by Fresh Start Tax | Jan 30, 2014 | Tax Help
If you owe back debt to Internal Revenue Service there are generally three tax solutions a taxpayer will be placed into by the IRS.
You can get a streamline payment agreement if you owe the IRS under $50,000, you can file for an economic tax hardship, try to settle your case with the Internal Revenue Service, and if you owe over $50,000 you can settle for an IRS installment agreement.
Depending on your case there are various options and tax solutions to settle with the IRS.
Let our firm get you a online payment agreement with the Internal Revenue Service and possibly settle your case with the IRS.
The Online Payment Agreement (OPA) program allows an individual taxpayer to enter into a payment agreement with the IRS while eliminating the need for personal interaction.
These are fast and simple.
This program is beneficial to both the taxpayer and the IRS.
Taxpayers’ use of the OPA program has increased from 18,291 taxpayers in FY 2007 to 95,979 in FY 2013 (a 425 percent increase).
In addition, the default rate of streamlined installment agreements processed with the OPA program is 44 percent lower than the overall default rate.
If you are looking for an IRS payment agreement call us today and we can walk you to the process to get you immediate and permanent relief from the Internal Revenue Service.
Need a IRS Payment, call us today.
Need a IRS Payment Agreement, Call Former IRS Agents – Miami, Ft.Lauderdale, Boca, Palm Beaches
by Fresh Start Tax | Jan 30, 2014 | Tax Help
Canceled Debt – Is It Taxable or Not?
A debt includes any indebtedness whether you are personally liable or liable only to the extent of the property securing the debt.
Cancellation of all or part of a debt that is secured by property may occur because of a foreclosure, a repossession, a voluntary return of the property to the lender, abandonment of the property, or a principal residence loan modification.
In general, if you are liable for a debt that is canceled, forgiven, or discharged, you will receive a Form 1099-C (PDF), Cancellation of Debt, and must include the canceled amount in gross income unless you meet an exclusion or exception.
If you receive a Form 1099-C but the creditor is continuing to try to collect the debt, then the debt has not been cancelled and you do not have taxable cancellation of debt income.
You must report any taxable amount of a cancelled debt for which you are personally liable, as ordinary income from the cancellation of debt, on Form 1040 (PDF) or Form 1040NR (PDF) and associated schedules, as advised in Publication 4681 (PDF), Canceled Debts, Foreclosures, Repossessions, and Abandonment’s (for Individuals).
Reporting Form
You must report the taxable amount of a taxable debt whether or not you receive a Form 1099-C.
Big Caution:
If your debt is secured by property and that property is taken by the lender in full or partial satisfaction of your debt, you are treated as having sold that property and may have a taxable gain or loss.
Gains or Loss
The gain or loss on such a deemed sale of your property is an issue separate from whether any cancellation of debt income associated with that same property is includable in gross income. See Publication 544, Sales and Other Dispositions of Assets, and Publication 523, Selling Your Home for detailed information on reporting gain or loss from repossession, foreclosure or abandonment of property.
Canceled debts that meet the requirements for any of the following exceptions or exclusions are not taxable.
Canceled Debt that Qualifies for EXCEPTION to Inclusion in Gross Income:
- Amounts specifically excluded from income by law such as gifts or bequests
- Cancellation of certain qualified student loans
- Canceled debt, that if paid by a cash basis taxpayer, would be deductible
- A qualified purchase price reduction given by a seller
- Any Pay-for-Performance Success Payments that reduce the principal balance of your home mortgage under the Home Affordable Modification Program
Canceled Debt that Qualifies for EXCLUSION from Gross Income:
- Debt canceled in a Title 11 bankruptcy case
- Debt canceled during insolvency
- Cancellation of qualified farm indebtedness
- Cancellation of qualified real property business indebtedness
- Cancellation of qualified principal residence indebtedness
The exclusion for “qualified principal residence indebtedness” provides tax relief on canceled debt for many homeowners involved in the mortgage foreclosure crisis currently affecting much of the United States.
The exclusion allows taxpayers to exclude up to $2,000,000 ($1,000,000 if married filing separately) of “qualified principal residence indebtedness.”
Generally, if you exclude canceled debt from income under one of the exclusions listed above, you must reduce your positive tax attributes (certain credits, losses, basis of assets, etc.), within limits, by the amount excluded.
You must file Form 982 (PDF), Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment), to report the amount qualifying for exclusion and any corresponding reduction of certain tax attributes.
If you received a Form 1099-C and the information is incorrect, contact the lender to make corrections. Refer to Publication 4681 (PDF), Canceled Debts, Foreclosures, Repossessions, and Abandonment’s (for Individuals), for more detailed information regarding taxability of canceled debt, how to report it, and related exceptions and exclusions.
Additional information can also be found in Publication 525, Taxable and Nontaxable Income. If you received a Form 1099-A (PDF), Acquisition or Abandonment of Secured Property, review Topic 160 for additional information.
Have Cancellation of Debt Issue – Taxable or not Taxable, Former IRS
by Fresh Start Tax | Jan 30, 2014 | Tax Help
Notice of Under Reported Income Notice – IRS CP-2000
Taxpayers should know that the Internal Revenue Service has a matching program that compares your tax return with third-party reporters of income.
The IRS computer program is trained to kick out tax returns that do not reflect all your income.
The IRS Matching Process
The IRS compares the information reported by employers, banks, businesses and other payers on Forms W-2, 1098, 1099, etc., with income and deductions you report on your income tax return.
If you failed to report any income, payments, and/or credits (or if you overstated certain deductions) on an income tax return, you may receive a Notice CP-2000.
The IRS notice is not a bill.
It informs you of the proposed adjustments to income, payments, credits, and/or deductions.
This may result in additional tax owed or a refund of taxes paid.
The first page of the notice provides a summary of proposed changes to your tax and the steps you should take to respond. If you have any questions, the notice provides a phone number to call for assistance.
The IRS Notice will show………
The notice will show the amounts you reported on your original or amended return, the amounts reported to the IRS by the payer, and the proposed adjustments by the IRS.
The notice also provides the name of the payer, the payer’s ID number, the type of document that was issued (i.e., W-2, 1099), and the tax identification number of the person to whom the document was issued.
Based on payer documentation, the notice proposes either an increase or decrease to your tax liability. Be sure that you review this information carefully to verify its accuracy.
The IRS tax notice includes a response form on which you should indicate whether you agree with all the changes, or do not agree with some or any of the changes the IRS is proposing.
The response form also allows you to authorize someone other than yourself to contact the IRS concerning the notice and provides payment options.
If you agree with the proposed adjustments, complete and sign the response form and return it in the enclosed envelope. The proposed adjustments will generally show interest calculated to 30 days from the date on the notice.
IRS Penalties
Certain penalties may also apply but may not be shown.
You may pay the amount you owe within 30 days from the date of notice, make a partial payment, or you may send the signed consent without payment, and the IRS will bill you for the amount due plus additional penalty and/or interest charges.
Making Payments to the IRS
If making a payment, please use the enclosed payment voucher to ensure proper application of your payment. If you are unable to pay, you may request a payment arrangement to pay the amount you owe.
What NOT TO DO
Do not file an amended return ( Form 1040X (PDF)), for the tax year shown in the upper right hand corner of page 1. The IRS will make corrections to your tax liability for the tax year listed on the notice after we receive your response.
If the same or other errors occurred in any prior or subsequent years as those listed on the CP-2000, however, you may wish to file an amended return for those years in order to prevent or reduce the accrual of penalties.
If you do not agree with any changes, or do not agree with some of the changes in the notice, do not sign the notice. Instead, explain in a signed statement why you do not agree, attach the statement and supporting documentation for consideration to the response form, and submit the response form and attachment to the IRS.
Include your phone number with area code and the best time of day to call.
You must respond within 30 days of the date of the notice or 60 days if you live outside the United States. An envelope will be enclosed for your convenience.
If you have lost the envelope, please send your response to the address listed on the first page of the response form. Send your response, a copy of the notice you received, and any other necessary documents (e.g., a signed statement of disagreement and supporting documents) to the address on the notice.
If you are making a payment, use the provided payment voucher to ensure correct application to your account.
If we do not hear from you within the 30 or 60-day period, and there is a proposed balance due, a statutory notice of deficiency will be issued and additional interest will be charged.
if you do not follow up on the final notice that IRS sends to you you can expect a notice of wage levy or a levy your bank account.
Call us today if you need any help with an IRS notice CP 2000.
by Fresh Start Tax | Jan 30, 2014 | Tax Help
PREDICTORS OF UNREPORTED INCOME:
Nearly $60 billion per year in tax revenue is lost from the tax due on income under reported by sole proprietors and informal suppliers according to estimates of the individual gross tax gap.
Unreported income is the single largest component of the gap.
The difference between income that was reported voluntarily and income that should have been reported is the definition of unreported income.
Both income and self-employment taxes are lost when these individuals inaccurately report their income.
Detecting unreported income is difficult.
Various efforts have been undertaken by the Internal Revenue Service over the years to address unreported income.
After IRS spent a great deal of time of due diligence they IRS have determined factors indicators to look for.
- Negative cash flow on the returns that led the classifier to believe that there could be unreported income.
- The appearance of related entities that were not reflected on the original return.
- Large Schedule E expenses that one classifier felt was the deduction of personal living expenses but another classifier felt was possibly disguising unreported income
- Questions of ownership of property and whether the taxpayer could actually afford it.
- Taxpayers living in certain areas with a high standard of living and income reflections are low.
Read the full IRS tax link – http://www.irs.gov/pub/irs-soi/puidif2.pdf
Need to amend your tax returns, call us today.
by Fresh Start Tax | Jan 30, 2014 | Tax Help
We are an affordable professional tax firm that specializes in IRS and State of Florida sales tax audit help and tax defense.
We’ve been practicing in the state of Florida since 1982 in are A+ rated by the Better Business Bureau.
On staff are tax attorneys, CPAs, and former IRS and state tax agents to help and assist in your IRS or sales tax audit matter.
Being former IRS and state tax employees we understand all the theories, settlement formulas and all the techniques necessary to peacefully resolve your IRS sales tax matters.
If you are going to owe back taxes as a result of a IRS/Sales Tax Audit, we can work out a tax settlement on your behalf.
Let us take the pain and worry out of your life.
Why IRS, Sales Tax audits are conducted
The IRS/State examines tax returns to verify that the tax reported is correct.
Selecting a return for examination does not always suggest that the taxpayer has either made an error or been dishonest.
In fact, some federal and state tax examinations result in a refund to the taxpayer or acceptance of the return without change.
The overwhelming majority of taxpayers files returns and make payments timely and accurately.
Taxpayers have a right to expect fair and efficient tax administration from the IRS/ State of Florida including verification that taxes are correctly reported and paid with enforcement actions against those who fail to comply voluntarily.
Taxpayer Rights for IRS/ State Sales Tax audits
The IRS/State trains its employees to explain and protect taxpayers’ rights throughout their contacts with taxpayers.
You must remember all state and federal employees have different personalities sometimes you may have a auditor with demons at other times you may have the most pleasant person in the entire world.
This is my luck of the draw in as a general rule you can never change auditors during the course of an audit.
Your rights tax payers bill of rights include:
1. A right to professional and courteous treatment by IRS/State employees.
2. A right to privacy and confidentiality about tax matters.
3. A right to know why the IRS is asking for information, how the IRS/State will use it and what will happen if the requested information is not provided.
4. A right to representation, by oneself or an authorized representative.
5. A right to appeal disagreements, both within the IRS and before the courts.
Many times if you are dealing with an unreasonable IRS or sales tax agent the appellate process is used to neutralize the agent and to get a better decision.
On staff for former IRS appellate agents that can help you in the process should you need to file an IRS or state tax appeal.
How Returns Are Selected for Examination
Tax returns are selected by various methods by the federal and state government.
Each agency has a budget and within that budget they are required to audit a certain amount of tax returns that will additionally generate monies back into the federal or state tax coffers.
As a general rule state or federal employee is worth four times their salary as a result of the audits conducted by the state or federal government.
The number one reason why Audits are pulled for Audit
Computer Scoring. This is BIG.
Some returns are selected for examination on the basis of computer scoring. Computer programs give each return numeric “scores”.
The Discriminant Function System (DIF) score rates the potential for change, based on past IRS experience with similar returns.
The Unreported Income DIF (UIDIF) score rates the return for the potential of unreported income. The reason you hire an experienced tax professional to file your tax returns is to keep you away from an IRS or sales tax audit.
IRS personnel screen the highest-scoring returns, selecting some for audit and identifying the items on these returns that are most likely to need review.
Being former IRS employees you should know that each tax return is reviewed and scored by the IRS Cade 2 to computer.
Each and every tax return will have a label on the back of the return showing its DIF number or give scoring.
The highest graded scores are reviewed by seasoned tax auditors. They will make decisions based on the overall appearance of the tax return whether it is audit worthy and be subject for a tax audit by the field of division.
IRS Information Matching.
The Internal Revenue Service collects over $10 billion each year as result of what is affectionately known as the mismatching program.
Some returns are examined because payer reports, such as Forms W-2 from employers or Form 1099 interest statements from banks, do not match the income reported on the tax return.
Related Examinations.
Returns may be selected for audit when they involve issues or transactions with other taxpayers, such as business partners or investors, whose returns were selected for examination.
Many times if a corporate tax return is being audited, the individuals who owns the company or corporation will be audited as well. Many times if a spouse is audited on a married filing separate return the IRS may choose to pull the other spouses tax return for audit.
IRS Examination Methods
An examination may be conducted by mail or through an in-person interview and review of the taxpayer’s records. The interview may be at an IRS office (office audit) or at the taxpayer’s home, place of business, or accountant’s office (field audit).
Taxpayers may make audio recordings of interviews, provided they give the IRS advance notice. If you do this many times the IRS will have a recording as well.
If the time, place, or method that the IRS schedules is not convenient, the taxpayer may request a change, including a change to another IRS office if the taxpayer has moved or business records are there.
The audit notification letter tells which records will be needed.
Taxpayers may act on their own behalf or have someone represent or accompany them. If you have a squeaky clean tax return there is nothing wrong with you representing yourself.
Appeal Rights
Appeal Rights are explained by the examiner at the beginning of each audit. Taxpayers who do not agree with the proposed changes may appeal by having a supervisory conference with the examiner’s manager or appeal their case administratively within the IRS, to the U.S. Tax Court, U.S. Claims Court or the local U.S. District Court.
If there is no agreement at the closing conference with the examiner or the examiner’s manager, the taxpayer has 30 days to consider the proposed adjustments and their next course of action.
If the taxpayer does not respond within 30 days, the IRS issues a statutory notice of deficiency, which gives the taxpayer 90 days to file a petition to the Tax Court. The Claims Court and District Court generally do not hear tax cases until after the tax is paid and administrative refund claims have been denied by the IRS.
The tax does not have to be paid to appeal within the IRS or to the Tax Court. A case may be further appealed to the U.S. Court of Appeals or to the Supreme Court, if those courts accept the case.
If you have any questions about IRS or sales tax audit call us today for free initial consultation. You can speak directly to a tax professional that is a true expert.
We are the affordable tax firm that has been practicing since 1982) the state of Florida.
IRS, Sales Tax Audit Help, Defense, Affordable Representation – Melbourne, Titusville, Palm Bay, Vero Beach
