid taxes qualify for one of several relief programs, including those recently expanded under the IRS "Fresh Start" initiative. These include the following:
• Most people can set up a payment agreement with the IRS on line in a matter of minutes. Those who owe $50,000 or less in combined tax, penalties and interest can use the Online Payment Agreement to set up a monthly payment agreement for up to six years. Taxpayers can choose this option even if they have not yet received a bill or notice from the IRS. Alternatively, taxpayers can request a payment agreement by filing Form 9465-FS. This form can be downloaded from IRS.gov and mailed along with a tax return, bill or notice.
• Most unemployed filers and self-employed individuals whose business income dropped substantially can apply for a six-month extension of time to pay. Eligible taxpayers will not be charged a late-payment penalty if they pay any tax, penalty and interest due by Oct. 15, 2012. Taxpayers qualify if they were unemployed for any 30-day period between Jan. 1, 2011 and April 17, 2012. Self-employed people qualify if their business income declined 25 percent or more in 2011, due to the economy. Income limits and other special rules apply. Apply using Form 1127-A.
• Some struggling taxpayers may qualify for an offer-in-compromise. This is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. Generally, an offer will not be accepted if the IRS believes the liability can be paid in full as a lump sum or through a payment agreement. The IRS looks at the taxpayer’s income and assets to make a determination regarding the taxpayer’s ability to pay.
Details on all filing and payment options are on IRS.gov.
The IRS says don’t panic. Tax-filing extensions are available to taxpayers who need more time to finish their returns. Remember, this is an extension of time to file; not an extension of time to pay. However, taxpayers who are having trouble paying what they owe usually qualify for payment plans and other relief. Last month, for example, the IRS, as part of its Fresh Start initiative announced penalty relief for unemployed taxpayers and self-employed individuals whose income has dropped.
Either way, taxpayers will avoid stiff penalties if they file either a regular income tax return or a request for a tax-filing extension by this year’s April 17 deadline. Taxpayers should file, even if they can’t pay the full amount due.
Here are further details on the options available.
More Time to File
People who haven’t finished filling out their return can get an automatic six-month extension. The fastest and easiest way to get the extra time is through the Free File link on IRS.gov . In a matter of minutes, anyone, regardless of income, can use this free service to electronically request an automatic tax-filing extension on Form 4868.
Filing this form gives taxpayers until Oct. 15 to file a return. To get the extension, taxpayers must estimate their tax liability on this form and should also pay any amount due.
By properly filing this form, a taxpayer will avoid the late-filing penalty, normally five percent per month based on the unpaid balance, that applies to returns filed after the deadline. In addition, any payment made with an extension request will reduce or eliminate interest and late-payment penalties that apply to payments made after April 17. The current interest rate three percent per year, compounded daily, and the late-payment penalty is normally 0.5 percent per month.
Besides Free File, taxpayers can choose to request an extension through a paid tax preparer, using tax-preparation software or by filing a paper Form 4868, available on IRS.gov. Of the 10.5 million extension forms received by the IRS last year, about 4 million were filed electronically.
Some taxpayers get more time to file without having to ask for it. These include:
• Taxpayers abroad. U.S. citizens and resident aliens who live and work abroad, as well as members of the military on duty outside the U.S., have until June 15 to file. Tax payments are still due April 17.
• Members of the military and others serving in Iraq, Afghanistan or other combat zone localities. Typically, taxpayers can wait until at least 180 days after they leave the combat zone to file returns and pay any taxes due. For details, see Extensions of Deadlines in Publication 3 , Armed Forces Tax Guide.
• People affected by certain tornadoes, severe storms, floods and other recent natural disasters. Currently, parts of Indiana, Kentucky, Tennessee and West Virginia are covered by federal disaster declarations, and affected individuals and businesses in these areas have until May 31 to file and pay.
Easy Ways to E-Pay
Taxpayers with a balance due IRS now have several quick and easy ways to electronically pay what they owe. They include:
• Electronic Federal Tax Payment System (EFTPS). This free service gives taxpayers a safe and convenient way to pay individual and business taxes by phone or online. To enroll or for more information, call 800-316-6541 or visit www.eftps.gov.
• Electronic funds withdrawal. E-file and e-pay in a single step.
• Credit or debit card. Both paper and electronic filers can pay their taxes by phone or online through any of several authorized credit and debit card processors. Though the IRS does not charge a fee for this service, the card processors do. For taxpayers who itemize their deductions, these convenience fees can be claimed on Schedule A Line 23.
Taxpayers who choose to pay by check or money order should make the payment out to the “United States Treasury.” Write “2011 Form 1040,” name, address, daytime phone number and Social Security number on the front of the check or money order. To help insure that the payment is credited promptly, also enclose a Form 1040-V payment voucher.
More Time to Pay
Taxpayers who have finished their returns should file by the regular April 17 deadline, even if they can’t pay the full amount due. In many cases, those struggling with unpaid taxes qualify for one of several relief programs, including those recently expanded under the IRS "Fresh Start" initiative. These include the following:
• Most people can set up a payment agreement with the IRS on line in a matter of minutes. Those who owe $50,000 or less in combined tax, penalties and interest can use the Online Payment Agreement to set up a monthly payment agreement for up to six years. Taxpayers can choose this option even if they have not yet received a bill or notice from the IRS. Alternatively, taxpayers can request a payment agreement by filing Form 9465-FS. This form can be downloaded from IRS.gov and mailed along with a tax return, bill or notice.
• Most unemployed filers and self-employed individuals whose business income dropped substantially can apply for a six-month extension of time to pay. Eligible taxpayers will not be charged a late-payment penalty if they pay any tax, penalty and interest due by Oct. 15, 2012. Taxpayers qualify if they were unemployed for any 30-day period between Jan. 1, 2011 and April 17, 2012. Self-employed people qualify if their business income declined 25 percent or more in 2011, due to the economy. Income limits and other special rules apply. Apply using Form 1127-A.
• Some struggling taxpayers may qualify for an offer-in-compromise. This is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. Generally, an offer will not be accepted if the IRS believes the liability can be paid in full as a lump sum or through a payment agreement. The IRS looks at the taxpayer’s income and assets to make a determination regarding the taxpayer’s ability to pay.
Details on all filing and payment options are on IRS.gov.
What To Do If You Can't Pay All of Your Taxes
The IRS understands that times are hard for many people. And they have release a list of tips on what to do if you can't pay all of your taxes on time. The most important suggestion is to still file your tax return on time. If you don't file on time, regardless if you have the money or not, you will receive a penalty for late filing. This is penalty you don't have to incurr. File on time, there is help, if you can't pay on time.
Tips for Taxpayers Who Can't Pay Their Taxes on Time
If you owe tax with your federal tax return, but can't afford to pay it all when you file, the IRS wants you to know your options and help you keep interest and penalties to a minimum.
Here are five tips:
1. File your return on time and pay as much as you can with the return. These steps will eliminate the late filing penalty, reduce the late payment penalty and cut down on interest charges. For electronic and credit card options for paying see IRS.gov. You may also mail a check payable to the United States Treasury
2. Consider obtaining a loan or paying by credit card. The interest rate and fees charged by a bank or credit card company may be lower than interest and penalties imposed by the Internal Revenue Code.
3. Request an installment payment agreement. You do not need to wait for IRS to send you a bill before requesting a payment agreement. Options for requesting an agreement include:
• Using the Online Payment Agreement application and
• Completing and submitting IRS Form 9465-FS, Installment Agreement Request, with your return
IRS charges a user fee to set up your payment agreement. See www.irs.gov or the installment agreement request form for fee amounts.
4. Request an extension of time to pay. For tax year 2011, qualifying individuals may request an extension of time to pay and have the late payment penalty waived as part of the IRS Fresh Start Initiative. To see if you qualify visit www.irs.gov and get form 1127-A, Application for Extension of Time for Payment. But hurry, your application must be filed by April 17, 2012.
5. If you receive a bill from the IRS, please contact us immediately to discuss these and other payment options. Ignoring the bill will only compound your problem and could lead to IRS collection action.
If you can’t pay in full and on time, the key to minimizing your penalty and interest charges is to pay as much as possible by the tax deadline and the balance as soon as you can. For more information on the IRS collection process go to or see IRSVideos.gov/OweTaxes.
Tips for Taxpayers Who Can't Pay Their Taxes on Time
If you owe tax with your federal tax return, but can't afford to pay it all when you file, the IRS wants you to know your options and help you keep interest and penalties to a minimum.
Here are five tips:
1. File your return on time and pay as much as you can with the return. These steps will eliminate the late filing penalty, reduce the late payment penalty and cut down on interest charges. For electronic and credit card options for paying see IRS.gov. You may also mail a check payable to the United States Treasury
2. Consider obtaining a loan or paying by credit card. The interest rate and fees charged by a bank or credit card company may be lower than interest and penalties imposed by the Internal Revenue Code.
3. Request an installment payment agreement. You do not need to wait for IRS to send you a bill before requesting a payment agreement. Options for requesting an agreement include:
• Using the Online Payment Agreement application and
• Completing and submitting IRS Form 9465-FS, Installment Agreement Request, with your return
IRS charges a user fee to set up your payment agreement. See www.irs.gov or the installment agreement request form for fee amounts.
4. Request an extension of time to pay. For tax year 2011, qualifying individuals may request an extension of time to pay and have the late payment penalty waived as part of the IRS Fresh Start Initiative. To see if you qualify visit www.irs.gov and get form 1127-A, Application for Extension of Time for Payment. But hurry, your application must be filed by April 17, 2012.
5. If you receive a bill from the IRS, please contact us immediately to discuss these and other payment options. Ignoring the bill will only compound your problem and could lead to IRS collection action.
If you can’t pay in full and on time, the key to minimizing your penalty and interest charges is to pay as much as possible by the tax deadline and the balance as soon as you can. For more information on the IRS collection process go to or see IRSVideos.gov/OweTaxes.
Thursday, March 29, 2012
Contribute to an IRA, Lower Your Taxes, While Saving for Retirement
One of the best ways to lower your taxes, is to contribute to an IRA. There are stipulations, especially if you have a retirement plan at your place of work. Below the IRS has provided 10 Tips about Contributing to an IRA in 2012.
Taxpayers Get More Time to Contribute to IRAs in 2012
You have two extra days this year to make contributions to your Individual Retirement Arrangements. That’s because April 15 falls on a weekend and Emancipation Day, a legal holiday in the District of Columbia, will be observed on Monday, April 16. That means the due date for filing your tax return and making contributions to your 2011 IRA is Tuesday, April 17.
Here are the top 10 things the IRS wants you to know about setting aside retirement money in a traditional IRA.
1. You may be able to deduct some or all of your contributions to your IRA. You may also be eligible for the Savers Credit, formally known as the Retirement Savings Contributions Credit.
2. Contributions can be made to your traditional IRA at any time during the year or by the due date for filing your return for that year, not including extensions. For most people, this means you must make contributions for 2011 by April 17, 2012. If you contribute between Jan. 1 and April 17, you should designate the year targeted for the contribution.
3. The funds in your IRA are generally not taxed until you receive distributions from it.
4. Use the worksheets in the instructions for either Form 1040A or Form 1040 to figure your deduction for your IRA contributions.
5. For 2011, the most you can contribute to your traditional IRA is generally the smaller of the following amounts: $5,000 for most taxpayers, $6,000 for taxpayers who were 50 or older at the end of 2011 or the amount of your taxable compensation for the year.
6. Use Form 8880, Credit for Qualified Retirement Savings Contributions, to determine whether you are also eligible for a tax credit equal to a percentage of your contribution.
7. You must use either Form 1040A or Form 1040 to deduct your IRA contribution or claim the Credit for Qualified Retirement Savings Contributions.
8. You must be under age 70 1/2 at the end of the tax year in order to contribute to a traditional IRA.
9. To contribute to an IRA, you must have taxable compensation, such as wages, salaries, commissions, tips, bonuses, or net income from self-employment. If you file a joint return, generally only one spouse needs to have taxable compensation. However, see Spousal IRA Limits in IRS Publication 590, Individual Retirement Arrangements, for additional rules.
10. Refer to IRS Publication 590 for more information on contributing to your IRA account.
Form 8880 and Publication 590 can be downloaded from irs.gov
Taxpayers Get More Time to Contribute to IRAs in 2012
You have two extra days this year to make contributions to your Individual Retirement Arrangements. That’s because April 15 falls on a weekend and Emancipation Day, a legal holiday in the District of Columbia, will be observed on Monday, April 16. That means the due date for filing your tax return and making contributions to your 2011 IRA is Tuesday, April 17.
Here are the top 10 things the IRS wants you to know about setting aside retirement money in a traditional IRA.
1. You may be able to deduct some or all of your contributions to your IRA. You may also be eligible for the Savers Credit, formally known as the Retirement Savings Contributions Credit.
2. Contributions can be made to your traditional IRA at any time during the year or by the due date for filing your return for that year, not including extensions. For most people, this means you must make contributions for 2011 by April 17, 2012. If you contribute between Jan. 1 and April 17, you should designate the year targeted for the contribution.
3. The funds in your IRA are generally not taxed until you receive distributions from it.
4. Use the worksheets in the instructions for either Form 1040A or Form 1040 to figure your deduction for your IRA contributions.
5. For 2011, the most you can contribute to your traditional IRA is generally the smaller of the following amounts: $5,000 for most taxpayers, $6,000 for taxpayers who were 50 or older at the end of 2011 or the amount of your taxable compensation for the year.
6. Use Form 8880, Credit for Qualified Retirement Savings Contributions, to determine whether you are also eligible for a tax credit equal to a percentage of your contribution.
7. You must use either Form 1040A or Form 1040 to deduct your IRA contribution or claim the Credit for Qualified Retirement Savings Contributions.
8. You must be under age 70 1/2 at the end of the tax year in order to contribute to a traditional IRA.
9. To contribute to an IRA, you must have taxable compensation, such as wages, salaries, commissions, tips, bonuses, or net income from self-employment. If you file a joint return, generally only one spouse needs to have taxable compensation. However, see Spousal IRA Limits in IRS Publication 590, Individual Retirement Arrangements, for additional rules.
10. Refer to IRS Publication 590 for more information on contributing to your IRA account.
Form 8880 and Publication 590 can be downloaded from irs.gov
Injured or Innocent Spouse Tax Relief
OK, he is a good husband (or wife) and he is all the things that you want in a man, except for his troubles with the IRS! And because he owes the IRS back taxes, they not only keep his refund, but they take your refund as well, because you are now married to him, and you filed "Married Filing Joint"
You don't want to hurt his feelings, but you are not happy with having your refund seized by the Department of Treasury. In fact your refund is how you pay for your annual vacation each year.
What do you do? Keep reading:
Injured or Innocent Spouse Tax Relief
You may be an injured spouse if you file a joint tax return and all or part of your portion of a refund was, or is expected to be, applied to your spouse’s legally enforceable past due financial obligations.
Here are seven facts about claiming injured spouse relief:
1. To be considered an injured spouse; you must have paid federal income tax or claimed a refundable tax credit, such as the Earned Income Credit or Additional Child Tax Credit on the joint return, and not be legally obligated to pay the past-due debt.
2. Special rules apply in community property states. For more information about the factors used to determine whether you are subject to community property laws, see IRS Publication 555, Community Property.
3. If you filed a joint return and you're not responsible for the debt, but you are entitled to a portion of the refund, you may request your portion of the refund by filing Form 8379, Injured Spouse Allocation.
4. You may file form 8379 along with your original tax return or your may file it by itself after you receive an IRS notice about the offset.
5. You can file Form 8379 electronically. If you file a paper tax return you can include Form 8379 with your return, write "INJURED SPOUSE" at the top left of the Form 1040, 1040A or 1040EZ. IRS will process your allocation request before an offset occurs.
6. If you are filing Form 8379 by itself, it must show both spouses' Social Security numbers in the same order as they appeared on your income tax return. You, the "injured" spouse, must sign the form.
7. Do not use Form 8379 if you are claiming innocent spouse relief. Instead, file Form 8857, Request for Innocent Spouse Relief. This relief from a joint liability applies only in certain limited circumstances. However, in 2011 the IRS eliminated the two-year time limit that applies to certain relief requests. IRS Publication 971, Innocent Spouse Relief, explains who may qualify, and how to request this relief.
You don't want to hurt his feelings, but you are not happy with having your refund seized by the Department of Treasury. In fact your refund is how you pay for your annual vacation each year.
What do you do? Keep reading:
Injured or Innocent Spouse Tax Relief
You may be an injured spouse if you file a joint tax return and all or part of your portion of a refund was, or is expected to be, applied to your spouse’s legally enforceable past due financial obligations.
Here are seven facts about claiming injured spouse relief:
1. To be considered an injured spouse; you must have paid federal income tax or claimed a refundable tax credit, such as the Earned Income Credit or Additional Child Tax Credit on the joint return, and not be legally obligated to pay the past-due debt.
2. Special rules apply in community property states. For more information about the factors used to determine whether you are subject to community property laws, see IRS Publication 555, Community Property.
3. If you filed a joint return and you're not responsible for the debt, but you are entitled to a portion of the refund, you may request your portion of the refund by filing Form 8379, Injured Spouse Allocation.
4. You may file form 8379 along with your original tax return or your may file it by itself after you receive an IRS notice about the offset.
5. You can file Form 8379 electronically. If you file a paper tax return you can include Form 8379 with your return, write "INJURED SPOUSE" at the top left of the Form 1040, 1040A or 1040EZ. IRS will process your allocation request before an offset occurs.
6. If you are filing Form 8379 by itself, it must show both spouses' Social Security numbers in the same order as they appeared on your income tax return. You, the "injured" spouse, must sign the form.
7. Do not use Form 8379 if you are claiming innocent spouse relief. Instead, file Form 8857, Request for Innocent Spouse Relief. This relief from a joint liability applies only in certain limited circumstances. However, in 2011 the IRS eliminated the two-year time limit that applies to certain relief requests. IRS Publication 971, Innocent Spouse Relief, explains who may qualify, and how to request this relief.
Sunday, March 25, 2012
Is Asset Protection Legal?
Asset protection involves using certain laws to protect your assets from claims of future creditors. As long as you answer the questions correctly at the bottom of your Schedule B of the Form 1040 - you will be OK. Check with your tax attorney or the Asset Protection Service to be sure you are in full compliance with the Department of Treasury.
To learn more about offshore asset protection services, click on the heading of this post and scroll down towards the bottom of the page. There is a short summary and a link for a well known International Asset Protection service, which is used by many US citizens who are living offshore.
http://forgottosaveforretirement.com/
To learn more about offshore asset protection services, click on the heading of this post and scroll down towards the bottom of the page. There is a short summary and a link for a well known International Asset Protection service, which is used by many US citizens who are living offshore.
http://forgottosaveforretirement.com/
Friday, March 23, 2012
IRS Fee for Form 8802 Going Up April 1, 2012
What is Form 8802?
Application for United States - Residency Certification
Beginning April 1, the fee for processing Form 8802, Application for United States Residency Certification, will increase from $35 per application to a flat fee of $85 per application. Presently, there is no limit to the number of certificates issued at the new rate of $85.
This is the first increase since the user fee policy was implemented in 2006 and reflects increases in labor and other costs to process the form. All Form 8802 applications submitted or postmarked on or after April 1 will incur the new fee.
The revised Form 8802 and instructions will be available to the public on April 1.
The Office of Management and Budget mandates that federal agencies charge user fees that reflect the full cost of goods or services that convey special benefits to recipients that go beyond those accrued by the general public.
Application for United States - Residency Certification
Beginning April 1, the fee for processing Form 8802, Application for United States Residency Certification, will increase from $35 per application to a flat fee of $85 per application. Presently, there is no limit to the number of certificates issued at the new rate of $85.
This is the first increase since the user fee policy was implemented in 2006 and reflects increases in labor and other costs to process the form. All Form 8802 applications submitted or postmarked on or after April 1 will incur the new fee.
The revised Form 8802 and instructions will be available to the public on April 1.
The Office of Management and Budget mandates that federal agencies charge user fees that reflect the full cost of goods or services that convey special benefits to recipients that go beyond those accrued by the general public.
Eight Tax Tips on Charitable Contributions, from the IRS
A donation made to your friend because they couldn't pay their rent, and now you want to take it off on your tax return? No, it does not work like that. Any deductible donation to a charity (or cause) HAS to be a legitimate, qualified organization with a valid Tax ID number.
Below are eight tips the IRS sent to tax preparers:
Deducting Charitable Contributions: Eight Essentials
IRS Tax Tip 2012-57
Donations made to qualified organizations may help reduce the amount of tax you pay.
The IRS has eight essential tips to help ensure your contributions pay off on your tax return.
1. If your goal is a legitimate tax deduction, then you must be giving to a qualified organization. Also, you cannot deduct contributions made to specific individuals, political organizations or candidates. See IRS Publication 526, Charitable Contributions, for rules on what constitutes a qualified organization.
2. To deduct a charitable contribution, you must file Form 1040 and itemize deductions on Schedule A. If your total deduction for all noncash contributions for the year is more than $500, you must complete and attach IRS Form 8283, Noncash Charitable Contributions, to your return.
3. If you receive a benefit because of your contribution such as merchandise, tickets to a ball game or other goods and services, then you can deduct only the amount that exceeds the fair market value of the benefit received.
4. Donations of stock or other non-cash property are usually valued at the fair market value of the property. Clothing and household items must generally be in good used condition or better to be deductible. Special rules apply to vehicle donations.
5. Fair market value is generally the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts.
6. Regardless of the amount, to deduct a contribution of cash, check, or other monetary gift, you must maintain a bank record, payroll deduction records or a written communication from the organization containing the name of the organization and the date and amount of the contribution. For text message donations, a telephone bill meets the record-keeping requirement if it shows the name of the receiving organization, the date of the contribution and the amount given.
7. To claim a deduction for contributions of cash or property equaling $250 or more, you must have a bank record, payroll deduction records or a written acknowledgment from the qualified organization showing the amount of the cash, a description of any property contributed, and whether the organization provided any goods or services in exchange for the gift. One document may satisfy both the written communication requirement for monetary gifts and the written acknowledgement requirement for all contributions of $250 or more.
8. Taxpayers donating an item or a group of similar items valued at more than $5,000 must also complete Section B of Form 8283, which generally requires an appraisal by a qualified appraiser
Below are eight tips the IRS sent to tax preparers:
Deducting Charitable Contributions: Eight Essentials
IRS Tax Tip 2012-57
Donations made to qualified organizations may help reduce the amount of tax you pay.
The IRS has eight essential tips to help ensure your contributions pay off on your tax return.
1. If your goal is a legitimate tax deduction, then you must be giving to a qualified organization. Also, you cannot deduct contributions made to specific individuals, political organizations or candidates. See IRS Publication 526, Charitable Contributions, for rules on what constitutes a qualified organization.
2. To deduct a charitable contribution, you must file Form 1040 and itemize deductions on Schedule A. If your total deduction for all noncash contributions for the year is more than $500, you must complete and attach IRS Form 8283, Noncash Charitable Contributions, to your return.
3. If you receive a benefit because of your contribution such as merchandise, tickets to a ball game or other goods and services, then you can deduct only the amount that exceeds the fair market value of the benefit received.
4. Donations of stock or other non-cash property are usually valued at the fair market value of the property. Clothing and household items must generally be in good used condition or better to be deductible. Special rules apply to vehicle donations.
5. Fair market value is generally the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts.
6. Regardless of the amount, to deduct a contribution of cash, check, or other monetary gift, you must maintain a bank record, payroll deduction records or a written communication from the organization containing the name of the organization and the date and amount of the contribution. For text message donations, a telephone bill meets the record-keeping requirement if it shows the name of the receiving organization, the date of the contribution and the amount given.
7. To claim a deduction for contributions of cash or property equaling $250 or more, you must have a bank record, payroll deduction records or a written acknowledgment from the qualified organization showing the amount of the cash, a description of any property contributed, and whether the organization provided any goods or services in exchange for the gift. One document may satisfy both the written communication requirement for monetary gifts and the written acknowledgement requirement for all contributions of $250 or more.
8. Taxpayers donating an item or a group of similar items valued at more than $5,000 must also complete Section B of Form 8283, which generally requires an appraisal by a qualified appraiser
Monday, March 19, 2012
Foreign Income Exclusion is at $92,900 - Take Notes if You Live and Work Offshore
Getting foreig income excluded OFF your income, can be done, however, you have to pass through the procedure and get the IRS to ok, the deal. However the exclusion enables you to exclude up to $92,900 of wages and other foreign earned income from U.S. tax. If you play your cards right, you can earn up to $92,900 a year (and more next year) without paying taxes, when you meet certain requirement.
Below is what the IRS has to say on the matter.
IRS Offers Tax Tips for Taxpayers with Foreign Income
The Internal Revenue Service reminds U.S. citizens and resident aliens, including those with dual citizenship who have lived or worked abroad during all or part of 2011, that they may have a U.S. tax liability and a filing requirement in 2012.
The IRS offers the following seven tips for taxpayers with foreign income:
1. Filing deadline U.S. citizens and resident aliens residing overseas or those serving in the military outside the U.S. on the regular due date of their tax return have until June 15, 2012 to file their federal income tax return. To use this automatic two-month extension beyond the regular April 17, 2012 deadline, taxpayers must attach a statement to their return explaining which of the two situations above qualifies them for the extension.
2. World-wide income Federal law requires U.S. citizens and resident aliens to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts.
3. Tax forms In most cases, affected taxpayers need to fill out and attach Schedule B, Interest and Ordinary Dividends, to their tax return. Certain taxpayers may also have to fill out and attach to their tax return the new Form 8938, Statement of Foreign Financial Assets. Some taxpayers may also have to file Form TD F 90-22.1 with the Treasury Department by June 30, 2012.
4. Foreign earned income exclusion Many Americans who live and work abroad qualify for the foreign earned income exclusion. If you qualify for tax year 2011, this exclusion enables you to exempt up to $92,900 of wages and other foreign earned income from U.S. tax.
5. Credits and deductions You may be able to take either a credit or a deduction for income taxes paid to a foreign country or a U.S. possession. This benefit is designed to lessen the tax burden that results when both the U.S. and another country tax income from that country.
6. Free File Taxpayers abroad can now use IRS Free File. This means U.S. citizens and resident aliens living abroad with adjusted gross income of $57,000 or less can use brand-name software to prepare their returns and then electronically file them for free.
7. Tax help If you live outside the U.S., the IRS has full-time permanent staff in four U.S. embassies and consulates. A list is available on the IRS Website – www.irs.gov - in the Contact Your Local Office Section, under International. These offices have tax forms and publications that can help you with filing issues and answer your questions about notices and bills.
More information is available in Publication 4261, Do You Have a Foreign Financial Account?
IRS publications, forms and more information on topics useful to individual international taxpayers can be found on the International Taxpayer page on the IRS website – www.irs.gov.
Below is what the IRS has to say on the matter.
IRS Offers Tax Tips for Taxpayers with Foreign Income
The Internal Revenue Service reminds U.S. citizens and resident aliens, including those with dual citizenship who have lived or worked abroad during all or part of 2011, that they may have a U.S. tax liability and a filing requirement in 2012.
The IRS offers the following seven tips for taxpayers with foreign income:
1. Filing deadline U.S. citizens and resident aliens residing overseas or those serving in the military outside the U.S. on the regular due date of their tax return have until June 15, 2012 to file their federal income tax return. To use this automatic two-month extension beyond the regular April 17, 2012 deadline, taxpayers must attach a statement to their return explaining which of the two situations above qualifies them for the extension.
2. World-wide income Federal law requires U.S. citizens and resident aliens to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts.
3. Tax forms In most cases, affected taxpayers need to fill out and attach Schedule B, Interest and Ordinary Dividends, to their tax return. Certain taxpayers may also have to fill out and attach to their tax return the new Form 8938, Statement of Foreign Financial Assets. Some taxpayers may also have to file Form TD F 90-22.1 with the Treasury Department by June 30, 2012.
4. Foreign earned income exclusion Many Americans who live and work abroad qualify for the foreign earned income exclusion. If you qualify for tax year 2011, this exclusion enables you to exempt up to $92,900 of wages and other foreign earned income from U.S. tax.
5. Credits and deductions You may be able to take either a credit or a deduction for income taxes paid to a foreign country or a U.S. possession. This benefit is designed to lessen the tax burden that results when both the U.S. and another country tax income from that country.
6. Free File Taxpayers abroad can now use IRS Free File. This means U.S. citizens and resident aliens living abroad with adjusted gross income of $57,000 or less can use brand-name software to prepare their returns and then electronically file them for free.
7. Tax help If you live outside the U.S., the IRS has full-time permanent staff in four U.S. embassies and consulates. A list is available on the IRS Website – www.irs.gov - in the Contact Your Local Office Section, under International. These offices have tax forms and publications that can help you with filing issues and answer your questions about notices and bills.
More information is available in Publication 4261, Do You Have a Foreign Financial Account?
IRS publications, forms and more information on topics useful to individual international taxpayers can be found on the International Taxpayer page on the IRS website – www.irs.gov.
Subscribe to:
Posts (Atom)
