May 18, 2013

Posts Comments

IRS Audits Are More Susceptible For Businesses

October 29, 2010 By

Signs Your Business Has Increased Possibility of an IRS Audit

It is the objective of every taxpaying business to avoid an IRS audit by fulfilling all the necessary requirements by the IRS. However, there are certain factors that could make a business more susceptible to an IRS audit. If you want to avoid an audit then the following facts could be of assistance to your business:

The odds of your business being audited are greatly increased for the following reasons:

  • Your kind of business generates large numbers of cash sales – examples of such businesses are restaurants, gas stations, motels and small stores.
  • The industry you are in has a poor record of tax fulfillment – for example music businesses, charter companies, cab companies, bed and breakfast establishments, mortuaries and gas companies.
  • The IRS audited one of your business associates especially if they paid you a lot of cash.
  • You are a cash basis filer but request expenses for bad debt.
  • Your facts and figures don’t add up – for example wages per income tax return and wages per payroll tax report.

You also have a greater risk of being audited by the IRS if your business is:

  • An individual filing a Schedule F – 6 %
  • A partnership – 4 %
  • An individual filing a Schedule C – 1.17 %
  • A C Corporation – 1 %
  • An S Corporation – 1 %

www.limonwhitaker.com

Filed Under: Our Blogs Tagged With: ,

Offer in Compromise Expense Allowances

October 28, 2010 By

Get Your $200 Ownership Cost for an Older Vehicle

Do you know how to benefit from the general IRS expense allowance? Find out before you make an Offer to Compromise. You are allowed to request a vehicle ownership cost of $200 for owning a vehicle that is older with no current or future payment. Even though you don’t have the expense of vehicle payments you will get it from the IRS.

The reason for the vehicle ownership cost allowance of $200 is the acceptance that older vehicles require replacement. This means you may not have this cost now but probably will in the future.

In order to get a vehicle ownership cost of $200 you must complete an IRS 433a financial statement with an Offer in Compromise. However, there are certain requirements:

  • You are the owner of a vehicle without any monthly payments; or
  • You are the owner of a vehicle with a monthly payment but it will be completely paid for prior to the IRS decree of restrictions on collection terminates
  • The vehicle is more than six years old; or
  • The vehicle mileage is more than 75,000 miles

A good example of allowance of older vehicle ownership in compromise is provided in the IRS manual 5.8.5.6.3:

If you own a 1995 vehicle with 9,000 miles purchased used and the loan will be paid up in thirty months at $300 every month – you will qualify for the ownership expense until your loan is paid up. This means $300 and the permitted operating costs of $231 every month. It gives a total allowance for transportation of $531 every month. The ownership allowance is no longer valid after thirty months. At this stage you are permitted a working expense allowance every month of $431.

Use all IRS expense allowances in an Offer in Compromise to get an offer accepted by the IRS.

www.limonwhitaker.com

Filed Under: Our Blogs Tagged With:

Tax Relief Help: New 1099 Form Revisions Are Confusing

October 27, 2010 By

Revisions to Forms 1099 Are Confusing Tax Payers

A new law will become effective regarding the health care bill on 1 January 2012. The IR Code 1986 is revised as follows:

a) Application to Corporations – in spite of any rule set by the Secretary prior to the date of the passing of this subsection, for intentions of this section the term ‘person’ is inclusive of any corporation not an association spared from tax under section 501(a).

b) Regulations – the secretary may specify such rules and other direction as apt or required to perform the intentions of this section as well as rules to stop doubling up on coverage of dealings.

c) Payment for Property and Other Gross Proceeds – amendments:

put in ‘amounts in consideration for property’ following ‘wages’
put in ‘gross proceeds’ following ‘emoluments, or other
put in ‘gross proceeds’ following ‘setting forth the amount of such’

d) Effective Date – revisions to this section pertain to payments completed prior to December 31, 2011.

Plainly put it revises IR Code section 6041. It’s wrong to assume forms 1099 (covers most data communicated in section 6041) are needed for every future transaction. The two sections combined mean the following (more or less):

All corporations and persons exempt from tax or not involved in trade or business and creating payment due to such trade or business to another corporation or person of income, rent, profits, salaries, determinable gains, wages, other gross proceedings, amounts connected to property, emoluments, premiums, compensation, premiums, remunerations and annuities … putting forward the totals of such gross earnings, income, gains, proceeds, profits and the personal details of the receiver of such sum.

The meaning of the revised section 6041:

  1. Before, forms 1099 were given to persons and partnerships and not corporations. Corporations are now integrated.
  2. Before, forms 1099 were given for financial dealings, rents and services but now the sale of actual goods are possibly reportable.

The threshold of reportable $600 stays. More paperwork will result from including goods. Congress wants to make it harder for items sold online to remain hidden. However, the IRS will probably offer direction when they distribute regs. It is suspected there could be a type of exception for bigger national retailers or recurring transactions i.e. monthly buys won’t be reported with a form 1099. You can send your personal opinions and comments to the IRS by email or US mail.

Continue to follow our daily blog to receive more useful tax relief tips!

www.limonwhitaker.com

Filed Under: Our Blogs Tagged With: ,

IRS Bank Levy: What’s The Next Step?

October 26, 2010 By

Help! The IRS Levied My Bank Account!

When you discover the IRS has levied your bank account, the first thing you should do is consult a qualified tax professional, who will be able to advise you about the best course of action. The IRS offer help on what you should do when they levy your account, but a reputable tax professional can be a lot more useful for helping you out.

A qualified tax professional may request a Collection Due Process hearing if the IRS has levied your bank account. This is an appeal against the levy, and there are a number of difference defences they can use for getting you released from it.

They may argue that paying the levy will cause you a significant degree of financial hardship. This means that they will argue that, should the levy not be removed, you will be unable to meet your basic needs for living.

They could also argue that you paid off all your tax debt before the IRS levied your bank account or that the IRS has made an error when assessing your situation, meaning they should not have levied your account. Additionally, it could be argued that the notice of levy was sent while you were in bankruptcy, meaning you were subject to the automatic stay during this time.

Sometimes the IRS takes the levy after the time to collect the tax owed has expired, therefore in some cases it can be argued that the IRS should not have levied your bank account for this reason.

Other cases they can make can avoid negotiation, such as telling them you would like to negotiate over the tax debt collection options, or that you would like to make a spousal defence. There are many types of arguments that a tax professional can make on your behalf to stop a bank levy.

www.limonwhitaker.com

Filed Under: Our Blogs Tagged With: , , ,

IRS Tax Help: Payroll Taxes

October 25, 2010 By

IRS Tax Help

How do Payroll Taxes work?

Frequently, people wonder exactly how the IRS is going to take payments for payroll taxes. This situation can be especially confusing if a business does not designate a trust fund payment from its employees’ wages.

If a business does not do this, the IRS applies the payment itself in a way that will benefit it the most. The payment here first of all will be for non-trust fund taxes, because this gives the IRS more scope for collection of these taxes.

In the end, what this means is that non-payroll taxes are paid by the business itself whereas the payroll taxes themselves are assessed on their own.

If payments are not designated, the assessment is handled in five different stages. First of all, the non-trust fund taxes are assessed, followed by the trust fund tax. Thirdly, any collection costs and fees that the business may owe are assessed. Next, interest and penalties are applied for any late payments or instalment agreements that may exist and lastly, accrued penalties and accrued interest are charged.

If you want to avoid this happening, you need to specify to the IRS that you have specified employment taxes that you are paying. If you don’t do this, the IRS might investigate the business, where it may decide that certain individuals should be held responsible for trust fund taxes – which is not something you want!

On a final note, it is important to know what taxes you are able to designate. You can only do this with trust fund taxes, and you cannot do it with other taxes such as federal tax deposits or instalment agreements.

www.limonwhitaker.com

Filed Under: Our Blogs Tagged With:

Faster Solution: Currently Not Collectible vs Bankruptcy

October 22, 2010 By

Which is a faster solution?

Currently Not Collectible status or Bankruptcy

A lot of people may wonder about whether currently not collectible status or bankruptcy is best for them. Bankruptcy is a great way to get rid of huge tax debt; however the ideal option for you depends on your situation.

Many people who qualify for Currently Not Collectible status may consider bankruptcy if they find they’re worrying excessively about any changes in situation and how it may affect their deemed ability to pay the IRS.

If you want to switch from Currently Not Collectible to bankruptcy, you need to be aware of the rules that apply for bankruptcy. If you are CNC, it is unlikely that you will be able to file for a Chapter 13 bankruptcy, since this implies your finances are in enough order to pay the IRS in monthly instalments for your owed debt. Instead, you will have to file for a Chapter 7 bankruptcy, which has a few criteria you need – the tax returns you owe for must have had a due date at least 3 years before the bankruptcy is filed and they must have actually been filed at least two years before.

In other words, if you filed your overdue returns less than two years ago, you will not be able to quality for Chapter 7 bankruptcy. Instead, your best bet is to wait until two years from the filing date has passed, and then you can apply for the bankruptcy.

No matter how long you have to wait, most of the time you will be able to file for the Chapter 7 bankruptcy in the end, since your current status as not collectible means the IRS will be ‘on hold’ with you until you can declare yourself as bankrupt.

www.limonwhitaker.com

Filed Under: Our Blogs Tagged With: ,

IRS Audits Go Up For First Time Homebuyers

October 21, 2010 By

Credit Claims by First Time Homebuyers Catch IRS Attention

The first time homebuyer credit expiration on April 30 resulted in greater numbers of people purchasing houses the previous month– it was to be expected. However, this means the IRS is under pressure to audit greater numbers of tax returns that include the new homebuyer request for tax credit.

The IRS may be under pressure but the economy benefits due to the raise in home sales. Credit can be claimed if the contract was drawn up by the 30th of April and the deal was settled by June 30.

The procedure is somewhat more complex due to previous abuse of credit in November 2009 when there was a credit expansion.

  • You must attach proof that you are eligible for credit to your completed Form 5405.
  • The IRS really wants a settlement sheet with date of purchase, property address, home/sale/purchase parties’ names and signatures and sales price.
  • If you are without this information see page 2 of the form for other options.
  • Emails are not permissible.
  • If you don’t follow the IRS’s requests you won’t get a tax credit.

There is greater analysis by the IRS of homebuyer credit claims. This means the IRS doesn’t have the time to give equal analysis to tax payers who don’t qualify as first time homebuyers. IRS stats show from February 27, 2010 there were 1.8 million FTHBC claims (both altered and original). Of the 1.8 million, the IRS chose in excess of 260,000 to be examined until 26 March 2010. Of those, almost 109,000 IRS audits are currently not closed.

For March 2010, 650,000 mail examinations in FY 2010 were shut. 139,298 included FTHBC (21% of all the mail audits until now in FY 2010). The figures don’t include FTHBC examinations and returns received from the time of February. It is clear the IRS is giving their attention to credit clams from first time homebuyers and allowing other claims to enter the normal tax procedures.

www.limonwhitaker.com

Filed Under: Our Blogs Tagged With: , ,

Do You Qualify For Innocent Spouse Relief?

October 20, 2010 By

Innocent Spouse Relief Requires Qualification

It is important to understand the joint filing of taxes by spouses can result in complications. It does seem like joint filing is an advantage because it entitles you to lowered tax rates and also deductions. The downside to filing jointly is if there’s a mistake such as incorrect reporting or the failure to report income on a return. In such instances both married parties will have be held accountable by the IRS.

There are married couples who make innocent mistakes on their jointly filed tax account. Even though it takes up time, these can eventually be cleared up. The big problems arise when one spouse is unaware of those mistakes or when one spouse is forced into providing a signature on the joint return. There are certain instances that qualify for Innocent Spouse Relief. This is how the IRS allows the innocent or blameless spouse to be exempted from the penalty caused by the fraudulent tax return of his or her spouse.

If you want to make use of the Innocent Spouse Relief option the IRS has specific requirements:

  • You and your spouse must have filed a joint tax return.
  • There must be an error on the joint return that is the responsibility of your spouse.
  • You must show evidence that at the date of signing you did not know of that error.
  • According to circumstance it must be clear it would be unjust to penalize you.

You can make use of an online tool at the IRS website that determines whether or not you qualify for Innocent Spouse Relief.

It is possible for the blameless spouse who signed the joint filing to avoid liability if the guilty spouse tried to defraud Uncle Sam or misappropriated income. If you meet all the requirements of the IRS simply complete Form 8857 (Innocent Spouse Relief). You must do this within two years subsequent to the IRS trying to collect tax.

www.limonwhitaker.com

Filed Under: Our Blogs Tagged With: , ,

Tax Levy Release: Fast and Easy

October 19, 2010 By

5 Ways To Get A Tax Levy Release

If you get a tax levy, this means the IRS has given you chances but you didn’t cooperate with them, or maybe just threw that mail away. Either way, you will need to work fast to make sure you don’t end up with collections coming after your assets. Here is a small list of 5 ways to get a tax levy release.

  1. Pay what you owe. This is the fastest and easiest way to resolve the situation before any of your assets get seized. This could cost a lot of money but it may be easier to pay small interest for a bank or other loan so you can handle this right away.
  2. Ask the IRS to let you set up a payment agreement. This is much like the installment agreement the IRS allows but the payments you make will be smaller. This is a great option to get a tax levy release while still taking care of your debt with the IRS. Make sure you keep to the payment schedule and don’t miss any payments at all.
  3. Prove that your assets don’t have equity. If you are already facing hard times and your car is a piece of junk, let the IRS know this. They won’t seize your vehicles if they are old, need severe repairs, or don’t run. They don’t know the car you bought 2 years ago was destroyed by vandals but a picture will help you get that message across clearly and immediately.
  4. Appeal. Yes, you can appeal the IRS levy right away then you may not have to worry about a tax levy release at all. Sometimes collectors won’t use ethical practices when dealing with you. If you suspect they weren’t honest with you, that’s definitely grounds for appeal.
  5. File Bankruptcy. This should be a last resort option but this can be a tax levy release by order of the courts. This isn’t a step that should be rushed so make sure you consult your accountant or a tax professional.

www.limonwhitaker.com

Filed Under: Our Blogs Tagged With: ,

Tax Relief: The Mortgage Debt Relief Act of 2007

October 18, 2010 By

Exceptions to Debt Taxation

All of the calendar years from 2007 to 2012 are under a provision from The Mortgage Debt Relief Act of 2007. This provision permits tax payers to eliminate earnings resulting from the absolution of debt on a primary residence. There must be the lowering of debt via mortgage reorganizing and debt forgiven in relation to foreclosure to be eligible for debt relief by the Internal Revenue Service.

  • If you do qualify for debt relief the next question is whether the cancelled income relating to you must be taxed by the Internal Revenue Service. The answer depends on the situation; there are certain instances when the Internal Revenue Service does make exceptions.
  • Debts released due to bankruptcy are not regarded as taxable earnings.
  • A debt acquired directly for the running of a farm and in excess of fifty percent of your earnings from the previous three years was due to farming plus the loan was payable to an individual or agency who routinely loaned money then a forgiven debt is usually not regarded as taxable earnings.
  • If the lender’s only recourse due to default is to reclaim the property being financed or used as security then the lender may not track you in a situation of default. This is a non-recourse loan as a result of foreclosure. Forgiveness of such a loan does not end in annulment of debt earnings as there may be other tax penalties.
  • If you are bankrupt at the time of cancellation you may not tax part or all of a debt. At the time when all your debts are higher than reasonable market value of your complete assets you are considered bankrupt.
  • The Mortgage Debt relief Act 2007 allows for eligible primary residency indebtedness for the majority of homeowners.

www.limonwhitaker.com

Filed Under: Our Blogs Tagged With: , ,
« Older Posts