by steve | Apr 14, 2010 | IRS Tax Advice
Don’t Panic! Eight Things to Know If You Receive an IRS Notice
The Internal Revenue Service sends millions of letters and notices to taxpayers every year. Here are eight things taxpayers should know about IRS notices ? just in case one shows up in your mailbox.
Don’t panic. Many of these letters can be dealt with simply and painlessly.
There are a number of reasons why the IRS might send you a notice. Notices may request payment of taxes, notify you of changes to your account, or request additional information. The notice you receive normally covers a very specific issue about your account or tax return.
Each letter and notice offers specific instructions on what you are asked to do to satisfy the inquiry.
If you receive a correction notice, you should review the correspondence and compare it with the information on your return.
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.
If you do not agree with the correction the IRS made, it is important that you 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-hand corner of the notice. Allow at least 30 days for a response.
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-hand corner of the notice. Have a copy of your tax return and the correspondence available when you call to help us respond to your inquiry.
It’s important that you keep copies of any correspondence with your records.
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 IRS.gov or by calling 800-TAX-FORM (800-829-3676).
by steve | Apr 13, 2010 | IRS Tax Advice
If you need to amend your tax return, use Form 1040X, Amended U.S. Individual Income Tax Return.
Use Form 1040X to correct previously filed Forms 1040, 1040A or 1040EZ. The 1040X can also be used to correct a return filed electronically. However, you can only paper file an amended return.
You should file an amended return if you discover any of the following items were reported incorrectly: filing status, dependents, total income, deductions or credits.
Generally, you do not need to file an amended return for math errors. The IRS will automatically make the correction.
You usually do not need to file an amended return because you forgot to include tax forms such as W-2s or schedules. The IRS normally will send a request asking for those documents.
Be sure to enter the year of the return you are amending at the top of Form 1040X. Generally, you must file Form 1040X within three years from the date you filed your original return or within two years from the date you paid the tax, whichever is later.
If you are amending more than one tax return, prepare a 1040X for each return and mail them in separate envelopes to the IRS campus for the area in which you live. The 1040X instructions list the addresses for the campuses.
If the changes involve another schedule or form, you must attach it to the 1040X.
If you are filing to claim an additional refund, wait until you have received your original refund before filing Form 1040X. You may cash that check while waiting for any additional refund.
If you owe additional tax for 2009, you should file Form 1040X and pay the tax as soon as possible to limit interest and penalty charges. Interest is charged on any tax not paid by the due date of the original return, without regard to extensions.
by steve | Apr 12, 2010 | IRS Tax Advice
There are many records you have that may help document items on your tax return. You?ll need this documentation should the IRS select your return for examination. Here are five tips from the IRS about keeping good records.
- Normally, tax records should be kept for three years.
- Some documents ? such as records relating to a home purchase or sale, stock transactions, IRA and business or rental property ? should be kept longer.
- In most cases, the IRS does not require you to keep records in any special manner. Generally speaking, however, you should keep any and all documents that may have an impact on your federal tax return.
- Records you should keep include bills, credit card and other receipts, invoices, mileage logs, canceled, imaged or substitute checks, proofs of payment, and any other records to support deductions or credits you claim on your return.
- For more information on what kinds of records to keep, see IRS Publication 552, Record keeping for Individuals, which is available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
by steve | Apr 8, 2010 | IRS Tax Advice
IRS Payment Options Include E-pay, Credit Card, and Installment Agreements.
The Internal Revenue Service today reminded taxpayers to pay all taxes due by the April 15 deadline to avoid interest and failure-to-pay penalties.
Filing and Paying on Time Saves Money
If you have a balance due and do not pay by April 15, you are subject to a failure-to-pay penalty. If you cannot complete your return and file it by April 15, you may request an extension of time to file. However, an extension of time to file is not an extension of time to pay.
If you cannot pay the full amount you owe, you will still benefit from filing your return and paying as much as you can by April 15 because interest and failure-to-pay penalties are due only on the unpaid balance.
Members of the military and some others currently serving in combat zones can wait until after April 15 to file and pay. Those eligible get the extra time penalty- and interest-free without having to ask for it. Normally, the filing and payment deadline is postponed until 180 days after the service member leaves the combat zone. Victims of recent natural disasters, listed on IRS.gov, also have extra time.
Electronic Options
A number of electronic payment options are available to taxpayers.
Payments can be made online, by phone using a credit or debit card or through the Electronic Federal Tax Payment System. Taxpayers who e-file their returns may use the electronic funds withdrawal option for submitting an electronic payment. It’s possible, for example, to e-file in February or March but schedule the payment for withdrawal as late as April 15.
Information on these options can be found on the Electronic Payment Options Home Page of IRS.gov.
Some taxpayers who itemize may now deduct the convenience fee charged for paying individual income taxes with a credit or debit card as a miscellaneous itemized deduction. The deduction is subject to the 2-percent limit on Form 1040, Schedule A.
Taxpayers may also pay any taxes by check made out to the ?United States Treasury.? Include Form 1040-V, Payment Voucher, along with the payment and tax return. If you have already submitted your tax return but still need to pay all or some of the balance, you may mail the check to the IRS with Form 1040-V.
Installment Agreements and Online Applications
If you can’t pay in full by April 15, consider applying for an installment agreement.
An installment agreement allows you to pay any remaining balance in monthly pieces. Taxpayers who owe $25,000 or less may apply electronically, using the Online Payment Agreement application. Or attach Form 9465, Installment Agreement Request, to the front of your tax return. You must show the amount of your proposed monthly payment and the date you intend to pay each month. The IRS charges $105 for setting up the agreement, or $52 if the payments are deducted directly from your bank account. Qualified lower-income taxpayers pay $43.
You will be required to pay interest plus a late payment penalty on the unpaid taxes for each month or partial month after the due date.
Offers in Compromise
This filing season the IRS has given its personnel additional flexibility on offers in compromise for struggling taxpayers. For some taxpayers, an offer in compromise, an agreement between a taxpayer and the IRS that settles the taxpayers debt for less than the full amount owed, is a viable option.
Specifically, IRS employees will be permitted to consider a taxpayers current income and potential for future income when deciding on an offer in compromise. Normally, the standard practice is to judge an offer amount on a taxpayers earnings in prior years. This new step provides greater flexibility when considering offers in compromise from the unemployed. The IRS may require that a taxpayer entering into such an offer agree to pay more if the taxpayers financial situation improves significantly.
Should you have any questions call Fresh Start Tax today.
by steve | Apr 8, 2010 | IRS Tax Advice
If you can’t meet the April deadline to file your tax return, you can get an automatic six month extension of time to file from the IRS.
Here are seven things you need to know about filing an extension:
- Extra time to file. An extension will give you extra time to get your paperwork to the IRS, but it does not extend the time you have to pay any tax due. You will owe interest on any amount not paid by the April 15 deadline, plus a late payment penalty if you have not paid at least 90 percent of your total tax by that date.
- File on time even if you can’t pay. If your return is completed but you are unable to pay the full amount of tax due, do not request an extension. File your return on time and pay as much as you can. The IRS will send you a bill or notice for the balance due. To apply online for a payment agreement, go to IRS.gov and click ?Online Payment Agreement Application? at the left side of the home page under Online Services. If you are unable to make payments, call the IRS at 800-829-1040 to discuss your options.
- Form to file. Request an extension to file by submitting Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return to the IRS by April 15, 2010, or make an extension-related electronic credit card payment. For more information about extension-related credit card payments, see Form 4868.
- E-file extension. You can e-file an extension request using tax preparation software with your own computer or by going to a tax preparer who has the software. The IRS will acknowledge receipt of the extension request if you file by computer.
- Traditional Free File and Free File Fillable Forms. You can use both Free File options to file an extension. Access the Free File page at IRS.gov.
- Electronic funds withdrawal. If you ask for an extension via computer, you can also choose to pay any expected balance due by authorizing an electronic funds withdrawal from a checking or savings account. You will need the appropriate bank routing and account numbers.For information about these and other methods of payment, visit IRS.gov or call 800-TAX-1040 (800-829-1040).
- How to get forms. Form 4868 is available for download at IRS.gov or may be ordered by calling 1-800-TAX-FORM (800-829-3676).You can also obtain the form at your local IRS office. Telephone requests normally take 10 days to fill.
