by steve | Mar 23, 2010 | Tax Help, Uncategorized
Electronically filed tax returns are on track with last year and overall refunds are running nearly 10 percent higher so far in 2010, according to statistics issued today by the Internal Revenue Service.
The statistics issued today, covering the period through March 12, show that while the overall number of tax returns filed this year is down slightly, the percentage of returns using e-file remains strong. More than 82 percent of the 69 million returns received this year have come in via e-file. Home usage of e-file is up almost 7 percent compared to this time last year.
Additionally, the average federal refund totaled $3,036, an increase of $266 compared with the same period a year ago.
The refund increase follows a number of federal tax incentives enacted last year as part of the American Recovery and Reinvestment Act, such as the home buyer credit and the American Opportunity Credit.
?There are several new credits and deductions this year, so we encourage taxpayers to see if they qualify when they fill out their tax return,? said IRS Commissioner Doug Shulman. ?To get their refunds quicker, the IRS reminds taxpayers that the fastest, easiest way is to e-file and use direct deposit.?
Taxpayers can check their eligibility for these credits and deductions on the IRS Web site at IRS.gov/recovery. This special section also contains instructions on how to claim the available tax incentives and provides answers to frequently asked questions. Detailed information is available on the:
Home buyer Credit
Making Work Pay Credit
Economic Recovery Payments
Earned Income Tax Credit
American Opportunity Tax Credit
Sales and excise tax deduction for new car purchases
Energy incentives for homeowners
2010 FILING SEASON STATISTICS
Cumulative through the weeks ending 03/13/09 and 03/12/10
Individual Income Tax Returns
2009
2010
% Change
Total Receipts
70,807,000
68,743,000
-2.9%
Total Processed
67,595,000
64,284,000
-4.9%
E-filing Receipts:
TOTAL
56,665,000
56,802,000
0.2%
Tax Professionals
36,751,000
35,509,000
-3.4%
Self-prepared
19,914,000
21,293,000
6.9%
Web Usage:
Visits to IRS.gov
126,091,068
121,091,068
-4.2
Total Refunds:
Number
61,042,000
57,779,000
-5.3%
Amount
$169.1
billion
$175.4
billion
3.7%
Average refund
$2,770
$3,036
9.6%
Direct Deposit Refunds:
Number
48,643,000
47,893,000
-1.5%
Amount
$146.4
billion
$154.8
billion
5.7%
Average refund
$3,010
$3,232
7.4%
Should you have any questions call Fresh Start Tax
by steve | Mar 16, 2010 | Tax Help, Uncategorized
Errors made on tax returns may delay the processing of your tax return, which in turn, may cause your refund to arrive later. Here are nine common errors the IRS wants you to avoid to help guarantee your refund arrives on time.
Incorrect or missing Social Security Numbers When entering SSNs for anyone listed on your tax return, be sure to enter them exactly as they appear on the Social Security cards.
Incorrect or misspelling of dependent?s last name When entering a dependent?s last name on your tax return, ensure they are entered exactly as they appear on their Social Security card.
Filing status errors Make sure you choose the correct filing status for your situation. There are five filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household, and Qualifying Widow(er) With Dependent Child. See Publication 501, Exemptions, Standard Deduction, and Filing Information to determine the filing status that best fits your needs.
Math errors When preparing paper returns, review all math for accuracy. Remember, when you file electronically, the software takes care of the math for you!
Computation errors Take your time. Many taxpayers make mistakes when figuring their taxable income, withholding and estimated tax payments, Earned Income Tax Credit, Standard Deduction for age 65 or over or blind, the taxable amount of Social Security benefits, and the Child and Dependent Care Credit.
Incorrect bank account numbers for Direct Deposit If you are due a refund and requested direct deposit, be sure to review the routing and account numbers for your financial institution.
Forgetting to sign and date the return An unsigned tax return is like an unsigned check ? it is invalid.
Incorrect Adjusted Gross Income information Taxpayers filing electronically must sign the return electronically using a Personal Identification Number. To verify their identity, taxpayers will be prompted to enter their AGI from their originally filed 2008 federal income tax return or their prior year PIN if they used one to file electronically last year. Taxpayers should not use an AGI amount from an amended return, Form 1040X, or a math error correction made by IRS.
Claiming the Making Work Pay Tax Credit Taxpayers with earned income should claim the Making Work Pay Tax Credit by attaching a Schedule M, Making Work Pay and Government Retiree Credits to their 2009 Form 1040 or 1040 A. Taxpayers who file Form 1040-EZ will use the worksheet for Line 8 on the back of the 1040-EZ to figure their Making Work Pay Tax Credit. The credit is worth up to $400 for individuals and $800 for married couples filing jointly. Many people who worked during 2009 are slowing down the processing of their tax return by not properly claiming this credit.
Should you have any questions call us a Fresh Start Tax.
by steve | Mar 16, 2010 | Tax Help, Uncategorized
WASHINGTON ? The Internal Revenue Service today issued its 2010 ?dirty dozen? list of tax scams, including schemes involving return preparer fraud, hiding income offshore and phishing.
Taxpayers should be wary of anyone peddling scams that seem too good to be true,? IRS Commissioner Doug Shulman said. The IRS fights fraud by pursuing taxpayers who hide income abroad and by ensuring taxpayers get competent, ethical service from qualified professionals at home in the U.S.?
Tax schemes are illegal and can lead to imprisonment and fines for both scam artists and taxpayers. Taxpayers pulled into these schemes must repay unpaid taxes plus interest and penalties. The IRS pursues and shuts down promoters of these and numerous other scams.
The IRS urges taxpayers to avoid these common schemes:
Return Preparer Fraud
Dishonest return preparers can cause trouble for taxpayers who fall victim to their ploys. Such preparers derive financial gain by skimming a portion of their clients? refunds, charging inflated fees for return preparation services and attracting new clients by promising refunds that are too good to be true. Taxpayers should choose carefully when hiring a tax preparer. Federal courts have issued injunctions ordering hundreds of individuals to cease preparing returns and promoting fraud, and the Department of Justice has filed complaints against dozens of others, which are pending in court.
To increase confidence in the tax system and improve compliance with the tax law, the IRS is implementing a number of steps for future filing seasons. These include a requirement that all paid tax return preparers register with the IRS and obtain a preparer tax identification number (PTIN), as well as both competency tests and ongoing continuing professional education for all paid tax return preparers except attorneys, certified public accountants (CPA) and enrolled agents.
Setting higher standards for the tax preparer community will significantly enhance protections and services for taxpayers, increase confidence in the tax system and result in greater compliance with tax laws over the long term. Other measures the IRS anticipates taking are highlighted in the IRS Return Preparer review issued in December 2009.
Hiding Income Offshore
The IRS aggressively pursues taxpayers involved in abusive offshore transactions as well as the promoters, professionals and others who facilitate or enable these schemes. Taxpayers have tried to avoid or evade U.S. income tax by hiding income in offshore banks, brokerage accounts or through the use of nominee entities. Taxpayers also evade taxes by using offshore debit cards, credit cards, wire transfers, foreign trusts, employee-leasing schemes, private annuities or insurance plans.
IRS agents continue to develop their investigations of these offshore tax avoidance transactions using information gained from over 14,700 voluntary disclosures received last year. While special civil-penalty provisions for those with undisclosed offshore accounts expired in 2009, the IRS continues to urge taxpayers with offshore accounts or entities to voluntarily come forward and resolve their tax matters. By making a voluntary disclosure, taxpayers may mitigate their risk of criminal prosecution.
Phishing
Phishing is a tactic used by scam artists to trick unsuspecting victims into revealing personal or financial information online. IRS impersonation schemes flourish during the filing season and can take the form of e-mails, tweets or phony Web sites. Scammers may also use phones and faxes to reach their victims.
Scam artists will try to mislead consumers by telling them they are entitled to a tax refund from the IRS and that they must reveal personal information to claim it. Criminals use the information they get to steal the victim’s identity, access bank accounts, run up credit card charges or apply for loans in the victim’s name.
Taxpayers who receive suspicious e-mails claiming to come from the IRS should not open any attachments or click on any of the links in the e-mail. Suspicious e-mails claiming to be from the IRS or Web addresses that do not begin with http://www.irs.gov should be forwarded to the IRS mailbox: phishing@irs.gov.
Filing False or Misleading Forms
The IRS is seeing various instances where scam artists file false or misleading returns to claim refunds that they are not entitled to. Under the scheme, taxpayers fabricate an information return and falsely claim the corresponding amount as withholding as a way to seek a tax refund. Phony information returns, such as a Form 1099-Original Issue Discount (OID), claiming false withholding credits usually are used to legitimize erroneous refund claims. One version of the scheme is based on a false theory that the federal government maintains secret accounts for its citizens, and that taxpayers can gain access to funds in those accounts by issuing 1099-OID forms to their creditors, including the IRS.
Nontaxable Social Security Benefits with Exaggerated Withholding Credit
The IRS has identified returns where taxpayers report nontaxable Social Security Benefits with excessive withholding. This tactic results in no income reported to the IRS on the tax return. Often both the withholding amount and the reported income are incorrect. Taxpayers should avoid making these mistakes. Filings of this type of return may result in a $5,000 penalty.
Abuse of Charitable Organizations and Deductions
The IRS continues to observe the misuse of tax-exempt organizations. Abuse includes arrangements to improperly shield income or assets from taxation and attempts by donors to maintain control over donated assets or income from donated property. The IRS also continues to investigate various schemes involving the donation of non-cash assets including situations where several organizations claim the full value for both the receipt and distribution of the same non-cash contribution. Often these donations are highly overvalued or the organization receiving the donation promises that the donor can repurchase the items later at a price set by the donor. The Pension Protection Act of 2006 imposed increased penalties for inaccurate appraisals and set new definitions of qualified appraisals and qualified appraisers for taxpayers claiming charitable contributions.
Frivolous Arguments
Promoters of frivolous schemes encourage people to make unreasonable and outlandish claims to avoid paying the taxes they owe. If a scheme seems too good to be true, it probably is. The IRS has a list of frivolous legal positions that taxpayers should avoid. These arguments are false and have been thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law or IRS guidance.
Abusive Retirement Plans
The IRS continues to find abuses in retirement plan arrangements, including Roth individual Retirement Arrangements (IRAs). The IRS is looking for transactions that taxpayers use to avoid the limits on contributions to IRAs, as well as transactions that are not properly reported as early distributions. Taxpayers should be wary of advisers who encourage them to shift appreciated assets at less than fair market value into IRAs or companies owned by their IRAs to circumvent annual contribution limits. Other variations have included the use of limited liability companies to engage in activity that is considered prohibited.
Disguised Corporate Ownership
Corporations and other entities are formed and operated in certain states for the purpose of disguising the ownership of the business or financial activity by means such as improperly using a third party to request an employer identification number.
Such entities can be used to facilitate under reporting of income, fictitious deductions, non-filing of tax returns, participating in listed transactions, money laundering, financial crimes and even terrorist financing. The IRS is working with state authorities to identify these entities and to bring the owners of these entities into compliance with the law.
Zero Wages
Filing a phony wage- or income-related information return to replace a legitimate information return has been used as an illegal method to lower the amount of taxes owed. Typically, a Form 4852 (Substitute Form W-2) or a ?corrected? Form 1099 is used as a way to improperly reduce taxable income to zero. The taxpayer also may submit a statement rebutting wages and taxes reported by a payer to the IRS.
Sometimes fraudsters even include an explanation on their Form 4852 that cites statutory language on the definition of wages or may include some reference to a paying company that refuses to issue a corrected Form W-2 for fear of IRS retaliation. Taxpayers should resist any temptation to participate in any of the variations of this scheme. Filings of this type of return may result in a $5,000 penalty.
Misuse of Trusts
For years, unscrupulous promoters have urged taxpayers to transfer assets into trusts. While there are many legitimate, valid uses of trusts in tax and estate planning, some promoted transactions promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes. Such trusts rarely deliver the tax benefits promised and are used primarily as a means to avoid income tax liability and to hide assets from creditors, including the IRS.
The IRS has recently seen an increase in the improper use of private annuity trusts and foreign trusts to shift income and deduct personal expenses. As with other arrangements, taxpayers should seek the advice of a trusted professional before entering into a trust arrangement.
Fuel Tax Credit Scams
The IRS receives claims for the fuel tax credit that are excessive. Some taxpayers, such as farmers who use fuel for off-highway business purposes, may be eligible for the fuel tax credit. But other individuals are claiming the tax credit for nontaxable uses of fuel when their occupation or income level makes the claim unreasonable. Fraud involving the fuel tax credit is considered a frivolous tax claim and potentially subjects those who improperly claim the credit to a $5,000 penalty.
How to Report Suspected Tax Fraud Activity
Suspected tax fraud can be reported to the IRS using Form 3949-A, Information Referral. The completed form or a letter detailing the alleged fraudulent activity should be addressed to the Internal Revenue Service, Fresno, CA 93888. The mailing should include specific information about who is being reported, the activity being reported, how the activity became known, when the alleged violation took place, the amount of money involved and any other information that might be helpful in an investigation. The person filing the report is not required to self-identify, although it is helpful to do so. The identity of the person filing the report can be kept confidential.
Whistle blowers also may provide allegations of fraud to the IRS and may be eligible for a reward by filing Form 211, Application for Award for Original Information, and following the procedures outlined in Notice 2008-4, Claims Submitted to the IRS Whistle blower Office under Section 7623.
by steve | Mar 15, 2010 | Tax Help, Uncategorized
The tax filing deadline is approaching. If you don’t file your return and pay your tax by the due date you may have to pay a penalty. Here are nine things the IRS wants you to know about the two different penalties you may face if you do not pay or file on time.
If you do not file by the deadline, you might face a failure-to-file penalty.
If you do not pay by the due date, you could face a failure-to-pay penalty.
The failure-to-file penalty is generally more than the failure-to-pay penalty. So if you cannot pay all the taxes you owe, you should still file your tax return and explore other payment options in the meantime.
The penalty for filing late is usually 5 percent of the unpaid taxes for each month or part of a month that a return is late. This penalty will not exceed 25 percent of your unpaid taxes.
If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.
You will have to pay a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes for each month or part of a month after the due date that the taxes are not paid. This penalty can be as much as 25 percent of your unpaid taxes.
If you filed an extension and you paid at least 90 percent of your actual tax liability by the due date, you will not be faced with a failure-to-pay penalty if the remaining balance is paid by the extended due date.
If both the failure-to-file penalty and the failure-to-pay penalty apply in any month, the 5 percent failure-to-file penalty is reduced by the failure-to-pay penalty. However, if you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100% of the unpaid tax.
You will not have to pay a failure-to-file or failure-to-pay penalty if you can show that you failed to file or pay on time because of reasonable cause and not because of willful neglect.
by steve | Mar 12, 2010 | Tax Help, Uncategorized
I am a former IRS agent in teaching instructor with the Internal Revenue Service.
I not only work the program while at the Internal Revenue Service I taught the program as well.
Call us today for a free initial tax consultation.
THE IRS Offers In Compromise
An offer in compromise (OIC) is an agreement between a taxpayer and the Internal Revenue Service that settles the taxpayer’s tax liabilities for less than the full amount owed. If the liabilities can be fully paid through an installment agreement or other means, the taxpayer will in most cases not be eligible for an OIC. For information concerning installment agreements, refer to Topic 202.
In most cases, the IRS will not accept an offer unless the amount offered by the taxpayer is equal to or greater than the reasonable collection potential (the RCP). The RCP is how the IRS measures the taxpayer’s ability to pay. The RCP includes the value that can be realized from the taxpayer’s assets, such as real property, automobiles, bank accounts, and other property. In addition to property, the RCP also includes anticipated future income, less certain amounts allowed for basic living expenses.
The IRS may accept an OIC based on three grounds. First, acceptance is permitted if there is doubt as to liability. This ground is only met when genuine doubt exists that the IRS has correctly determined the amount owed.
Second, acceptance is permitted if there is doubt that the amount owed is collectible. This means that doubt exists in any case where the taxpayer’s assets and income are less than the full amount of the tax liability.
Third, acceptance is permitted based on effective tax administration. An offer may be accepted based on effective tax administration when there is no doubt that the full amount owed can be collected, but requiring payment in full would either create an economic hardship or would be unfair and inequitable because of exceptional circumstances.
When submitting an OIC, taxpayers must use the most current version of Form 656 (PDF), Offer in Compromise. Except when an OIC is submitted based on doubt as to liability, taxpayers must also submit Form 433-A (PDF), Collection Information Statement for Wage Earners and Self-Employed Individuals, and/or Form 433-B (PDF), Collection Information Statement for Businesses. A taxpayer filing an OIC based on doubt as to liability must file a Form 656-L, Offer in Compromise (Doubt as to Liability), instead of Form 656 and Form 433?A and/or Form 433?B.
In general, a taxpayer must submit a $150 application fee along with the Form 656. There are two exceptions to this requirement. First, no application fee is required if the offer is based on doubt as to liability. Second, the fee is not required if the taxpayer is an individual (not a corporation, partnership, or other entity) who qualifies for the low-income exception. This means that the taxpayer’s total monthly income falls at or below 250 percent of the poverty guidelines published by the Department of Health and Human Services. If the total monthly income falls at or below the poverty guidelines, the taxpayer may submit a Form 656-A (PDF), Income Certification for Offer in Compromise Application Fee and Payment, instead of the $150 application fee. The Form 656 package contains a worksheet and the IRS OIC Low Income Guidelines table to assist taxpayers in determining whether they qualify for the low-income exception. The Form 656-A and the worksheet must be submitted with the Form 656.
Taxpayers may choose to pay the offer amount in a lump sum or in installment payments. The tax law provides rules for “lump sum offers” and “periodic payment offers” submitted on or after July 16, 2006. A lump sum offer is defined as an offer payable in 5 or fewer installments. If a taxpayer submits a lump sum offer, the taxpayer must include with the Form 656 a nonrefundable payment equal to 20 percent of the offer amount. This payment is required in addition to the $150 application fee. The 20 percent amount is called “nonrefundable” because it cannot be returned to the taxpayer even if the offer is rejected or returned to the taxpayer without acceptance. The 20 percent amount will be applied to the taxpayer’s tax liability. The taxpayer has a right to specify the particular tax liability to which the IRS will apply the 20 percent amount.
The offer is called a “periodic payment offer” under the tax law if it is payable in 6 or more installments. When submitting a periodic payment offer, the taxpayer must include the first proposed installment payment along with the Form 656. This payment is required in addition to the $150 application fee. This amount is nonrefundable, just like the 20 percent payment required for a lump sum offer. Also, while the IRS is evaluating a periodic payment offer, the taxpayer must continue to make the installment payments provided for under the terms of the offer. These amounts are also nonrefundable. These amounts are applied to the tax liabilities and the taxpayer has a right to specify the particular tax liabilities to which the periodic payments will be applied.
Ordinarily, the statutory time within which the IRS may engage in collection activities is suspended during the period that the OIC is under consideration and is further suspended if the OIC is rejected by the IRS and the taxpayer appeals the rejection to the IRS Office of Appeals within 30 days from the date of the notice of rejection.
If the IRS accepts the taxpayer’s offer, the IRS expects that the taxpayer will have no further delinquencies and will fully comply with the tax laws. If the taxpayer does not abide by all the terms and conditions of the OIC, the IRS may determine that the OIC is in default. To avoid a default, the taxpayer must timely file all tax returns and timely pay all taxes for 5 years or until the offered amount is paid in full, whichever period is longer. When an OIC is declared to be in default, the agreement is no longer in effect and the IRS may then collect the amounts originally owed, plus interest and penalties.
If the IRS rejects an OIC, then the taxpayer will be notified by mail. The letter will explain the reason that the IRS rejected the offer and will provide detailed instructions on how the taxpayer may appeal the decision to the IRS Office of Appeals. The appeal must be made within 30 days from the date of the letter. In some cases, an OIC is returned to the taxpayer, rather than rejected, because the taxpayer has not submitted necessary information, has filed for bankruptcy, has failed to include a required application fee or nonrefundable payment with the offer, or has failed to file tax returns or pay current tax liabilities while the offer is under consideration. A return is different from a rejection because there is no right to appeal the IRS’s decision to return the offer.
Additional information about the offer in compromise program can be found on Form 656 (PDF), Offer in Compromise, and in Publication 594 (PDF), The IRS Collection Process, or by visiting the www.irs.gov Offers in Compromise web page.
SHOULD YOU HAVE ANY QUESTIONS CALL US AT FRESH START TAX. THE INFO FOR THIS BLOG WAS TAKEN FROM THE IRS
by steve | Mar 12, 2010 | Tax Help, Uncategorized
I am a former IRS agent in teaching instructor of the offer in compromise.
I am a true expert when it comes to tax debt settlement.
Call us today for free initial tax consultation.
Below you’ll find the new fresh start initiative by the Internal Revenue Service for the offer in compromise program
The Internal Revenue Service today announced several additional steps it is taking this tax season to help people having difficulties meeting their tax obligations because of unemployment or other financial problems.
The steps an expansion of efforts that began more than a year ago ?? include additional flexibility on offers in compromise for struggling taxpayers, a series of Saturday ?open houses? offering taxpayers extra opportunities to work out tax problems face to face with the IRS, special outreach with partner groups to unemployed taxpayers and the availability of more information on a special section of the IRS Web site.
Times are tough for many people, and the IRS wants to do everything it can to help people who have lost their job or face financial strain,? IRS Commissioner Doug Shulman said. We continue to make adjustments to key programs and expand ways for people to get help. We?re doing everything we can to help ease the burden on struggling taxpayers.?
New Flexibility for Offers in Compromise
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 ?? continues to be a viable option. IRS employees will now have additional flexibility when considering offers in compromise from taxpayers facing economic troubles, including the recently unemployed.
Specifically, IRS employees will be permitted to consider a taxpayers current income and potential for future income when negotiating 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 also require that a taxpayer entering into such an offer in compromise agree to pay more if the taxpayers financial situation improves significantly.
