Understanding the Different IRS Letters!

There are many types of letters that you may receive from the IRS. And believe it or not, all of them have a number which makes it easy for the IRS to track and should do the same for you. While you will probably never see most of the IRS notices that are used, there is a chance that you will be sent one at some point in time. The more you know about these correspondences and what they mean the less stressed you will be when you find one in your mailbox.

IRS Letters

IRS Notice 525 or General 30 day note. This one is sent in correspondence with a report detailing adjustments to your return. It also says what you can do if you do not agree with the adjustments.

CP 531 or Notice of Deficiency. This notice lets you know that you owe additional tax for the year(s) outlined.

CP 692 or Request for Consideration of Additional Findings. This letter is sent in correspondence with a report detailing adjustments to your return. You can either sign and send back your adjustment form or start the protest process.

CP 1153 or Trust Funds Recovery Penalty Letter. Used for explaining that the IRS is attempting to collect tax for the named business.

CP 3391 or 30 Day Nonfiler Notification. The IRS sends this when they believe that you should be paying taxes for the specified period of time.

Letter 3016 or IRC Section 6015 Preliminary Determination Notice. Once you receive this it gives you 30 days to appeal the determination for spouse relief as outlined by IRS Section 6015.

These are among the most commonly used IRS letters. As noted above, there is a good chance that you will never receive on of these during your lifetime. But if you do, you now have more information on what it means and how to proceed. The IRS is typically good about notifying tax payers of problems and there is a solution to each notification they send out. If you are still having trouble with your IRS letter, you can always contact a tax resolution firm or call the IRS directly to find out what the best solution would be for your particular situation.

Find more information on IRS Letters. Find out what each specific letter means and what actions you should take if you receive a specific letter.

Article Source: Manuel Davis, Jr.

Common IRS Tax Penalties!

The IRS is much feared when it comes to government agencies. While the audit is the tool of the IRS, most people will never experience it. Instead, we are all far more likely to pay penalties at one point or another. Although not nearly as stressful as an audit, they can add up quickly and do serious damage to one's bank account.

There are a host of penalties that can be assessed from a tax perspective. One need only look at Willie Nelson who was so far upside down on his taxes that he had to actually release a CD for which all the revenue went to the IRS! Hopefully, none of us will ever be in that situation, particularly since I sing like a cat in an alley. Still, there are common tax penalties we may all walk into. Let's take a look at them.

Filing your tax return late is definitely going to generate a penalty. The penalty is usually 5 percent of each month you are late. That being said, the penalty caps out at 25 percent. Ah, but a percentage of what? The percentage is applied to the tax that was due. If you owed $10,000 and didn't file for 6 months, the penalty would be $2,500.

What if you file the tax return on time, but don't actually pay the tax then due? You are still going to face a penalty, but it is going to be much less than what you faced with the failure to file penalty. This penalty will equate to half a percent per month you didn't pay the tax. That is pretty painless.

The accuracy related penalty is a step up in penalties. This penalty is assessed when you under pay your tax because you show negligence or disregard for the tax regulations. It can also be assessed if you understate the tax due. The penalty in this situation is a hefty 20 percent of the underpayment.

Fraud is something that really gets the
IRS fired up. If you under report the tax you owe because of a fraudulent move, the penalty is a killer. How so? It is 75 percent. Yes, 75! There is a very decent chance you will also face criminal charges for the fraudulent act, which raises the specter of jail time.

The tax code is full of provisions allowing the IRS to have at you if it finds fault with your efforts regarding taxes. The above represent the most common assessed penalties, but hardly all of them.

Thomas Ajava writes for BusinessTaxRecovery.com - where you can get tax help when fighting the IRS.

Article Source: Thomas Ajava

The IRS Payment Plan Can Be a Life Saver - Beware, Strings Are Attached!

Requesting an IRS Installment Agreement is certainly a positive action towards resolving a tax liability. Yet, there can be definite drawbacks to an Installment Agreement and the biggest drawback is: Interest and penalties continue to accrual. It is possible to pay your tax bill for months and end up owing more than when you started

It's easy to become discourage and wonder if you will ever get the tax bill paid off. Not to worry, there are options. First things first. Taxpayers can not request an Installment Agreement until all past due returns have been filed.

Once all your tax returns have been filed, you can contact a Tax Attorney or Enrolled Agent to discuss the possibility of filing bankruptcy or an Offer in compromise (OIC - this is when you settle with the IRS for pennies on the dollar)

Do you own a home? What is your annual income? Do you have a 401K? Do you have assets that you could sell to pay off the IRS? These are questions you can address with your Tax Attorney or Enrolled Agent to see if you qualify for a Offer in Compromise.

If you decide to pursue the Installment Agreement option and the IRS request a 433-A or 433-B, you still might want to seek out professional help. A 433-A is a Collection Information Statement for Individuals, and helps the IRS determine how much "you" should pay "them" each month.

The form look harmless, but should not be taken lightly. It is easy to make irreversible mistakes that could affect the quality of your life. Example: A taxpayer list expenses for his/her child's private school -- this is not a valid expense! The IRS may fully expect for you to forward that amount to pay your tax liability. Another irreversible error: A taxpayer list his/her monthly cable bill as a utility expense. Cable bills in American can run anywhere from $12.99 to $150 a month. This is not a valid or acceptable expense as far as the IRS is concerned.

Summary: Before you can request an IRS Installment Agreement, you must file all past due tax returns. It is more cost effective to have a Tax Preparer or Tax Accountant to complete the past due returns, before employing a Tax Attorney or Enrolled Agent to file a bankruptcy or Offer in Compromise.

Cassandra Ingraham is a Tax Accountant in the San Francisco Bay Area and manages the online past due tax return service, at http://taxeswilltravel.com/pdr.htm - a site for taxpayers needing to file back taxes and request Installment Agreements with the IRS.

The site provides help with past due returns, with or without W2s and 1099 information and help with the reconstruction of tax information to prepare past due tax returns. Visit http://taxeswilltravel.com/pdr.htm, now, to get started.

Article Source: Cassandra Ingraham

Can't Pay Your Taxes? The IRS May Negotiate With You For A Smaller Amount Than You Owe!

If the IRS is sending you notices for past due taxes, whatever you do, DON'T JUST PUT THEM IN A DRAWER and hope they'll go away.

They won't.

When you acknowledge your debt, you are miles ahead of the game. You may not agree with what the IRS says you owe. You will be given an opportunity to make your case.

There are many ways to settle your debt with the IRS. One common way is what is called an "Offer in Compromise". What that means is that if you can make your case to the IRS to settle your debt and can prove that you have no assets and little means to repay the debt, they will settle with you for a lesser amount than originally billed.

In order to get to this place, you will be asked to give full disclosure of all you assets, income and expenses. It's imperative that you tell the truth!

You may qualify for an Offer in Compromise if it is determined that it is unlikely that they can collect the full amount of the tax debt or if there is legitimate doubt that exists that you are not liable for some or all of the tax liability.

To begin the process for an Offer in Compromise, you be current on all your Income Tax Filings, if you own a business with employees, their tax deposits must be current, if applicable, your estimated tax payments must be up to date for the current year, must complete IRS Form 656-A, the Offer in Compromise and an accurate collection information statement (your assets, income and expenses), IRS Form 433 A and/or B.

After the IRS has computed your figures, they will determine a new amount of your tax liability and how you may pay it.

The relief that you will experience getting this obligation off your shoulders will change your life.

Don't hesitate, get the IRS paid and move on with the rest of your life!

Katherine Evans is the CEO of 123 Easy Tax Filing, an online efile company created to help you efile your taxes. http://efile.123easytaxfiling.com


All you have to do to E-file your 1040, 1040A, or 1040EZ Federal Tax Return and associated forms for only $9.95 is

1. Enter your information...
2. Review your forms...
3. E-file your return!!
It's as easy as 123!
Contact Katherine at katie@123easytaxfiling.com

Article Source: Katherine Evans

IRS Tax Help Payment Plan - How to Set Up a Payment Plan With the IRS on Back Taxes!

Ok. Let's talk about how to get the IRS to accept a pay plan for the back taxes you owe. Malcolm C. of Lexington, KY writes me asking how he can set up a payment plan with the IRS on his $19,000 tax debt.

Let's review some of the facts of the case first:

1. Malcolm owes for two years; 2003 and 2004.

2. All of his tax returns are filed.

3. He is not under a current levy/garnishment.

4. He does not owe for business taxes, just personal.

It turns out Malcolm claimed "exempt" on his W-4 for 2003 and 2004 to try to get some extra cash. And now the IRS wants their money. The IRS wants Malcolm to pay $753 per month on a payment plan. But he can only afford to pay $400 per month. What are his options? This is a very common scenario that I see over and over again with my clients.

First of all, you will never get away with claiming "exempt" on your W-4. Eventually you will always have to pay the piper (plus penalties and interest). In almost every situation, the extra money you got during the exempt period just isn't worth the hassle and expense you experience later on. If the IRS wanted to get super technical about it, they could probably make a criminal charge of tax fraud stick by claiming that you knowingly and willfully underwithheld on your income taxes. However, the chances of you getting even investigated (let alone indicted) are next to none in a case like this. Bottom line: Just don't do it.

SOLUTION: The best thing for Malcolm to do is call the IRS ACS (Automated Collection System) line at 1-800-823-1040 and request a "Streamlined Installment Agreement." A Streamlined Installment Agreement is available to any taxpayer as a matter of right if you owe less than $25,000; have all of your tax returns filed; and only owe for personal income tax (no business payroll tax debts). The Streamlined Installment Agreement is calculated by taking your total tax liability (in this case $19,000) and dividing it by 60 months. So Malcolm is looking at a monthly payment of approximately $320 to $325 per month over the next five years (60 months) that he can set up with the IRS ACS unit.

The benefit of a Streamlined Installment Agreement is that the IRS will not levy or garnish you as long as you are on the pay plan. It becomes another monthly bill and you just pay it for the next five years (it will actually be a little longer than 5 years since penalties and interest will still accrue). Now the IRS reserves the right to file a Federal Tax Lien even if you are making the payments to preserve their interest in the debt until it is paid in full, so don't be shocked if this happens. Remember a Lien and a Levy are two different things. The lien will not take your money, your wages, or your property. It just sits on your credit report until the debt is paid.

Also, you need to make sure that you stay compliant for the future. Any non-compliance will put the agreement in default and then all bets are off. The IRS defines "compliance" in this case as making sure all of your returns are filed on time (usually by April 15th) and that you do not run any new balances (all taxes are paid by April 15th for the previous year). Good luck Malcolm. In a future article I will explain how you can get a reduction in a similar case by getting the penalties and interest on penalties removed.

Jack Manhire is an 11-year veteran tax attorney who specializes in IRS tax problems. You can find out other ways of getting your IRS problem behind you by visiting his blog for free help at http://taxhelpirs.blogspot.com/

Article Source: Jack Manhire

If You Filed an Extension for Your Taxes – Time's Almost Up!

During a beautiful summer day, it is easy to forget some of the things you have to take care of. If you filed an extension on your taxes earlier this year, the deadline is approaching.

Highly disciplined Americans are known for always being organized and getting their taxes filed on time. They plan ahead for their taxes and then meet with their tax professional to get the returns prepared. A few weeks prior to the first deadline, the file their taxes and prepare for next year. Yeah, right. While this is true for many people, there are a number of us that file extensions.

When filing an extension, we all swear on our mother’s grave that we will get on top of the situation well before the extension period runs out. Well, did you? If not, the clock is ticking and it is late in the fourth quarter of the football game.

For corporate filings, the tax extension period is coming very fast indeed. If you were supposed to have filed on March 15th, you had the right to file for an automatic 6 month extension. This means September 15th is now the magical filing date for your returns. Since corporate returns tend to be complex, now is the time to get working on them.

Of course, most people file extensions for their personal tax returns. In a change from previous years, you are now given an automatic 6 month extension. The previous relief was only 3 months. Regardless, this now means that you need to have your tax returns filed by October 15th. While that may seem a long way off, you still need to get hopping on the process. Getting a second extension is much more difficult these days.

As with the original filing dates, you can e-file your tax returns. This tends to make life a bit simpler, but keep in mind you need to keep copies of the returns. You should also get verification that the returns were actually sent to the IRS.

Human nature being what it is, you will probably read this and yawn. If you do, you run the risk of being in panic mode in a month or two when the filing date looms large. Don’t say you weren’t warned!

Richard A. Chapo is with Business Tax Recovery - providing information on taxes.

Article Source: Richard Chapo

5 Reasons to File Delinquent Tax Returns - There's Still Hope If You Haven't Paid Your Taxes!

The April 15 tax deadline has come and gone. For the millions of taxpayers who failed to file legally required tax returns, tax help is available for those who act now! Even taxpayers who received an extension for filing are not granted more time for the payment of taxes owed and may need income tax relief.

The act of not filing your tax returns can lead to more significant financial problems in the long run. Not to mention, failure to file tax returns may be construed as a criminal act by the IRS, punishable by one year in jail and $10,000 for each year not filed. Needless to say, it's one thing to owe the IRS money, but another thing to potentially lose your freedom for failure to file a tax return.

The longer you put off dealing with overdue taxes, the more serious your IRS problems will be. So I recommend filing any tax returns that are due as soon as possible to avoid additional interest, penalties and potential IRS collection tactics, such as a levy on your bank account.

With the federal budget deficit for the current year expected to top $1.8 trillion, Americans can expect more tax audits and increased IRS actions. So anyone who owes back taxes want to avoid becoming targets of aggressive IRS collection efforts that can financially cripple them for life.

Here are 5 reasons to file your delinquent tax returns:

1) You can go to jail for not filing your taxes.

Even if you haven't filed your tax return for one year - it is still considered delinquent and could be construed by the IRS as a criminal offense. Actor Wesley Snipes didn't report more than $10 million to the IRS and he was convicted of three misdemeanor counts of failing to file a tax return. Richard Hatch, who won the first season of CBS's hit show Survivor, is in prison for failing to report $1 million in prize money.

The IRS goes after those U.S. taxpayers who try to avoid taxes, and Average Joes as are just as likely as high-profile individuals to be targets of the tax-collecting agency. At every level, the agency has become increasingly aggressive in pursuing tax cheats. Are you willing to lose your freedom because you failed to file your tax returns?

2) You can incur a 25% penalty for not filing your tax returns

In this economic downturn, Americans may opt to not file because they don't have the funds to pay the taxes owed. The best thing for taxpayers in difficult financial situations to do is file their tax return, pay what they can and work with the IRS to establish a payment plan that will keep them compliant.

Additionally, if there are any delinquent tax returns that are due, they should consider filing these returns as soon as possible to avoid the wrath of any potential IRS action, such as a levy on their bank accounts.

3) You can incur additional penalties for not paying your taxes

If you fail to pay your taxes due, you will incur additional penalties for failure to pay. Taxpayers who request an extension of time to file should keep in mind that this it is not an extension of time to pay. To avoid additional penalties, taxpayers should file by the deadline and pay as much as they can, even if they are unable to pay the entire amount due. You will still have a failure to pay penalty, but it's much less. Then you can work with a specialized tax resolution expert to help you negotiate a tax settlement.

4) You can be subject to an increased tax bill if the IRS prepares your taxes for you

The IRS may prepare a "Substitute For Return" for delinquent taxpayers, in which they won't be able to file for all of their personal exceptions or allowable deductions. Because these returns are filed in the best interest of the government, the only deductions they'll usually see are the standard deduction and one personal exemption, subjecting them to a larger tax liability. So it's important for individuals to file their 2008 tax return as well as any prior delinquent tax returns as soon as possible to save money and avoid significant long-term consequences.

5) You must have all prior tax returns filed to be eligible for income tax relief

All back tax returns must be filed before the IRS will even entertain any type of tax settlement like an offer in compromise or monthly payment plan arrangement. The good news is the sooner you take care of your delinquent taxes, the less penalties and interest you'll owe.

I believe there's a solution to every problem. For delinquent taxpayer, it's never too late for to resolve your tax debt and avoid IRS penalties.

Michael Rozbruch is one of the nation's leading tax experts. A Certified Tax Resolution Specialist (CTRS), licensed CPA in the state of Maryland, and the founder of Tax Resolution Services (http://www.taxresolution.com/), he helps individuals and small businesses solve their IRS problems and is dedicated to educating the public on tax planning and other strategies for managing their personal and business finances.

Article Source: Michael Rozbruch