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

What the Mortgage Forgiveness Debt Relief Act Means For You!

On December 20, President Bush signed a law that is meant to help homeowners who are facing foreclosure or who sell their homes in a short sale. Before this law, the Mortgage Forgiveness Debt Relief Act of 2007, if your bank or lender forgave a portion of your mortgage debt because the value of your home had decreased, the IRS treated the forgiveness as taxable income.

That meant that if your mortgage lender forgave $15,000 in mortgage debt because your house was worth $15,000 less than your remaining mortgage balance, the IRS treated it as earned income. When you filed your taxes, you were required to add that amount to your annual income and pay taxes on it at your regular tax rate. Just when you most needed a break, you ended up owing taxes on $15,000 in phantom income.

Not for the next three years. Under the Mortgage Forgiveness Debt Relief Act, taxpayers can exclude up to $2 million of forgiven mortgage debt on their principal residence in 2007, 2008 or 2009. If you're married filing separately, you can exclude up to $1 million in forgiven debt from your income.

What is mortgage forgiveness?


Mortgage forgiveness is a term that has become more familiar in the real estate market over the past couple of years. In essence, anytime that a lender accepts less than the full amount of the debt owed in full payment of a mortgage, the difference between the amount owed and the amount accepted is "forgiven".

Let's take a look at Sue and Jim. They took advantage of a great adjustable rate mortgage to buy a home for $350,000 four years ago. The payments were manageable until the adjustable rate did what adjustable rates do - and thanks to the changes in the housing market and the sub-prime lending market, they are now facing foreclosure. To make things even worse, the best offer that they can get on the home for which they paid $350,000 is $275,000. Although they still owe $330,000 on the mortgage, their lender agrees to accept the $275,000 as full payment of the remainder of the mortgage, forgiving $55,000 of the debt.

Under the Old Rules The IRS Gets Their Cut


When a bank or other mortgage lender forgives your loan or any part of it, they send you a 1099C in the amount of the debt forgiven. You are then required to count the amount on the 1099C as taxable income along with your earned income and wages. Sue and Jim from the paragraph above would have got a 1099C from their old lender. When they file their taxes for the year, that $55,000 would be added to their earned income, adding the insult of having to pay taxes on income they never saw. Instead of relief, they'd end up owing the IRS a hefty chunk of change at the next tax term.

The Mortgage Forgiveness Debt Relief Act Changes Everything

Well, not exactly everything. If you're forced into a short sale, you'll still get a 1009C from your lender, and you'll still have to file that with your taxes. Now, however, you're allowed to exclude the forgiven amount up to $2 million ($1 million if you're married, filing separately) from your taxable income. In other words, while it's still counted as income, you won't have to pay taxes on that amount of your income.

Who Qualifies for the Mortgage Forgiveness Debt Relief Exclusion?

According to the IRS, you'll qualify for this tax exclusion whether you mortgage debt is forgiven as part of a refinancing or if it's forgiven in connection with a foreclosure. In order to qualify for the exclusion, the following conditions must apply:

The debt forgiven must be on a mortgage for your principal residence. The principal residence is qualified based on the amount of time that you lived in it over the past five years.

The mortgage forgiveness must be because of loss of value in your home or because of a forced short sale in connection with a mortgage foreclosure. A forgiveness that is given in return for services performed for the lender is not allowed.
The debt must be forgiven between January 1, 2007 and January 1, 2010.
The debt forgiveness must be on the mortgage used to buy your home.

How to Claim the Debt Relief Exclusion

In order to claim the debt relief exclusion, you'll need to show the IRS how much of the debt has been forgiven. That will require some calculation on your part, because the IRS wants to see the fair market value of your home as well as the amount of your mortgage that was forgiven. Often, when the lender makes out the 1099C or 1099A, they may just put the value of the loan in the field that's reserved fair market value of the home. In some cases, the 1099C or 1099A may not include the fair market value at all.

Like your math teacher, the IRS wants to see your work. When you submit your taxes, you'll need to include documentation of the fair market value of the home as well as your calculations. If the fair market value of your home - the price that it was sold for - is not listed on the 1099C form, you may do best to hire an appraiser to document the fair market value.

The calculations can get complex if you've taken out home equity loans or a second mortgage on your home as well as the primary mortgage. In this case, special considerations may apply. For instance, the income exclusion only qualifies for "acquisition indebtedness"- money that's spent to buy your home, build a new home or that you use to make substantial improvements to your home.

Suppose you bought a house 10 years ago and paid $80,000 for it with a 100% loan. The Florida land boom was very good to you, and five years later your home had increased in value to $200,000. You took advantage of lower interest rates to do a cash-out refinance for $150,000, paid off the remainder of the original mortgage and pocketed $70,000. When time comes to sell, though, you can only get $100,000 for the property and your lender agrees to a short sale because the home has decreased in value, forgiving $50,000 of the loan amount. Can you use the Mortgage Forgiveness Debt Relief Exclusion to avoid taxes on the $50,000?

That depends, says the IRS, on what you did with the cash-out part of the loan refinance. If you used the money from the refi to pay college tuition or your daughter's wedding, then you'll have to pay taxes on the forgiven amount. If, on the other hand, you used it to make major improvements to your home, then it qualifies for the exclusion - but you'd better be able to prove the expenditures. If you're audited, you may need to provide your original warranty deed, or your HUD-1 form. You may need to show canceled checks, receipts and invoices to show the cost of improvements you made.

Filing For the Debt Forgiveness Exemption

The new law came at the end of the year, after the tax forms for this year had been printed, so you won't find anywhere on the tax forms to make the calculations you'll need to prove you qualify for the exemption. The IRS is suggesting that those who are facing a short sale or foreclosure this year use electronic tax preparation software. The private software companies have worked hard to update their own forms so that you can do all the necessary calculations within the software, then print out the results so that you can attach them to your completed tax return.

Calum MacKenzie is Owner of Real Living Southern Homes a residential real estate brokerage located in Wesley Chapel, Florida and also serving the Tampa real estate and Land O' Lakes FL real estate markets.

Article Source: Calum MacKenzie

How to Settle Your Tax Debt for Pennies on the Dollar!

When you owe the IRS for back taxes, you probably owe a large sum. Most people who fall behind in their taxes, owe for more than just one year. When you owe back taxes, you know that the penalties and interest will end up costing you more than the original debt... usually MUCH MORE! These fees keep growing and compounding upon themselves only to get you deeper and deeper in debt! I'm sure that if you are reading this article that you are both in debt and you owe the IRS for past due taxes. I'm also sure that you know that this IRS Debt can not be discharged through bankruptcy. Luckily, there is still the option of Income Tax Debt Settlement!

What is Income Debt Settlement? It is a program offered by the IRS to people who find that they are unable to pay their overdue income taxes. This Income Tax Debt Settlement Offer is called "an Offer in Compromise" and can be completed by anyone who has outstanding tax debt. You can obtain the forms needed to do your own Debt Settlement Offer directly from the IRS by calling 1-800-829-2006 or 1-800-829-0115.

You may want to consider the use of an attorney or service that specializes in Income Tax Debt Settlement. They can save you time and money in going through this process. There are several requirements you must meet to qualify for this option. These specialized services and attorneys will help you determine if you will qualify or tell you what you need to do in order to qualify.

If you are considering bankruptcy, you may want to hold off until you complete the Income Tax Debt Settlement process. Being in debt will actually help you to qualify for the program! Once you apply and send in your offer, it takes up to 4 to 6 months to complete the process. Once you cave an accepted offer, you may file for bankruptcy on your other debt. After all, I assume you are trying to become debt free.

Good luck to you on your quest to financial freedom!

This article was written by Kriss Standke who is an accomplished Webmaster and publisher of CREDIT-SCORE-REPORT-FREE where he provides detailed and informative articles, tips, and advice on Debt Relief, IRS Tax Settlement Procedures, and general credit issues.

Article Source: Kriss Standke

Small Business Tax Issues for Self-Employed Individuals!

The United States is a nation of entrepreneurs. There are literally tens of millions of self-employed individuals that enjoy pursuing their dream business. Of course, few of you enjoy the paperwork and confusing tax issues that arise from owning your own business.

Many self-employed individuals are considered "sole proprietors" or "independent contractors" for legal and tax purposes. This is true regardless of whether you are turning a hobby into a business, selling an indispensable widget or providing services to others. As a self-employed person, you report business revenue results on your personal income tax return. Following are a few guidelines and issues you should keep in mind if you are pursuing your entrepreneurial spirit.

Schedule C - Form 1040.

As a self-employed person, you are required to report your business profits or losses on Schedule C of Form 1040. The income earned through your business is taxable to you as an individual. This is true even if you do not withdraw any money from the business. While you are required to report your gross revenues, you are also allowed to deduct business expenses incurred in generating that revenue. If your business efforts result in a loss, the loss will generally be deductible against your total income from all sources, subject to special rules relating to whether your business is considered a hobby and whether you have anything "at risk."

Home-Based Business

Many self-employed individuals work out of their home and are entitled to deduct a percentage of certain home costs that are applicable to the portion of the home that is used as your office. This can include payments for utilities, telephone services, etc. You may also be eligible to claim these deductions if you perform administrative tasks from your home or store inventory there. If you work out of your home and have an additional office at another location, you also may be able to convert your commuting expenses between the two locations into deductible transportation expenses. Since most self-employed individuals find themselves working more than the traditional 40-hour week, there are a significant number of advantageous deductions that can be claimed. Unfortunately, we find that most self-employed individuals miss these deductions because they are unaware of them.

Self-Employment Taxes - The Bad News

A negative aspect to being self-employed is the self-employment tax. All salaried individuals are subject to automatic deductions from their paycheck including FICA, etc. In that many self-employed individuals often do not run a formal payroll for themselves, the government must recapture these taxes through the self-employment tax. Simply put, you are required to pay self-employment taxes at a rate of 15.3% on your net earnings up to $87,900 for 2004. For net income in excess of $87,900, you will pay further taxes at a rate of 2.9% on the excess.

In an interesting twist that reveals the confusing nature of the tax code, you are allowed a partial deduction for the self-employment tax. Simply put, you are allowed to deduct one-half of your self-employment taxes from your gross income. For example, if you pay $10,000 in self-employment taxes, you are allowed a deduction on your 1040 return of $5,000. Many self-employed individuals miss this deduction and pay more money to taxes than needed.

Health Insurance Deduction

This used to be a very messy area for self-employed individuals, to wit, you received little tax relief when it came to your health insurance bill. This was a particular burden for small business owners when considering the astronomical cost of health insurance. All of this has changed and you now may deduct 100% of your health insurance costs as a business expense.

No Withholding Tax

Unlike a salaried employee sitting in a cubicle, you are not subject to withholding tax on your paycheck. While this sounds great, you are required to make quarterly estimated tax payments. If you fail to make the payments, you are subject to a penalty, but the penalty is not the biggest concern.

A potential and dangerous pitfall of being self-employed is failing to pay quarterly estimated taxes and then getting caught at the end of the year without sufficient funds to pay your taxes. The IRS is not going to be happy if you fail to pay your taxes and you will suffer the consequences in the form of penalties and interest. Making sure you pay quarterly estimated taxes helps avoid this situation and it is highly recommended that you follow this course of action.

Record Keeping

You must maintain complete records of all business income and expenses. Simply put, document everything. Create a filing system for each month and file every receipt, etc. All business travel expenses must be documented, including auto mileage you incur when performing business tasks. Office supply stores sell business mileage books that you can keep in your car and use whenever you travel. If you have any doubt about documenting something, just do it!

In Closing

As a self-employed individual, your focus and time is spent on making your business successful. Your focus is not on the complexities of the tax code and how to limit the amount of taxes you owe. If any of the information in this article is new to you, then it is highly likely you have paid far more in taxes than required.

Richard A. Chapo is with http://www.businesstaxrecovery.com - recovery of business taxes through tax help and tax relief. Visit http://www.businesstaxrecovery.com/articles to read more business tax articles.

Article Source: Richard Chapo

Tax Relief Help!

Tax-relief help pertains to helping taxpayers settle their current and past due taxes. Many taxpayers are increasingly finding it difficult to pay their taxes on time and for them, tax relief reduces the burden of taxation. The Internal Revenue Service introduced a new tax-relief program in 1992, allowing individuals and corporations to settle back taxes. Several such tax-relief programs exist at both the federal and state levels.

Tax relief help is the assistance offered by various service agencies and companies that engage in tax-related matters. These companies have specialized personnel who are typically taxation experts and attorneys who help taxpayers with receiving the full benefits that they are entitled to under the federal and state tax-relief programs. Even though the program introduced by the IRS in 1992 allows taxpayers who are in financial hardship to settle their tax liabilities for less than the full amount, the task of interacting with the IRS can be very emotionally draining. This is particularly so in the case of tax-relief programs since most of them are aimed at low-income persons and senior citizens.

There is a wealth of information provided online by many agencies that are engaged in providing tax-relief help. The average man is quite unaware of tax-relief programs, and getting help with the tax relief from organizations dedicated to this task is quite beneficial. There are various organizations that, apart from offering their services for obtaining tax relief, also assist with financial help to manage the tax payments in a timely manner. However, most agencies that offer tax relief help also concentrate on preparing tax returns for the clients and defending them during audits and appeals.

Tax Relief provides detailed information on Tax Relief, Income Tax Relief, Property Tax Relief, Tax Relief For Small Businesses and more. Tax Relief is affiliated with State Tax Refunds.

Article Source: Steve Valentino

Why Wait For a Painful IRS Garnishment?

I have been in the business of helping those with delinquent taxes for over ten years. My company has solved tax problems for over 10,000 clients. We have interviewed over 50,000 prospects. Even with those big numbers, I am always baffled that people wait for the IRS to garnish their paycheck before taking action.

This is especially true these days with all the help around. I count at least five companies advertising on national TV. Substantially more use radio. A dozen companies still solicit clients through direct mail. People with tax problems are exposed to companies offering solutions 2 -5 times a week. Of course, the IRS backs that up with constant threatening letters.

Even with all the advertised help and IRS threats, most will not take any positive action. An IRS wage garnishment is an extremely painful experience. If not resolved quickly the garnishment can permanently damage your finances. Almost always short-term financial damage is encountered. Yet the garnishment is easy to avoid. So why do people wait to take the financial punch?

It's like the guy sawing a hole around himself on the ice. Suddenly he is in the cold waters and cannot figure out how he got there or what to do next. I've spent years observing the destructive effects of tax garnishments. Finally, I think I have figured out why people wait for the IRS to clobber them and figured out how to get folks off IRS death row. I have come to believe there are four basic factors at play.

Fear of the IRS: Of course, their reputation does not help so this is easy to understand. However, in my many dealings with the IRS, I have found they are generally reasonable. Further, the IRS wants to make a deal with you, but you must instigate it. No doubt, IRS agents are easier to deal with before a garnishment than after. So do not be scared to make the call to the IRS or a tax professional.

Tax Debtors tend to be Procrastinators: In my many marketing studies, the only common factor I found was that tax debtors tend to procrastinate. Most will continue to procrastinate until the hammer falls. This is truly one of those cases where no action is usually worse than the wrong action.

Financially they are Unable to Pay: This is understandable. After all, if you had the money you would pay and that would be the end of it. Additionally, tax professionals charge from $3,500 to $10,000. For this reason, we developed a "Do It Yourself Tax Relief Kit" and it is easily affordable for everyone.

An Acceptable Solution is Unavailable: The quandary of writing the IRS a check, getting on an unreasonable payment plan or hiring an expensive tax attorney is a difficult one. This is why we developed the Do It Yourself Kit to tax resolution. We hope it will serve many well. Its goal is to resolve the "Garnishment wipes me out" dilemma.

Anthony Cannon, President of DoItYourselfTaxRelief.com (DIYTR), wrote this article
Unlike every other tax relief firm, DIYTR believes people can solve most tax debt problems themselves without the use of expensive attorneys or tax professional. His company offers a Do It Yourself Stop Garnishment Kit at: http://doityourselftaxrelief.com/tax-relief-kits/stop-garnishment-kit.

You can Stop an IRS Garnishment Yourself Now. Your IRS debt problems will go away quickly and you will get your paycheck back. However, you must act or the IRS will take your paycheck until every penny with tax and interest has been seized from you.

Please if you are currently under an IRS tax Garnishment, visit our web page at:

http://doityourselftaxrelief.com/tax-relief-kits/stop-garnishment-kit

End the paycheck seizure today. Save thousands over attorney fees. You owe it to yourself to try.

Article Source: Anthony Cannon

How To Get Tax Resolution And Tax Debt Relief!

You can achieve a positive tax resolution if you are enmeshed in a tax dispute with the Internal Revenue Service. Tax debt relief can be brought about with the assistance of Enrolled Agents (EA), Certified Public Accountant (CPA), and Tax attorneys or Tax accountants. Various remedies are at your disposal including Offer in Compromise, Innocent Spouse Relief, Injured Spouse Relief, Currently Not Collectible, the Collection Due Process (CDP) and statute of limitation analysis.

Even if you have a size-able tax liability, that seems monumental or have not filed taxes in years, your tax issues can be resolved. An acute tax dispute can result in a tax lien being filed, your bank accounts being attached, wages garnished, and the confiscation of your property. A tax resolution with the IRS can prevent facing or lessen the impact of these consequences.

As hard as it may seem, it is possible to reach a tax resolution and settle the dispute for much less than the amount owed. This can be achieve through a "Offer in Compromise", which is a settlement or agreement between you and the IRS for delinquent taxes, for an amount much less than the original tax owed. It has been shown that approval rates are greatest when professional tax help has been enlisted.

If you are unable to satisfy a claim of liability by immediately paying it in full to resolve your tax issues there is a excellent tax debt relief alternative. An Installment agreement with the IRS can bring about a tax resolution. This will allow you to pay in smaller, more affordable, amounts over time.

"Currently Not Collectible" is another tax debt relief strategy, this implies that you the taxpayer does not have the ability to repay your tax debt. After receiving concrete proof that the taxpayer does not have the capacity to pay, the IRS can affirm you "Currently Not Collectible". Once this occurs all recovery and collection activity is discontinued, including levies and garnishment. You will however receive an annual statement that states the amount of tax still owed. While your status is "Currently Not Collectible" the ten year statute of limitations on tax debt collection remains in force. If after the ten year period the tax debt is not collected it expires.

It is wise not to negotiate with the IRS for tax debt relief without expert tax help. Professionals like CPA's, tax attorneys and Enrolled Agents should be sought out if your tax issues involve unfiled returns, missing records, garnishment or the threat of property seizure, levies or other penalties. If it is a installment agreement, a "Offer in Compromise" you want or to be declared "Currently Not Collectible" their advice and representation can be priceless in this arena.

As the IRS is in the business of collecting and recovering taxes, they are receptive to serious offers that are reasonable and will help them achieve these aims. Even if the amount collected is a fraction of the original tax debt this is viewed as a win and a closed case by the IRS. This is a win-win for you, the tax debt can be resolved and for less than the original amount. You will actually be helping your government to reach a tax resolution and close a case when you seek a tax resolution. Go for it.

Taxes can be confusing and stressful get more information and help on getting Tax Resolution and Tax Debt Relief as well as other resources related to tax preparation at Tax Preparation Help here: http://www.tax.totalinfoguide.com

Article Source: Ronn Espy

Are You In Need Of Tax Relief?

For those who are getting swamped with concern over their tax situation – there’s hope. Tax relief is available to many who are dealing with the burden of figuring out how to catch up on their back taxes. It’s certain that a great deal of people that have back tax issues are more stressed than they have to be – but now there’s a chance you won’t have to handle all or most of that debt, thanks to tax relief available to many people.

To be sure, the IRS can bring much stress to your life if you have problems with unpaid taxes. Whether it’s wage garnishing, or tax liens, or even people who serve as private debt collectors and gain by getting money people owe, the IRS has many ways of collection that can get under our skin. How many of you have gotten incessant phone calls from collection agencies looking to speak to you about whatever debts you may owe?? For those who are trying to keep a business going – or keep the family finances solvent – tax relief can be a huge lifesaver.

There is a certain form of tax relief available to people who foreclose to wash away their debts – it’s called offer-in-compromise. Keep in mind that in cases where foreclosure funds are greater than the amount of debt you owe, the resulting difference can be taxed. So what happens is that your lender should give you a year-end financial statement form, on which the most important things are stating your property value and the amount of debt that was forgiven.

If a disaster of some sort strikes you and your area, you may want to see if there is disaster tax relief offered. This assistance allows those in ravaged areas the ability to try and get back on their feet.

There are also opportunities for those who are low-income and are in dire need of tax relief. In plenty of instances, there are states (that do not have income taxes) which offer programs designed to help struggling people and families. Since the poor have more difficulty overcoming the burden that local and state sales taxes and other taxes can place upon them, income-tax-free states figure that implementing programs such as these help keep families from going under by providing tax relief. Should a state actually have an income tax, then what happens is exemption for those who live below the poverty line. Plus, tax relief is available for homeowners who happen to make under $60,000 annually. Some states offer homeowners’ credit certificates to these people, who then pay their property taxes thanks to these certificates. All of these are welcome aid to those who are in low-income situations or those who have collateral, but still struggle wit the task of finding the money to pay back taxes.

There are also a host of debt relief services that would be happy to help anyone who is in need. So those who are worried about their tax situation can rest easy – somewhere, there is a tax relief package that should fit your situation.

Matt D. Murren owns and operates:

http://www.tax-relief-advisor.com

Tax Relief

Article Source: Matt Murren

Offer in Compromise (OIC)

If you or someone you know owes the IRS money I'm sure you've heard the term "offer in compromise". While this is not the only solution to solve your IRS problems, it certainly is the most common approach. An offer in compromise is basically an agreement between the tax payer and the IRS that settles the tax payers' debt for less than the amount owed. How much less highly depends on the unique financial circumstances for the individual applying. The key element of this agreement to understand is that negotiation is everything and who you hire to negotiate your IRS debt will directly show in the outcome of your agreement. It is not recommended for a tax payer who is in debt to attempt to negotiate an offer in compromise by themselves; there are many legal and industry terms thrown around that are designed to confuse the average consumer.

There are currently hundreds of websites circulating across the internet that claim to help individuals negotiate an offer in compromise with the IRS. On top of that, they also claim to have the ability to negotiate your IRS debt down to a few pennies on the dollar. Consumers should not trust any company that claims to settle your debt for (X) amount of dollars before even seeing your required documentation. As stated above, any offer in compromise negotiation is done on a case by case basis. There are many factors that come into play when negotiating your debt such as your income, assets (property, bank accounts, etc), and basically what your ability is to pay back the debt. For these reasons, no company can reasonably promise you anything without first reviewing your unique case. When choosing a firm to help alleviate your IRS debt, it is important not to base your decision solely on the lowest price; the money you will save by picking the right firm will usually more than pay for itself.

When you do decide to hire a company to negotiate your IRS debt it's important to check its credentials and make sure it has attorneys on staff. Having an attorney involved during the negotiation process will greatly improve your chances of having a positive outcome (i.e. pay back less money). As state laws are always changing and being revised, it is a good idea to hire someone who has extensive knowledge of the laws governing your unique situation.

If you need assistance in solving your IRS tax problems contact the CreditLawGroup today at (800) 284-2548.

Smith & Gromann, P.A./CreditLawGroup is a national law firm concentrating on helping consumers, especially those affected by the current mortgage and debt crisis. We provide cost-effective and accountable representation on the matters of: Foreclosure Postponement, Loan Modification, Mortgage Document Audit, Refinance, Shortsale/Payoff, IRS Debt Negotiation, Credit Repair, & Debt Settlement. We are a real law firm representing clients under federal and state law. Don't trust your future to supposed "consultants" and generic companies. With a law firm you can assure that your interests are properly represented on what are critical legal issues.

Article Source: Ken Dsouza

IRS Debt Settlement Options!

If you are kind of desperate about finding solutions to your IRS debt, and you are serious in settling it once and for all, then you must read on. You don't have to worry because there are millions in the country who are also trapped with the same problem. IRS debt settlement is something simple and easy if you only know what to prioritize first.

Here are some tips to aide you on settling your debts:

Compromise Agreement

There is nothing that can't be achieved with negotiating. Yes, you can always agree to a compromise with the IRS. While others think it is not feasible because IRS has always set the guidelines, terms, and conditions, there is no harm in trying. You can negotiate for a longer period of time for the completion of the payment. You can also ask if they can lower the amount to pay while you promise to pay it on time. There are many ways in which you can have a win-win situation with the IRS. You just have to be humble and sincere.

Installment Terms

Installment is always accompanied with interest rates. Although all in all, you will be paying for a much larger amount, at least you have the luxury of time to complete it. You may either pay monthly, and this allows you to manage your finances every month, allotting a portion to your IRS debt. This is good for those who are not capable of paying the IRS debt in full because in a monthly basis, only a minimum amount is required for you to settle.

Currently Not Collectible

By having this status does not mean that you are freed from your debt. It only gives you the leeway to not pay the debt in full for some reason that you are not capable of paying yet. A yearly checking will be done by the IRS to see if you can already pay. However, be mindful that IRS gives only 10 years for those with debts to pay.

Advantage of taking more time to pay in full

The automated IRS collection, in a general view, is actually helpful to those who are not capable of paying the debt in full yet. How does this happen? For some reason, the automated IRS collection system is slow, which gives way to people to look for their money to pay. When the IRS sees that you still have some debts to pay, they will send you their automated notices. Then, they will send you some collection letters which remind you of their debt. The first letter that will be sent is an assessment letter telling you of the amount you owe. Next, you will be given a series of four computer-generated letters reminding you that you have 3-6 months before the IRS moves. If you still haven't had the money to pay, you can write them a letter asking for a 45-day extension of the deadline. The same process is applied if you are again not able to comply with the deadline.

Tax Expert

Since you still have not settled your IRS debt means you are not that good in your finances. Sometimes, you have to admit that you cannot trust yourself with financial matters so might as well hire the services of a tax expert. They are those in-the-know in debts and other financial matters, and they are always available to advise you with the most effective methods in settling a debt, especially with an established institution such as the IRS.

Do not be complacent. Do not just sit back and relax. If you have taxes unsettled, move and find solutions. There are no problems that have no solutions at all. Good luck!

The writer can be contacted at his websites, IRS Tax Settlement and IRS Debt Relief.

Article Source: Yan Susanto

IRS Notice of Levy!

In order to know what you should do next, you need to realize how you got here in the first place. The IRS first mails you a notice and demand for payment once they have determined that you owe taxes. Some people never respond or perhaps just put it aside and forget about it. Nevertheless, if they do not receive a payment from you, then they send you what is called a Final Notice of Intent to Levy and Notice of Your Right to a Hearing thirty days before the levy. This can be given in person at your home, at your business, or by mail.

But let's dig a little deeper about why you got here. Yes it matters, because if you had a hardship that caused you to get behind on your taxes, the IRS will include that in their negotiations. Did you go through difficult financial times that caused you to owe back taxes? If so, what caused it? Did you lose your job...Did you go through a divorce? Medical problems? Once you have determined why you got behind on your taxes, write everything down. Then write down your budget so that you can figure out what your monthly expenses are and what you can afford to pay. If you're starting to think that getting tax relief is a pain, then you're right. Heck, we haven't even started.

Now do keep in mind that you can request a Collection Due Process hearing with the Office of Appeals. However you'll need to file your request within thirty days of the date on your notice. For example, if you already paid your IRS taxes, then that would be grounds for an appeal. Or if you were protected by bankruptcy, then again you could appeal the levy. Or if the IRS made a procedural error when they assessed your liability. Perhaps you have received a notice to levy on taxes that you owed that are beyond the statute of limitations. Again, that would definitely be a reason to appeal the levy notice. There are other grounds for appeal, but I do want to mention one more, which is that you would like to discuss collection options. This is important!

If you owe less than $10,000 in IRS back taxes, you have the option to enter into an installment agreement. Granted that could make it difficult to pay all your other bills, but you do have that option nonetheless. Ideally however, what you want to do is settle your IRS debt. This is where your hardship comes into play. Along with your financial worksheet, called a 433, you can submit for a hardship plan. You may choose to also negotiate an abatement of your penalties and interest. There are numerous payment plans available with regards to receiving tax relief. Receiving an IRS Notice of Levy is not the end of the world, but not doing anything about it can be.

Of course if you owe more than $10,000, you may not qualify for an installment agreement or other plans or you may simply not be able to afford the payments. Again, this is where reducing the debt is key. Due to the IRS bureaucracy and never ending paperwork and negotiations, you may choose to have a tax representation firm do all the work for you. Do keep in mind that if you have years of un-filed taxes, then those will need to be filed prior to negotiating an IRS debt settlement program. If you owe a substantial amount and need experts to represent you, make sure that they have an in house CPA to prepare your taxes.

The basic eleven steps in resolving your IRS Notice of Levy are the following:

a) Take action. Don't just sit around hoping that it all goes away, because it won't.

b) Determine whether there are grounds for appeal.

c) Write your hardship reasons for tax relief.

d) Educate yourself on Tax Law.

e) Write down your budget and complete a 433 (A or B).

f) Research various IRS debt settlement plans, i.e. CNC, Installment Agreements, Offer In Compromise, Innocent Spouse, etc. to determine which you may qualify for, a combination of these plans.

g) Prepare any un-filed tax returns.

h) Request a tax record to find out exactly how much you have been charged in penalties and for which years.

i) File for a Penalty Abatement.

j) Once you have determined which plan you may qualify for, submit the proper forms CORRECTLY! One mistake could disqualify you. This is especially true of an Offer In Compromise.

k) Contact the IRS to find out which Agent is in charge of your file. Keep calling and calling until you get the decision maker. Keep them abreast of what you are doing and negotiate with them all the while to resolve your back taxes. (This should be done from the start until the end.)

Nigel Galt is a partner in Atlas Tax Solutions, the premiere tax resolution firm. With expert CPA's, Attorneys and Tax Team Members on staff, we assist with wide ranging needs, from tax preparation, to submitting offers in compromise. In short, Atlas helps businesses and individuals resolve their tax debt once and for all. If you owe more than $10,000 in back taxes, or are currently having your wages garnished or have received a lien, then apply online at http://www.BackTaxDefense.com for immediate assistance or call toll free (866)892-5036 for a Free Consultation.

Article Source: Nigel Galt

Settle Tax Debts!

The IRS doesn't really want you to know you can settle tax debts for a percentage of the total owed. In many cases, the entire tax debt can be eliminated. The only way to find out about the various alternatives in any detail is to spend hours pouring over tax code books, or take a shortcut to resolution through the services of a tax relief associate.

Point A to Point B

When you need to settle tax debts, the quickest way to get from point A to point B is by using the services of a tax specialist. A tax specialist has years of experience both negotiating and settling a large variety of tax accounts. There are many different routes which can be taken between the 2 points and the one that works best for you depends on the facts of your situation.

Anyone can get in trouble with the IRS. The IRS doesn't care how poor or rich you are and doesn't care if you're the most famous person in the world. In fact, the IRS uses public figures as examples to the general public. It's a warning to everyone the IRS means business.

What the IRS doesn't like to talk about are the many ways you can settle tax debts. For example, you can request an audit reconsideration of a closed audit. It's possible to reopen an audit which created a tax debt you can't afford to pay when certain situations existed at the time of the audit. One of those situations is you did not attend the audit because you didn't know about it.

Another way to settle tax debts is through the Offer In Compromise. The Offer In Compromise enables you to pay the IRS an amount significantly less than the amount owed with the balance being written off. It's highly recommended the Offer In Compromise be negotiated by a tax attorney or tax representative in order to increase your chances of success.

Direct Route

Of course, there are more direct routes you can take in order to settle tax debts. If the tax debt is more than 10 years old the taxpayer doesn’t owe the debt any longer. But the IRS has to be notified and will probably make attempts to resist the write-off.

In addition, you can settle tax debts by filing bankruptcy. A lot of people don't know that if a tax assessment is 3 years old or older it can be included in a bankruptcy filing. There's also innocent or injured spouse regulations which can enable a person to be relieved of responsibility for a tax debt they did not create.

The variety of ways to settle tax debts provide lots of opportunity for negotiating an agreement with the IRS. The best way to insure you get the best settlement possible is by retaining a tax expert to represent you at the IRS.

Article Source: William D. McConnaughy, CPA

What is Form 941 and Why Must You File It?

If you own a small business, you have a small mountain of paperwork to climb every year. You are probably most familiar with income tax returns and their onerous filing requirements. But if you have employees, you have a significantly more complicated tax situation. There are several payroll-related tax forms that must be filed. One of them is Form 941, and the purpose of this article is to introduce you to the purpose of this form and its IRS-mandated filing rules.

Form 941 is entitled Employer's QUARTERLY Federal Tax Return. Note that the IRS has graciously emphasized the word "quarterly", so that's a good place to start. The purpose of Form 941 is to report federal payroll information for each calendar quarter, i.e. the 3-month period ending March 31, June 30, September 30 and December 31. Generally speaking, the form must be filed with the IRS by the end of the month following the end of the quarter, i.e. the due dates are April 30, July 31, October 31, and January 31.

More specifically, the purpose of Form 941 is to report the following federal payroll information for each quarter: 1) Wages and other compensation paid to employees; 2) Federal income tax withholdings from your employee paychecks; 3) Social security tax and Medicare tax withheld from your employee paychecks; 4) Social security tax and Medicare tax that the employer must pay; 5) Federal payroll tax payments the employer has made for the quarter; and 6) Any remaining balance due of the quarterly payroll tax liability.

After adding up all the federal payroll taxes mentioned above, the employer tax payments are subtracted from the payroll tax liability to determine whether there's a refund or balance due. There are therefore three possible end results: 1) The employer has accurately paid the liability amount and there is no refund or balance due; 2) The employer has paid more than the liability and is due a refund; and 3) The employer has paid less than the liability and has a balance due.

If you are entitled to a refund, you can request the IRS to send you a check or you can authorize the IRS to keep the refund and apply it to the next quarter's payroll tax liability. If you have a balance due, you should remit a payment with the return, also enclosing payment voucher Form 941-V.

Looking for more small business tax tips? For a free copy of the 25-page Special Report "How to Instantly Double Your Deductions" visit: http://www.YouSaveOnTaxes.com Wayne M. Davies is author of 3 ebooks on tax reduction strategies for small business owners and the self-employed.

Article Source: Wayne Davies

What is Form 940 and Why Must You File It?

Any small business owner with employees must file Form 940. The purpose of this article is to help you understand what Form 940 is all about and why you must file it. Not filing is not an option. Not filing will result in a letter from the IRS wondering why you haven't filed this tax return. And not filing could result in still penalties that you really want to avoid. So read on to get an overview of this payroll tax requirement.

The purpose of Form 940 is to report your federal unemployment tax liability, aka "FUTA", which stands for "Federal Unemployment Tax Act". Every employer must pay federal unemployment tax to the IRS. The employee does not pay the tax, nor can the employer withhold this tax from employee wages. This tax is used to pay unemployment compensation to workers who lose their jobs.

The tax is usually 0.8% of the first $7,000 of wages paid to each employee each year. So if an employee's compensation is $7,000 or more in a given year, the employer pays $56 ($7,000 x 0.8%) in federal unemployment tax. If the employee's compensation is less than $7,000, the FUTA is calculated as follows: compensation x 0.8%.

The IRS requires that the tax be paid quarterly whenever the FUTA quarterly liability exceeds $500. If the quarterly liability is less than $500, then no payment is required and that quarter's liability is carried over to the next quarter. Example: in the first quarter, your FUTA liability is $400, so no payment is required. In the second quarter, your FUTA liability is $300. So now that your total year-to-date liability (first and second quarters combined) is $700, you must pay the entire $700 because that amount exceeds $500. In the third quarter, your liability is $400, but no payment is required. In the fourth quarter, you must pay any remaining liability for previous quarters as well as the fourth quarter, regardless of the amount, even if the liability is less than $500.

Form 940 is only filed at the end of year and is due by January 31 of the following year. The form reports total wages, wages subject to federal unemployment tax (i.e. any compensation in excess of $7,000 to any employee), the FUTA tax liability for each quarter, any FUTA tax payments made in previous quarters, and any remaining balance due.

Should a quarterly payment be required for any particular quarter, that payment must be made via the federal tax deposit system, i.e. via Form 8109 at your local financial institution or via EFTPS, the Electronic Federal Tax Payment System.

Any required quarterly payment must be made by the end of the month following the end of the quarter, i.e. Quarter 1 payment is due April 30, Quarter 2 payment is due July 31, Quarter 3 payment is due October 31, and Quarter 4 payment is due January 31.

Looking for more small business tax tips? For a free copy of the 25-page Special Report "How to Instantly Double Your Deductions" visit: http://www.YouSaveOnTaxes.com Wayne M. Davies is author of 3 ebooks on tax reduction strategies for small business owners and the self-employed.

Article Source: Wayne Davies

Why Do Self-Employed People Hate the Self-Employment Tax?

For Sole Proprietors, Schedule SE (Self-Employment Tax) is arguably the most hated of all tax forms. The purpose of the form is to calculate the dreaded self-employment tax that all self-employed people must pay. The purpose of this article is to explain the reason for this tax and the resulting hatred.

If you own a small business that is not a partnership, a corporation, or a multi-member limited liability company, your business is probably a Sole Proprietorship. You may not consider yourself to be a "small business owner", but in the eyes of the IRS, a Sole Proprietor is just that. Other titles for this esteemed designation include self-employed, independent contractor, consultant, or freelancer. The end result is the same: you must report your business income and expense on Schedule C, Profit or Loss from Business.

If your profit from that self-employment activity is greater than $433, you must not only pay federal income tax on that profit, you must also pay federal self-employment (SE) tax on that profit. In 2008, if your Schedule C profit is less than $102,000, your SE tax is calculated according to this formula: Net profit x 92.35% x 15.3%. If your Schedule C profit is greater than $102,000, you use the above formula, plus another 2.9% on any profit above $102,000.

So this is the calculation behind the tax. The tax itself is simply the government's way of assessing social security tax (12.4%) and Medicare tax (2.9%) on the Sole Proprietor. When you add 12.4% plus 2.9%, you get 15.3%. And now we get to the heart of the matter: this 15.3% is actually twice as much as an employee would pay for social security and Medicare tax, because an employee only pays 6.2% and 1.45%, for a total of 7.65%. The employer then pays the equivalent 7.65%, and when you add the two, the employee and the employer together pay the same 15.3%. The Sole Proprietor pays it all himself, whereas the employee and employer each pay half.

So now you know why this is known as the "dreaded" SE tax. Why should the self-employed person pay twice as much as the employed person? An answer to that question is beyond of the scope of this article, of course, but at least you understand what is going on, and why Sole Proprietors shake their fists in rage at the mere mention of Schedule SE.

Looking for more small business tax tips? For a free copy of the 25-page Special Report "How to Instantly Double Your Deductions" visit: http://www.YouSaveOnTaxes.com Wayne M. Davies is author of 3 ebooks on tax reduction strategies for small business owners and the self-employed.

Article Source: Wayne Davies

What Are State Payroll Taxes and Why Must You Pay Them?

Every small business owner with employees must withhold and then pay state payroll taxes. It's just part of doing business that every employer must handle properly. If you don't, you face the likelihood of incurring stiff penalties (late payment fines and interest charges). The purpose of this article is to give you an overview of how the state payroll tax system works, so you can do it right not only the first time, but every time, and thereby avoid any unnecessary expenses.

The types of state payroll tax are somewhat similar to federal payroll taxes. Here are the primary ones that are common to most states:

1. Income tax withholdings. Most states have an income tax. And most states require the employer to withhold state income tax from their employee's paychecks. So you must be sure to properly calculate the appropriate state income tax, withhold that tax from each paycheck, and then send the tax to your state's tax department at the right time, along with the appropriate state income tax withholding form.

Check with your state regarding the timing of these withholding tax payments. The frequency of the payment usually depends on the amount withheld. The more you withhold, the more often you must remit the payment. You may be required to file and pay monthly, quarterly, or annually. It all depends on the numbers.

2. Local income tax withholdings. This also varies from state to state and from locality to locality within the state. By "locality" we are referring to any political subdivision of the state, such as county, city, township, or school district. There's a tremendous variety here across our country, so be sure to check with your local government to find out whether there is a local income tax and what the employer withholding requirement may be.

3. State unemployment tax. Like state income tax, state unemployment tax varies from state to state. This is the tax that is usually paid by the employer to the state for your state's unemployment fund. Typically, every employer must pay a fixed percentage of a certain maximum wage amount for each employee each year. For example, in Indiana an employer starts out with a default state unemployment tax rate of 2.7% of the first $7,000 of wages paid to each employee each year. This 2.7% rate is in effect for the first three years, after which the rate can be adjusted by the state on an employer-by-employer basis, depending on each employer's situation. Many states have an unemployment tax system similar to Indiana, but with perhaps a different tax rate and a different maximum wage amount subject to the tax.

Looking for more small business tax tips? For a free copy of the 25-page Special Report "How to Instantly Double Your Deductions" visit http://www.YouSaveOnTaxes.com Wayne M. Davies is author of 3 ebooks on tax reduction strategies for small business owners and the self-employed.

Article Source: Wayne Davies

What To Do If You Have IRS Tax Problems Because of Your Spouse!

Filing a joint tax return with your spouse has many benefits, but can also cause problems. What if your spouse understates taxes? How about if deductions are made that shouldn't be? Many people find this type of situation particularly frustrating especially if divorced, separated, or deserted by their spouse. Despite misconceptions that both spouses are responsible for taxes due, there is a way out for innocent spouses.

Known as innocent spouse tax relief, innocent spouses can be relieved of paying tax, interest and penalties caused by a spouse or former spouse's omitted or wrongly reported items on a tax return. If you believe you are qualified, file IRS Form 8857.

Most people find themselves filing IRS Form 8857 when items on tax returns go wrongly reported. These items may include underreported income or an incorrect deduction, property basis, or credit claimed.

Though you and your spouse being divorced or separated may work in your favor when applying, the IRS may find it fair to hold you responsible if you received a significant benefit from the tax understatement either directly or indirectly.

You can receive innocent spouse tax relief though if you meet the right criteria. You may qualify if you:


File a joint return with an understatement of tax due because of your spouse.
Did not know and had no reason to suspect tax was understated when you signed the return.

Would be treated unfairly by being held liable for the understated tax.

Are not attempting to transfer property between yourself and your spouse as part of a fraudulent scheme.

Request innocent spouse relief within 2 years after the date IRS began collection activity against you for the unpaid taxes.

The IRS will notify the other spouse if one spouse files a claim for innocent spouse relief. If one spouse is granted tax relief from preliminary determination, the other spouse may appeal the decision.

Other types of tax relief for spouses include relief by separation of liability and equitable relief. Relief by separation of liability is where understated tax, interest, and penalties are divided. If you don't qualify for the other types of tax relief, you may be able to get equitable relief. Equitable relief is where having to pay the tax would be unfair because you weren't part of a fraudulent scheme, involved in tax evasion, and didn't know what your spouse was doing.

Becky Schmitz is a certified tax problem resolution specialist and enrolled agent. Named 2006 Top Practitioner by the American Society of Tax Problem Solvers, she is the owner of Centsable Accounting, a tax problem resolution firm. Centsable Accounting offers many tax problem resolution services including help with innocent spouse tax relief and setting up installment agreements.

Article Source: Becky Scmitz

Get Tax Relief From an Attorney at Law!

If you have government issues with your taxes that require the assistance from a tax relief attorney you can find ample contacts in the yellow pages of your phone book or on the web by searching on Google for tax lawyers in your area. These attorneys specialize in a plethora of issues such as when the government puts a lien on your house, if you need to make a compromise on the taxes you owe due to extenuating circumstances, advice on filing for bankruptcy to avoid paying taxes as well as assistance in answering questions pertaining to legal issues involving taxes.

If you are having financial problems that gets worse knowing that you have to pay taxes that you simply can't afford, you can seek the advice of a tax attorney to provide you with assistance and legal advice towards trying to get an extension on your taxes, or seeing if you have the ability to only pay a certain amount of the total you owe. A tax relief attorney can point you in the right direction and can also help you each step of the way in representing you as a client.

Filing for bankruptcy is another way to get out of paying your taxes. Unfortunately, many people use this as a way out leaving other people who desperately need to use this option without the ability to do so. Filing for bankruptcy should be the last resort for an individual. However, if you do feel as though there is no other way out, you can file for bankruptcy and claim the taxes you owe as part of your debt. If you qualify for bankruptcy, you should get the money you owe on your taxes waived leaving you with a clean slate to start over again. Meeting with a tax relief attorney can help you decide if this is the right direction for you to take and your attorney can represent you in your bankruptcy filing. Tax lawyers can represent clients for many different reasons. If you simply need help filing your taxes, you should see a tax accountant; however, if your issues are more geared towards the legal aspect of tax filing, a tax attorney is the best person you can contact to proceed.

Matt D Murren owns and operates http://www.tax-relief-advisor.com/


Tax Relief Attorney

Article Source: Matt Murren

Back Taxes Help - Do it Yourself Or Use a Tax Professional?

OK, so you have IRS or State taxes you cannot pay or haven't paid. Depending on where you are in the process, you could be experiencing a tax levy, tax lien accompanied with interest, penalties and stress. IRS or State tax problems can seem complex but really you have two options in dealing with them.

1) You tackle the situation yourself or
2) You use a tax professional like a tax accountant, tax attorney, or tax relief company

In most cases a tax attorney or tax accountant is the best choice if you have over 10k in back taxes, but self-help is possible by using the IRS or State website along with other sites. Much of the decision lies in a few questions you should answer:

a) How serious is the tax problem? Do you have more than 10k in back taxes?
b) Do you have time to research and negotiate with the IRS or State?
c) Do you have some small funds available for tax reduction services?

Before running to the tax accountant/attorney or deciding you can take this problem on yourself, consider and ask yourself a few things:

1) How serious is your back taxes problem? A serious tax problem could be defined as a taxpayer with over 10k in back taxes, accompanied with interest, penalties, a lien or a levy. If you have more than 10k in debt, or you are experiencing a levy or lien, then it is in your best interests to work with a back taxes resolution company (considering their fees). They are staffed with attorneys and former IRS agents who can resolve and negotiate your debt down to a level most rarely obtain themselves. If you have less than 7500 in back taxes, using a tax resolution firm is not recommended because they can not save you enough to justify the service costs.

2) Do you have time to research and negotiate with the IRS or State? Realize that you will need to factor in the time and effort required to understand how your State and the IRS code works with regards to enforcement actions (lien or levy) if you decide to tackle the problem yourself. You will also need to learn how to effectively negotiate within this code by utilizing and researching the trusted tax solutions available. This is possible if you have time because there are many self-help information sites out there that can assist you. Considering question 1, in summary, if you have more than 10k in back taxes and limited time, you are more likely to save more and prevent credit degradation with a tax resolution firm.

3) Do you have some small funds available for tax reduction services? Many tax reduction companies charge differently. Some charge an upfront retainer fee, some only have a flat contingency fee, and some determine fees based on a percentage of savings. It is best to work with those companies that don't have a retainer fee and work on a contingency basis. In either case, if you don't have at least 1k in funds to get you out of your tax problem then your only choice is to tackle the problem yourself. Some firms will give you advice or a free tax consultation and that is always good to take advantage of to get you on right track.

Overall, deciding to work with a professional or tackle the problem yourself can be complex. However, if you consider how serious your tax problem is, the time it takes to negotiate yourself, and funds available for services, many times you can decide what you need to do. If you need to research, go to the IRS website, and other back taxes help websites.

For Self Help Information and a Review of Other Factors to Consider When Selecting A Tax Professional: Tax Relief Professional Help.

Find more solutions for resolving Back Taxes.

Article Source: Manuel Davis, Jr.

Innocent Spouse Tax Debt Relief!

"Innocent Spouse Tax debt Relief" from the IRS is available if you require tax debt relief from taxes and penalties that originated from a joint tax return filed with your spouse or ex-spouse. That's right, the IRS offers you a way to get out from under tax debt liability that was the result of mistakes and errors not made by you on a joint tax return. "Innocent Spouse Relief" is a good option , as the IRS holds both spouses equally responsible for everything filed on a joint return, all taxes and penalties are an equally shared responsibility regardless of who made a mistake.

If you discover that you now owe taxes, you can file IRS form 8857 for "Innocent Spouse Relief" if you were not party in any way to the intentional or unintentional under-reporting of income or of unqualified claimed deductions. If you qualify and don't seek Innocent Spouse Tax Debt Relief you can be subject to a federal levy of your bank accounts, wages, or other valuable assets seized to satisfy the tax debt. The IRS can also place a lien on your home which means the IRS will be paid first if you sell your house. Your credit rating will be damaged with reporting of any liens. Your wages may also be garnished until all taxes are paid in full. Any penalties or interest will only increase the original debt and require payment.

If your spouse (or former spouse) made false reports or mistakes on your joint return, and you can prove you had no knowledge of the mistakes, you may qualify for Innocent Spouse Relief. You MUST meet these requirements:

1.) You filed a joint return which has an understatement of tax due to erroneous items of your spouse (or former spouse).

2.) You establish that at the time you signed the joint return you did not know, and had no reason to know, that there was an understatement of tax .

3.) Taking into account all the facts and circumstances, it would be unfair for you to be held liable for the understatement of tax or falsely claimed exemptions.

4.) A request for innocent spouse tax debt relief will not be granted if the IRS proves that you and your spouse (or former spouse) transferred property to one another as part of a fraudulent scheme. A fraudulent scheme includes a scheme to defraud the IRS or another third party, such as a creditor, ex-spouse, or business partner.

You may qualify for partial tax debt relief if, at the time you filed your return, you had no knowledge or reason to know of only a portion of an erroneous item. You will be relieved of the understatement due to that portion of the item if all other requirements are met for that portion. Be advised that divorce or separation do not automatically qualify you for "Innocent Spouse Relief".

The IRS recognizes that there are cases where it would be unfair to hold you liable for your spouse's or former spouse's tax obligations or mistakes. You can file for Innocent Spouse Tax Debt Relief yourself by simply filing IRS form 8857. However, it is advisable to consult a tax professional that is well versed in IRS tax law, to achieve the most expedient and positive results in your "Innocent Spouse Relief" filing.

Get rid of the confusion and stress of taxes, get more information and help on Innocent Spouse Tax Debt Relief as well as other resources related to tax preparation and tax resolution at Tax Preparation Help here: http://tax.totalinfoguide.com/Articles/Tax_Resolution.php

Article Source: Donald Magnus

What the IRS Doesn't Want You to Know About Your Back Tax!

Owing the IRS back taxes is one of the most stressful things you can endure. With the almost daily phone calls and constant letters, it can seem like they will never go away. No one should have to live like that. There are millions of Americans who have tax debt and they are in the same boat as you are. Coming up with the money to pay back taxes is hard for anyone and during this tough economic time, it's worse than ever. But, there is no need to panic because you do have options when dealing with the IRS and your tax bills. Knowing what those options are and how to execute them can be the tricky part.

Having an IRS back tax situation is not the end of the world although it may seem like it at first. What the IRS doesn't want you to know is you can fight to make your situation better and settle for a fraction of your bill. It seems very unfair the extravagant fees and fines that the IRS can add to your bill. It's scary really. And, you better believe eventually they will collect on that bill. The IRS has the biggest, most sophisticated and intimidating collection process out there. You shouldn't be afraid of it though. Your IRS tax situation can be resolved favorably for your specific situation. You just need to consult a tax professional and start planning your attack.

IRS tax problems plague so many people that even the IRS can't keep up and if they know you have someone who understands your options fighting for you, they will cave in and give you the best deal possible. However, if you go it alone, the IRS will take advantage of their leverage over you and settle your tax bill in a manner that best suits the government. Don't let them do that, fight back!

Resolve your unpaid tax by using a tax professional who knows how to best deal with the IRS and settle your tab for a lot less than you originally thought. Beat the IRS at their own game. Show them you are in control, not them. Your tax professional is there to help you and keep the IRS from executing their draconian tactics on good honest people. Be strong and start solving your back tax problems today.

Do you need help resolving IRS Back Tax? We can help you find the best solution for your tax problem and possibly settle for much less than you owe. Please contact us through our website or call us at 800-717-2797 to receive help, or browse our site for self-help articles on resolving tax debt problems.

Article Source: Manuel Davis, Jr.