by Jim Magary | Feb 12, 2016 | Tax Help
We are a AFFORDABLE full service tax firm that specializes in federal or state tax debt.
We have over 206 years of professional tax experience in over 65 years of working directly for government agencies in the local, district, and regional tax offices.
All work is done in-house.
You can call us today for a free initial tax consultation to learn the truth about your case.
What You Need to Know If You Owe Use Tax?
You may owe use tax on purchases you made from out-of-state or Internet sellers. Use tax is similar to the sales tax paid on purchases you make in California.
You may report use tax on your income tax return instead of filing a use tax return with the State Board of Equalization.
To report use tax on your income tax return, you may use either the Use Tax Worksheet or the Use Tax Lookup Table. Both are included in the tax booklet instructions.
You must pay California use tax when you purchase out-of-state items by telephone, Internet, mail, or in person and both of the following apply:
• The seller does not collect California sales or use tax.
• You use, give away, store, or consume the item in this state.
Use Tax Worksheet
When you choose to use the following Use Tax Worksheet method to determine the amount of use tax you owe:
1. Add the amount of all purchases made from out-of-state or Internet sellers made without payment of California Sales/Use tax. Include only items on which you would have paid sales tax if you had purchased them in California. See the Board of Equalization website for more information on taxable items.
2. Look up the use tax rate for the location where you used, gave away, stored, or consumed the items you purchased.
3. Multiply the amount by the use tax rate.
4. If the Use Tax Lookup Table is used to estimate individual purchases less than $1,000, add the amount from the table.
5. Subtract any sales or use tax you paid to another state for the items you purchased.
6. Enter this amount.
If you have a combination of individual items purchased for $1,000 or more and/or items purchased for use in a trade or business not registered with the Board of Equalization, and individual, non-business items purchased for less than $1,000, you may either:
• Use the Use Tax Worksheet to compute use tax due on all purchases, or
• Use the Use Tax Worksheet to compute use tax due on all individual items purchased for $1,000 or more plus items purchased for use in a trade or business not registered with the Board of Equalization, and use the Estimated Use Tax Lookup Table to estimate the use tax due on individual, non-business items purchased for less than $1,000, then add the amounts.
Use Tax Lookup Table
Instead of reporting your use tax liability using the Use Tax Worksheet you can use the Use Tax Lookup Table. The table allows individuals who are not required to hold a California Seller’s Permit or a Consumer Use Tax account, to report their use tax due based on their California Adjusted Gross Income (AGI).
The table can only be used for individual purchases less than $1,000. Individual purchases of $1,000 or more must be calculated separately using the use tax worksheet.
Items to Report Directly to the Board of Equalization
Report use tax due on the following items directly to the Board of Equalization. Do not report it on your income tax return.
• Vehicles, vessels, and trailers that must be registered with the Department of Motor Vehicles.
• Mobile homes or commercial coaches that must be registered annually as required by the Health and Safety Code.
• Vessels documented with the U.S. Coast Guard.
• Aircraft.
• Leases of machinery, equipment, vehicles, and other tangible personal property.
If you owe use tax for prior years
The Board of Equalization has established a voluntary use tax liability disclosure program for in-state qualified purchasers who wish to acknowledge their liability for California use tax.
By voluntarily coming forward to the Board of Equalization under this program, you may be able to limit your liability for tax, penalties, and interest due for prior periods.
Please Note:
If you traveled to a foreign country and brought items back to California, generally the use tax is due on the purchase price of the goods you listed on your U.S. Customs Declaration less the $800 per-person exemption.
This $800 exemption does not apply to goods sent or shipped to California by mail or other common carrier.
If your filing status is “Married/RDP Filing Separately”, you may elect to report one-half of the use tax due or the entire amount on your income tax return.
If you elect to report one-half, your spouse may report the remaining half on his or her income tax return or on the individual use tax return available from the State Board of Equalization.
Call us today for free initial tax consultation.
Do You Owe Use Tax? California State Board of Equalization = Settle Your Tax Debt
by Jim Magary | Feb 11, 2016 | Tax Help
We are a full service tax firm that specializes in federal and state tax matters especially those who have California business tax problems. Since 1982.
We can help any taxpayer that has 941 federal tax issues as well as the state of California
We have over 206 years of professional tax experience in over 65 years of working directly for the government in the local, district, and regional tax offices.
We are A+ rated by the Better Business Bureau has been practicing our professional craft since 1982.
In California payroll taxes are administered by the California Employment Development Department also know as the EDD.
Many of the issues that arise in the state of California are due to the classification problems that is employees or independent contractors.
The IRS form SS8 is a comprehensive list of questions that employers can find out whether people who work for them are employees or independent contractors.
Below you will find some of the questions that may relate to employee or independent contractors.
How did the worker obtain the job (bid, application, employment agency, or other
Description of the work done by the worker
Explanation of why you believe the worker is an employee or independent contractor
:
Training and instructions
Type Work assignments
Problems and complaints
Daily routine of person
Substitutes or helpers
Specific questions to determine financial control; for example:
Who provides supplies and materials
Who provides leased equipment
Are worker expenses reimbursed
Type of pay received (salary, commission, hourly wage, piece work, lump sum, or other
Who does the customer pay
Who have ultimate control of the person.
Economic loss/financial risk for worker, right to control time in hours.
Ability to hire and fire
The IRS generally applies a 20 factor test.The SS8 form will give you the the questions.
Usually, the California Employment Development Department focuses more on the right of the principal to control the manner, mode, method and means of performing the details of the work.
Is there fraud involved?
Some California payroll tax audits can lead to a finding of payroll tax fraud by the EDD or the IRS auditors if both Agencies are involved. As a former IRS revenue officer I referred more than one Corporation for payments in cash or people off the books and records.
should you have questions or concerns call us today for a free initial tax consultation and we will walk you through the process of California or federal payroll tax problems.
by Jim Magary | Feb 11, 2016 | Tax Help
We are an AFFORDABLE full-service firm that specializes in the resolution of all federal and state tax matters. Since 1982.
We have over 206 years of professional tax experience and over 65 years of working directly for government agencies and the local, district, and regional tax offices.
If you owe any type of tax or state payroll taxes and need to understand the process of payment options, the offer in compromise to settle your tax debt, the filing of back taxes or going through a tax audit call us today and speak to a true tax professional and tax expert.
Since 1982 we have been serving a nationwide audience in resolving any IRS, federal or state tax matter.
We are A+ rated by the Better Business Bureau.
The Employment Development Department
The EDD is in charge of California Payroll Taxes.
The EDD regularly tries to reclassify independent contractors to employee status to get business owners to pay additional California payroll taxes.
The EDD can personally hold an individual taxpayer liable for a corporation’s nonpayment of California payroll taxes. they will aggressively go after any individual responsible party who was supposed to pay over this tax.
The EDD has criminal authority. They may criminally prosecute a taxpayer for not paying over their required California Payroll Taxes.
The EDD has powers to file tax liens, levy and seize bank accounts, and close down for the nonpayment of California payroll taxes. As a former IRS agent and teaching instructor, I understand this process well is I myself have closed over 300 businesses in my time with IRS.
The EDD has an Offer In Compromise program that can save qualified taxpayers who can settle their debt for pennies on a dollar.
What you should know before preparing an Offer in Compromise
Are you an Offer in Compromise candidate?
If you are an individual or business taxpayer that does not have the income, assets, or means to pay your tax liability now or in the foreseeable future, you may be a candidate. The Offer in Compromise program allows you to offer a lesser amount for payment of a non-disputed final tax liability.
Generally, the State approve san Offer in Compromise when the amount offered represents the most we can expect to collect within a reasonable period of time.
Although you will be evaluated each case is based on its own unique set of facts and circumstances, we give the following factors strong consideration:
• The taxpayer’s ability to pay.
• The amount of equity in the taxpayer’s assets.
• The taxpayer’s present and future income.
• The taxpayer’s present and future expenses.
• The potential for changed circumstances.
• Whether the offer is in the best interest of the state.
The process your application?
They will only process your Offer in Compromise application if you have done all of the following:
• You have filed all of the required tax returns. If you have no filing requirement, note it on the application.
• You have fully completed the Offer in Compromise application, and provided all supporting documentation.
• You agreed with the Franchise Tax Board on the amount of tax that you owe.
• You authorized the Franchise Tax board to obtain your consumer credit report and to investigate and verify the information you provided on the application.
Will a collateral agreement be required?
Upon approval, the State may require you to enter into a collateral agreement for a term of five years. Generally, a collateral agreement will be required if you have significant potential for increased earnings.
A collateral agreement requires you to:
• Pay us a percentage of your future earnings that exceed an agreed upon threshold.
Are collections suspended?
Collection activity is not automatically suspended.
If delaying collection activity jeopardizes our ability to collect the tax, we may continue with collection efforts. Interest will continue to accrue.
OWE STATE PAYROLL TAXES + California + Payments Options + Offer in Compromise + Settle + File Taxes + Audits
by Jim Magary | Feb 11, 2016 | Tax Help
Need help getting a payment agreement with IRS, call us today. Former IRS agents and managers since 1982. YOU MAY BE ABLE TO SETLE YOUR TAX DEBT.
Direct debit installment agreements (DDIA) give taxpayers a convenient way to make payments on their installments while eliminating the need for checks or paper forms and IRS resources to process the payments each month.
During Fiscal Year 2014, more than 500,000 taxpayers entered into DDIAs, and approximately $2.8 billion was collected.
Revising DDIA procedures to automatically add new liabilities to existing DDIAs could increase revenue collection and reduce taxpayer burden.
TIGTA AUDIT ON THE DDIA
Taxpayers are required to remain in tax compliance as a condition of entering into an installment agreement, and systemic processes exist to default an installment agreement if a taxpayer incurs and fails to pay a new tax liability.
These defaults may occur even if the taxpayer would have preferred adding the new liability to the installment agreement.
This audit was initiated to determine whether the systemic default of DDIAs due to new tax liabilities causes unnecessary burden on taxpayers and the IRS or improves taxpayer compliance.
WHAT TIGTA AUDIT FOUND
DDIAs provide benefits for both the taxpayer and the IRS.
Taxpayers benefit from establishing DDIAs because they do not have to manually write a check and mail it in order to fulfill their obligations.
The IRS benefits because taxpayer payments can be posted faster and do not require IRS employee involvement.
In addition, taxpayers who enter into DDIAs are less likely to default on their agreement compared with taxpayers who enter into traditional installment agreements.
In order to maintain a DDIA, taxpayers must pay any new tax liability when due or the DDIA will systemically default.
When defaulted, the IRS stops automatic collection from the taxpayer’s financial accounts. TIGTA found that when DDIA defaults are due to a new tax liability, most taxpayers want to include the new balance due into their existing DDIA.
In addition, the IRS has a procedure that eliminates the need to default the DDIA if a taxpayer incurs a new tax liability, but it is only used when taxpayers request it.
As a result, systemic DDIA defaults increased taxpayer burden because taxpayers incurred additional interest on their unpaid balances.
In addition, revenue collection was suspended until the DDIAs were restructured, and some DDIAs were not reestablished.
WHAT TIGTA RECOMMENDED
TIGTA recommended that the IRS:
1) consider establishing systemic programming to allow DDIA taxpayers who incur a new unpaid tax liability to absorb the new liability into the current agreement without stopping the automatic payment in qualifying situations;
2) in the interim, provide taxpayers with information as to how they can avoid a default of their DDIA in the event of a new unpaid liability on Form 9465, Installment Agreement Request, and Form 433‑D, Installment Agreement; and
3) for taxpayers who cannot absorb their liabilities in existing DDIAs, establish procedures so that direct debit payments do not stop while the DDIA is suspended and the IRS actively addresses the new balance due.
IRS management agreed that systemically adding a new tax liability to an existing DDIA could save time and collect additional revenue, but did not commit to ensuring that qualifying new liabilities would be absorbed into existing DDIAs or discontinuing the practice of stopping automatic collection when the DDIA is suspended due to a new liability.
Management did agree to provide taxpayers with more information on how to avoid default. TIGTA believes that all of the recommendations would benefit the IRS and taxpayers.
by Jim Magary | Feb 11, 2016 | Tax Help
Falsely Padding Deductions on Returns is on the IRS Annual “Dirty Dozen” List of Tax Scams to Avoid
The Internal Revenue Service warns taxpayers to avoid the temptation of falsely inflating deductions or expenses on their returns to under pay what they owe and possibly receive larger refunds.
The vast majority of taxpayers file honest and accurate tax returns on time every year.
However, each year some taxpayers fail to resist the temptation of fudging their information.
That’s why falsely claiming deductions, expenses or credits on tax returns is on the “Dirty Dozen” tax scams list for the 2016 filing season.
Taxpayers should think twice before overstating deductions such as charitable contributions, padding their claimed business expenses or including credits that they are not entitled to receive especially like the Earned Income Tax Credit or Child Tax Credit.
Increasingly efficient automated systems generate most IRS audits.
The IRS can normally audit returns filed within the last three years.
Additional years can be added if substantial errors are identified or fraud is suspected.
Significant civil penalties may apply for taxpayers who file incorrect tax returns including:
- 20 percent of the disallowed amount for filing an erroneous claim for a refund or credit.
$5,000 if the IRS determines a taxpayer has filed a “frivolous tax return.” A frivolous tax return is one that does not include enough information to figure the correct tax or that contains information clearly showing that the tax reported is substantially incorrect.
In addition to the full amount of tax owed, a taxpayer could be assessed a penalty of 75 percent of the amount owed if the underpayment on the return resulted from tax fraud.
- Taxpayers even may be subject to criminal prosecution (brought to trial) for actions such as:
1.Willful failure to file a return, supply information, or pay any tax due
2.Fraud and false statements
3.Preparing and filing a fraudulent return, or
4.Identity theft.
Criminal prosecution could lead to additional penalties and even prison time.
Taxpayers should remember that they are legally responsible for what is on their tax return even if it is prepared by someone else, so they should be wise when selecting a tax professional.
