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Tax Evasion: What Are Your Chances of Getting Out Unscathed

noreply@blogger.com (Shruti Chandra) — Fri, 24 May 2013 17:30:00 +0000

Everyone makes mistakes. Tax evasion is a mistake many taxpayers make to minimize their tax liability. However, after they realize the error of their ways, what are the chances of correcting it without punishment?

Offshore Voluntary Disclosure Program
If you have been using offshore bank accounts to keep money hidden, you may consider the IRS' Offshore Voluntary Disclosure Program (OVDP) to get back into compliance. Under this program, you avoid a heavy penalty and possible imprisonment. However, you will still be charged with a penalty for tax evasion but it is reduced. After disclosing the hidden assets and paying the penalty, you are now compliant with the IRS.

Voluntary Disclosure
A case of tax evasion can carry up to a five-year prison sentence and/or a penalty of $100,000. Filing a false tax return, using abusive domestic and/or trust schemes, or having unaccounted money in overseas banks are all tax crimes that may attract imprisonment or penalties. To minimize the risk of imprisonment and penalties, it is advisable to consult a tax lawyer. Voluntary disclosure of unaccounted money alone often softens the punishment.

For Victims of Tax Evasion Schemes
For the victims of a fraudulent scheme which promised them a reduction or the elimination of their tax liability, the IRS may ask for the full payment of taxes owed, including interest and penalties, or they may proceed to litigation. Often, the severity of the punishment depends upon the amount of taxes evaded, the severity of the crime and the victims' level of involvement in the fraudulent scheme.

Before contacting the IRS, consult a lawyer to understand the risks and advantages of your case so you are fully prepared.

Tax Frauds Defraud the Homeless, Poor for Quick Cash

noreply@blogger.com (Shruti Chandra) — Fri, 17 May 2013 18:23:00 +0000

Tax frauds will go to any length to scam taxpayers. The current scam targets the homeless, drug addicts and the poor by duping them into signing blank tax forms in return of “free” government money. Afterward, the fraudsters receive large refunds, most of which they pocket as a “fee”.

Tax frauds use the Earned Income tax credit (EIC) to claim refunds and enter false information on the tax forms signed by their “clients”. Between 2008 and 2011 fraudsters, Isaiah Konkus of San Diego and Justin Petersen of Lakeside cheated the government out of thousands of dollars using false tax returns.

The fraudsters filed more than a thousand false tax returns during those three years, while also falsifing their own tax returns to colelct more than $35,000 each, according to prosecutors. They pled guilty to all charges in October 2012.

It is important to know the various methods tax frauds use to dupe taxpayers and the government, to be able to take timely action to against the fraudsters.

Targeting homeless shelters, trolley stations, and single mothers, tax frauds put forward tempting deals of free money to attract lower income taxpayers. Indulging in such fraud is a tax crime that can lead to penalties, fines, and/or imprisonment.

The IRS has been fighting tax fraud for years, but the extent of tax fraud steadily increases. The IRS complains that a lack of enforcement staff and their limited resources as the reasons for their inability to control the extent of tax fraud. Meanwhile, tax fraudsters get away with large amounts of tax money without punishment. At the end of the day, ultimate protection lies with the taxpayer, as authorities are failing to bring down tax fraud.

IRS’ “Robo-Audits” to Help Catch Big Tax Evaders

noreply@blogger.com (Shruti Chandra) — Fri, 10 May 2013 19:34:00 +0000

The IRS is upgrading its tax system to make it more high-tech. The new computer-driven processing will assist the IRS in catching tax evaders, especially small businesses. According to a report, besides businesses, the self-employed are one of the biggest tax evaders.

Currently, the IRS is increasingly receiving tax returns electronically. As of now, "robo-audits" has helped discover tax fraud, but a large number of fraudulent tax returns still go unnoticed. It leads to a loss of revenue.

The new high-tech systems are expected to help the IRS catch big tax evaders, especially small businesses. As the IRS is always complaining about lack of human resources, the new system will make their job easier.

What's the Secret?
The IRS is not disclosing the details of the new systems it will be using. Tax experts are of the opinion that the IRS must not keep the technology a secret because it will need cooperation from taxpayers to make their upgraded programs a success. Judging from the success of electronic tax filing, the IRS might disclose which technology they are using and how it works later.

Myths Galore
Myths, regarding how the new technology might "trigger" an audit, are going around the internet. Many have stated that a Facebook post could lead to an audit, or personal emails could result in an audit. Some believe IRS auditors will be able to scan through social media posts based on keywords about tax payments to get to tax evaders. However, these rumors have yet to be proven true or false.

The introduction of high-tech systems is just the latest step from the IRS to help discover tax evaders. It is expected to make it difficult for taxpayers to indulge and get away with tax fraud without punishment.

Unpaid Taxes: Living in Fear of the IRS

noreply@blogger.com (Shruti Chandra) — Fri, 03 May 2013 13:58:00 +0000

No matter how large or small the tax debt amount, the IRS has the legal right to place a tax
lien or levy if taxpayers ignore paying their debt. This is why many taxpayers live in fear
of the IRS if they have unpaid taxes. However severe the debt, the IRS does not and cannot
put a lien or a levy before sending preliminary notices regarding the tax debt to taxpayers
explaining the details of the debt and how they can resolve it.

It is only after no effort is made by taxpayers to resolve the tax debt that the IRS sends a
C-90 ‘Final Notice of Intent to Levy’ letter. This is the last IRS notice sent before the IRS
initiates collection actions.
Some of the important facts taxpayers under tax debt must consider are:

• It can take up to a few months before the IRS to place a lien or a levy after the
sending of the first notice regarding tax debt.
• Taxpayers must begin making preparation to pay back the debt after the IRS has taken
notice of the debt and sent a notice to request payment.
• The IRS can and does place a lien or levy if taxpayers ignore or avoid them.

The first tax debt notice means the IRS is aware of the debt and will eventually use
aggressive collection actions. It also means that taxpayers have time to prepare.

Instead of ignoring the notices and allowing the IRS to get stronger, taxpayers should begin
to look for ways to reduce their back taxes as soon as possible to help save money on interest
and penalties that the IRS charges on tax debt.

Many times, taxpayers do not resolve their back taxes because they do not have the money
to pay back the debt. Even though the IRS calls their tax debt resolution plans ‘payment
plans’, taxpayers may not necessarily have to pay the full debt amount or even partial tax
debt amount to satisfy their tax obligation.

The IRS is bound by rules. Knowing the rules and taking appropriate action will give
taxpayers the power to beat them.

IRS Dirty Dozen Holds No Surprises

noreply@blogger.com (Shruti Chandra) — Fri, 26 Apr 2013 00:48:00 +0000

This year's IRS Dirty Dozen tax scam list the IRS released has identity theft as the number one tax scam in the country, just like 2012. Even though the IRS claims to have made efforts to curb identity theft, the country still loses billions of dollars in tax scams each year. Informing taxpayers about the various tax scams is a helpful way to counter tax fraud.

Problems the IRS Faces
It is difficult to catch identity thieves because of their distance from the victim. Most identity thefts are carried out over the internet or phone. After extracting personal and financial information, the scammers disappear without a trace. Therefore, the IRS focuses on spotting fraudulent tax returns when they reach the office for review.

How Identity Theft is Conducted
Phishing is second on the list of tax scams. It is simple to carry out identity theft through the internet by creating fake websites and sending unsolicited emails to incite taxpayers to share their tax information. As anonymity can easily be achieved in the digital world, it is usually a taxpayer's awareness that saves them from falling victim to identity theft.

Using a taxpayer's financial and personal information, scammers have been known to empty bank accounts, file false tax returns on behalf of taxpayers and claim huge refunds, and commit other financial crimes.

How You Can Save Yourself
It is best for taxpayers to protect themselves against identity theft by using only legitimate sites, avoid sharing their financial and personal information on the internet, and investigating suspicious websites/companies before submitting any information to them.

Scammers use the names of legitimate institutions to trick taxpayers into trusting them. Unsolicited emails that ask to act immediately are mostly a trap. Instead of clicking on the links of such emails, it is better to call up the institution to inquire about the legitimacy of the claims made in the email.

With all the efforts the IRS is making, at the end it is up to taxpayers to save themselves from identity theft.

How Competent the IRS Is in Countering Tax Fraud

noreply@blogger.com (Shruti Chandra) — Fri, 19 Apr 2013 21:58:00 +0000

Tax fraud by the self-employed is more common than by W2 employees because with estimated taxes. they withhold their taxes themselves. Schemes, such as underreporting income or overstating deductions, are used to decrease the tax liability. The Treasury Inspector General for Tax Administration (TIGTA), in its recent report, found that high-income taxpayers and sole proprietors are escaping punishment for tax fraud because of the incompetence of the IRS in dealing with tax fraud.

The TIGTA states that because "indicators of fraud are not always recognized and properly investigated, the IRS may be missing opportunities to further promote voluntary compliance and enhance revenue for the Department of the Treasury."

After this damaging March report, the IRS will need to strategize about how it can stop the numerous fraudulent tax returns from passing under its nose. The TIGTA conducted 100 office audits, closed between October 2009 and September 2010, involving high-income taxpayers and sole proprietors, and found them agreeing to owe additional taxes of at least $10,000 or more. The TIGTA also found 26 audits with fraud indicators that were not recognized and investigated by the IRS. Based on the sample, the TIGTA estimates that during 2010, there were fraud indicators that were not recognized or investigated in approximately 939 office audits, resulting in an estimated loss of $5.8 million in civil fraud penalties.

This not only encourages tax fraud, but also boosts repeated non-compliance and cheating. It is time the IRS considers taking strong steps to correct the quality and efficiency of their examiner and first-line managers whose job is to recognize tax fraud indicators.

This kind of tax fraud has also been featured in the IRS' 2013 Dirty Dozen Tax Scams Report. Although the IRS says that "claiming income you did not earn or expenses you did not pay in order to secure larger refundable credits such as the Earned Income Tax Credit could have serious repercussions," the TIGTA report shows how many of those who indulge in this type of fraud get away with paying less in taxes.

Cannot Pay Taxes in Full? You Have Options

noreply@blogger.com (Shruti Chandra) — Fri, 12 Apr 2013 15:45:00 +0000

One of the reasons why many people do not file their tax returns is because they cannot pay the amount they owe. Even if a taxpayer cannot pay their tax liability in full, they still need to file a tax return. The more paid before the April 15^th deadline, the less penalties and interest charged to the balance, by avoiding the late-filing penalty.

There is little time left to file taxes and those who have yet to file should e-file their returns. If a taxpayer owes a tax debt, they can pay the amount with an IRS debt payment plan. Depending on a taxpayer's financial situation, the IRS will deem the taxpayer Currently Not Collectible. However, if a taxpayer ignores their tax debt and all IRS communications, the IRS can place a lien or a levy to collect the unpaid taxes.

Tax avoidance can lead to more trouble than it's worth. At the end, taxpayers who ignore their taxes, usually pay more overall. The IRS charges separate penalties for non-compliance, along with interest, on any tax amount. Therefore, the later the amount is paid, the more that will need to be paid.

The IRS has many debt payment plans depending on the various financial capabilities of a taxpayer. From those who cannot pay any amount of tax debt to those who can pay it in full, there is a resolution for everyone.

Facing the IRS with the right information and knowledge of your rights is the best way to move forward with a tax debt. There are rules and regulations the IRS must follow and if a taxpayer follows those rules to reduce their tax debt, or get an extension of time and/or reduce penalties, they can expect favorable results.

Secret Offshore Bank Accounts Targeted: 2.5 million Secret Files Leaked

noreply@blogger.com (Shruti Chandra) — Fri, 05 Apr 2013 16:46:00 +0000

It is not only the IRS that is after those who hide income overseas but the International Consortium of Investigative Journalists (ICIJ) is also involved. The ICIJ received 2.5 million leaked files containing more than 120,000 secret offshore accounts of companies, trusts and individuals.

The amount of data received by the ICIJ is unprecedented. Measured in gigabytes, the size of the files is 160 times larger than the 2010 leak by Wikileaks on the U.S. State Department documents.

More than a dozen journalists from The Guardian and the BBC in the U.K., Le Monde in France, Süddeutsche Zeitung and Norddeutscher Rundfunk in Germany, The Washington Post in the U.S., the Canadian Broadcasting Corporation (CBC), and 31 other media partners from around the world analyzed the leaked files for authenticity and precision.

With the IRS partnering with other governments to help them uncover hidden offshore bank accounts, it is becoming difficult for taxpayers to use overseas accounts to hide taxable income. Abusive tax schemes, Ponzi schemes, and abusive trust tax evasion schemes are commonly used to evade taxes.

It is difficult for the IRS to track the transactions back to American taxpayers because they use cards issued by the tax haven country. That is the reason the IRS introduced the Foreign Account Tax Compliance Act (FATCA).

"Under FATCA, U.S. taxpayers with specified foreign financial assets that exceed certain thresholds must report those assets to the IRS. This reporting will be made on Form 8938, which taxpayers attach to their federal income tax return, starting this tax filing season. In addition, FATCA will require foreign financial institutions to report directly to the IRS information about financial accounts held by U.S. taxpayers, or held by foreign entities in which U.S. taxpayers hold a substantial ownership interest."

The IRS continues its efforts to recoup tax money from secret offshore accounts and improve tax compliance among taxpayers. There is little doubt that the ICIJ leak will help the IRS in their pursuit.

Married Gay Couples Can Add $1 Billion a Year to Revenue

noreply@blogger.com (Shruti Chandra) — Fri, 29 Mar 2013 16:44:00 +0000

Legalizing same-sex marriage is not only beneficial for same-sex couples; it will also be beneficial for the U.S. Treasury. According to the Congressional Budget Office, recognition of gay marriage will add $1 billion a year for the next ten years to the U.S. budget.

The Census Board also revealed that in the United States, there are 130,000 same-sex married couples. In total, there are 650,000 same-sex couples in the country. Currently, same-sex partners cannot file a "married filing separately" or "jointly filing" status as a married couple because federal law doesn't treat same-sex partners as married for federal tax purposes.

The Obama administration will need to determine whether to treat same-sex married couples the same as opposite-sex marriage or use a unique definition for them. In certain tax codes, the words "husband and wife" appear. The verbiage will need to be amended if same-sex married couples use those tax codes.

Moving from a Legalized State
There are only nine states, and the District of Columbia, that have legalized gay marriage. 31 other states do not allow gay marriage. Some states recognize gay marriages that took place in other states, and some provide certain legal benefits to same-sex married couples.

No one is sure whether moving from a state that has legalized gay marriage to a state that still holds the ban will mean continuance of the rights or not. It might depend on the state and the firmness of their position regarding the issue.

End of DOMA
States can expect to gain millions of dollars in revenue by legalizing gay marriage. Unmarried domestic partners pay fewer taxes than their married counterparts. The end of the Defense of Marriage Act (DOMA) will mean married gay couples will also be able to use tax breaks they previously were excluded from.

The U.S. Supreme Court is currently hearing arguments against the federal law banning recognition of same-sex marriage, arguing that the law is discriminatory. While its end will mean freedom for same-sex partners to legally marry, to enjoy the benefits and shoulder the burdens as their heterosexual couples do, it will also give a new revenue stream for the federal government and states.

IRS Owes $917 million in Tax Refunds from Unfiled Taxes

noreply@blogger.com (Shruti Chandra) — Fri, 22 Mar 2013 19:10:00 +0000

The IRS has over $917 million in unclaimed refunds from 2009. According to the IRS, an estimated 984,400 taxpayers did not file their tax return in 2009. Taxpayers who did not file that year can file their 2009 tax return along with this year to claim their refund or have their refund added to their taxes owed.

If taxpayers want to claim their refund, they have three years time to claim their refund. After the expiration, the tax refund is considered forfeited and becomes property of the U.S. Treasury.

The April 15^th deadline gives taxpayers little time to claim their 2009 tax refunds. Make sure there are no errors on the return because there is little time left to amend before the April 15^th deadline.

There will not be a penalty for filing late if the return qualifies for a refund. Those taxpayers who haven't filed their tax returns for 2010 and 2011 along with 2009 may need to hire the help of tax professionals to resolve their tax debt. If a taxpayer owes for past years, apart from 2009, it is stressed that they hire professional help.

It is best to hire outside help if a tax debt is substantial and cannot be paid in full. The IRS will apply any refunds to any tax debt amounts owed if a taxpayer qualifies for a refund from past years.

Consult a tax preparer or a tax professional before filing a 2009 tax return to claim a refund, but make sure that there aren't any taxes owed before contacting the IRS about a refund from past years.

Not Providing Health Care to Employees? IRS is Taking Note

noreply@blogger.com (Shruti Chandra) — Fri, 15 Mar 2013 18:09:00 +0000

Under the employer shared responsibility requirement, employers are required to offer affordable health coverage to their full-time employees. Those employers who shirk their duty will get the reminder from the IRS about payments due in 2015.

What does the law say?
Under the individual mandate, or the "shared responsibility requirement," an employer sponsors health insurance on behalf of their employees as part of an employee benefit package. Employers who have a shared responsibility payment under 4980H and have not been paying for health care of their employees might be assessed a penalty by the IRS. It is only in cases where the assessment leads to the evidence of non-compliance that the IRS may act.

Employers have the right to dispute IRS’ claims and explain their stance. In some cases, the shared responsibility payment assessments by the IRS may be wrong, and can be appealed against by taxpayers.

How the IRS works it out?
The IRS assesses non-compliance based on many factors including the information obtained from employers’ insurers, the Department of Health and Human Sciences, and other sources the IRS has access to. On the basis of this information, the IRS gathers proof of non-compliance and then proceeds to contact the employer.

Conditions:
From Jan 1, 2014, employers that employ 50 or more full-time employees, or a combination of full-time and part-time employees that is equal to at least 50 full-time employees, will be subject to the employer shared responsibility provisions under section 4980H of the IRS code.

According to the law, a full-time employee is one who works at least 30 hours a week on an average.

Employers may assess their tax responsibility because the IRS will take note of those who do not comply with the new healthcare rules. Prepare yourself before the IRS does.

Punishment for Tax Non-Compliance

noreply@blogger.com (Shruti Chandra) — Fri, 08 Mar 2013 18:18:00 +0000

When the IRS categorizes a taxpayer "non-compliant," they include unfiled taxpayers, tax fraudsters, and tax evaders. Every non-compliance leads to punishment in the form of penalty and/or imprisonment. Tax evasion and tax fraud are serious crimes where convictions can result in imprisonment of up to five years and/or a fine of up to $100,000.

Even intentional falsification of information in a tax return where evidence proves that the taxpayer intended to evade taxes can lead to up to three years in prison and/or a fine of up to $100,000.

When a taxpayer is unfiled for several years, the punishment can include one year of imprisonment and/or a fine of up to $25,000 for each year unfiled.

Under-reporting of income is the most common kind of tax fraud. A government study shows that the self-employed, including clothing store owners, restaurateurs, telemarketers, car dealers, accountants, doctors, and salespeople commonly under-report their income.

Fraudulent tax returns or inaccuracies in a tax return, if detected by an auditor, can also lead to a criminal investigation. The IRS’ Criminal Investigation (CI) division undertakes the job.

Many times taxpayers make errors on their return unintentionally. Careless mistakes on a tax return can attract a penalty of 20 percent of the tax bill. The IRS will determine whether an error in tax reporting is intentional or not. In case of intentional inaccuracies that lead to an underpayment of taxes, the civil penalty can go up to as much as 75 percent. The IRS also considers how much taxes a taxpayer owes. If the tax amount is negligible, taxpayers can get away with light penalties.

Tax fraud is a crime that can get taxpayers into trouble once it is discovered. Still, for many the temptation of easy money is just too much until they receive punishment and realize that it is not worth it.

When to Expect Your Tax Refund

noreply@blogger.com (Shruti Chandra) — Fri, 01 Mar 2013 17:15:00 +0000

You have filed your taxes for 2012 and are eagerly awaiting the refund. With IRS' new 'Where's My Refund?' page, you can track when the IRS received your tax return, when it began to process it, and when your refund check is scheduled to arrive. The IRS announced that it will begin to process 2012 tax returns on January 30, so you may start checking your refund status after that.

Tax refunds in 10 days: the IRS
Due to the recent changes in the tax code, including the payroll tax increase, the IRS needed to revise their tax forms and instructions. Some believed it would slow them down, but according to the IRS they anticipated the changes and updated in time. They claim to issue refunds within 10 days of submission this year.

More than 90 percent of refunds are issued within 21 days. You can expect your refund anywhere between 10 to 21 days. However, the IRS also states that the timing of a refund might change due to different factors. They explain that the date of issuance on 'Where's My Refund?' is just an estimate. A delay of a week should be expected.

Factors affecting processing of tax refund
A delay in getting a tax refund can also be due to inaccuracies in the return. If a return is electronically filed, you will be told to make the correction and submit the return again. To receive your refund on time, it is best to file your tax return as early as possible. Even if a correction is required, it should not delay the tax refund.

To get your refund faster, you can e-file your tax return with direct deposit. The IRS takes longer to process paper returns as opposed to electronically filed returns. Not all taxpayers can file electronically though. For example, taxpayers claiming the adoption credit need to file a paper return. You might want to consult a tax preparer before e-filing your tax return.

Form 1099-K: New IRS Information Return

noreply@blogger.com (Shruti Chandra) — Fri, 22 Feb 2013 20:20:00 +0000

If you started a business in 2012, you might want to know about Form 1099-K, because the IRS introduced the form in 2011. The 1099-K form reports third party network transactions, including payment card receipts, checks, credit card payments, and cash payments. The information you record on your 1099-K needs to mirror your income tax return.

What to Report?
Business owners need to report, both annual and monthly, the gross amount of reportable payment transactions for each payee, including their name, address, and taxpayer identification number.

What Will the 1099-K Achieve?
The IRS brought in this new form to increase tax compliance among businesses and individuals, and assist in obtaining information from third parties. The information on Form 1099-K helps the IRS to determine any income under-reporting, which is the most common tax fraud scheme.

When the IRS Spots Inaccuracies
If the IRS spots inaccuracies between what a taxpayer's Form 1099-K and their income tax return, it will send a notice. The most common inaccuracy is related to under-reported gross receipts. It is strongly encouraged that taxpayers check the figures on the IRS notice, their income tax return, the 1099-K form, and all payment/merchant cards and third party transactions. If there is under-reporting, hire a tax professional to resolve the issue.

E-filing of Taxes: How To Do It & What Can Go Wrong

noreply@blogger.com (Shruti Chandra) — Fri, 15 Feb 2013 16:16:00 +0000

The 2012 tax filing season is here and the IRS, taxpayers, and tax thieves are busy. If you are unsure about paying taxes on the income you earned in 2012, you may use the ITA (Interactive Tax Assistance) tool of the IRS. Whether you are required to file taxes or not depends upon your income level, age, filing status, and type of income.

Dangers of E-filing
Many taxpayers and tax preparers prefer to e-file their taxes because it is convenient and fast. The IRS boasts that last year nearly 100 million taxpayers filed their tax returns through IRS e-file. Granted that e-filing is fast and easy, but it is not without glitches.

Taxpayers who are not careful can mistakenly send their tax information to tax scammers using fake IRS web pages. In case of inaccuracies on the tax return, the IRS sends a notification with instructions on how to fix it. Taxpayers who e-file must fix the problem and re-submit the return.

Taxpayers will receive confirmation from the IRS within 48 hours after they e-file their return. If they don't, they should immediately contact the IRS because the threat of phishing is forever present online.

Faster Filing & Receiving of Refund
Because an e-filed return reaches the IRS earlier, taxpayers can expect a faster refund. The IRS will issue a refund in less than 21 days. Taxpayers can check the status of their refund on the IRS' "Where's My Refund?" section, and choose to deposit their refund in their bank account as well.

Taxpayers can either e-file their tax return after it has been professionally prepared or ask a tax preparer to file it for them. Before filing, ensure the information entered is accurate, along with the PTIN (Personal Tax Identification Number) of the tax preparer. Smart filing is safe filing.

File Your Back Tax Returns

noreply@blogger.com (Shruti Chandra) — Fri, 08 Feb 2013 18:11:00 +0000

Unpaid taxes can become problematic. The IRS warns taxpayers to pay their unfiled taxes this tax season: "Taxpayers who continue to not file a required return and fail to respond to IRS requests for a return may be considered for a variety of enforcement actions. Continued non-compliance by flagrant or repeat nonfilers could result in additional penalties and/or criminal prosecution." If you have been notified of taxes owed and you do not pay, the IRS may act aggressively.

Resolving Tax Debt is Easy if Paying is Not
The IRS is understaffed and uses its limited resources to focus on tax returns during the tax season. However, after the tax filing season is over, they will review cases of non-payment. Therefore, resolving all past taxes needs to be a priority during the tax filing season. If you are unable to pay your back taxes in full, the IRS has various programs to assist in resolving tax debts.

Fight the IRS
The IRS will try to recover the full tax debt amount with interest if you do not negotiate an arrangement. You can submit an application for a reduction in penalties, or extension of time to pay the tax debt if you qualify. To do this, you will need knowledge of tax laws, IRS rules, and experience in negotiating with the IRS.

IRS' Plans are Flexible
The IRS will not tell you the specifications of its debt payment plans. For example, the time period in between payments under an Installment Agreement can be increased or decreased depending on the amount of the tax debt and the financial ability of the taxpayer. The amount to be paid in monthly installments can also be negotiated. Exploring all the options available and choosing the ones that are most beneficial for taxpayers is the job of a tax professional. Getting the IRS to agree to those terms is a battle that is won through expertise and experience.

Tax Filing Tips for the Elderly

noreply@blogger.com (Shruti Chandra) — Fri, 01 Feb 2013 18:18:00 +0000

Sometimes the elderly are unable to take advantage of tax credits designed to benefit them. It might be because of the incompetence of tax preparers, unavailability of tax help or lack of information. If you are 65 years of age or older, you can get more spending money out of your retirement money by reducing your tax liability using tax credits and free help.

Tax Credit for the Elderly
If you and/or your spouse are 65 years old or older, you qualify for tax credits for the elderly. Using the standard deduction, you can save more on taxes if you qualify for the "Credit for the Elderly or Disabled" tax credit. Details about the qualifying factors for this credit include age, filing status, and income amount. To claim this credit, you can use Form 1040 or Form 1040A.

If you are 65 or older, and either you or your spouse is blind, you can receive a higher standard deduction. To calculate the amount of credit and the taxable amount of your Social Security, you can seek help from tax professionals.

Free Tax Filing Help by the IRS
You do not necessarily need to hire a tax preparer to prepare your tax return if you cannot afford the service. The IRS provides Tax Counseling for the Elderly (TCE) and Volunteer Income Tax Assistance (VITA) at various local sites. You can use the AARP Site Locator Tool to locate the nearest tax help site or call 888-227-7669.

If you are 60 years old or older, you should seek help from TCE because this tax assistance is specifically designed for the elderly and provides additional help for questions related to retirement, pensions, etc.

VITA offers general tax help mostly to those who cannot afford professional tax help. They provide taxpayers with $51,000 or less income with assistance. Get the benefit of all tax credits you qualify for this year, and reduce your taxes.

Energy Efficiency Tax Credits for 2013

noreply@blogger.com (Shruti Chandra) — Fri, 25 Jan 2013 21:09:00 +0000

Many of the Bush tax cuts have now expired, but good news is that one major tax incentive, the energy efficiency tax credit, got an extension. Both upgrades made to existing homes, and new purchases in 2012 and 2013 can be used to get the tax credit for energy efficiency. This tax credit can cover up 10 percent of the cost of new energy efficient equipment, up to $500. The qualifying energy-efficient products include, insulation, air sealing homes, duct sealing, windows, heat pumps, air conditioners, water heaters, and furnaces.

New Homes Tax Incentive to Builders
Builders of new homes can use the new home tax credit to reduce their tax liability. Home builders who build high-efficiency homes can avail the $2,000 tax credit. The qualifying criterion is that the new homes built must use 50 percent less heating and cooling energy than homes that met standards of the 2006 International Energy Conservation.

Appliance Credit to Manufacturers
Manufacturers can use the appliance tax credit if they are building energy-saving, high-efficiency products, namely refrigerators, dishwashers, and clothes washers. For 2012, you can only use this tax credit if you qualify for higher tiers of efficiency. Check the IRS website to see the qualifications for each tier.

The appliance tax credit was introduced to provide incentives to manufacturers to come up with products that save energy and/or to increase the production of high-efficiency dishwashers, refrigerators, and clothes washers.

Filing for Energy Efficiency Tax Credits
You can use the following IRS forms to file for different energy efficiency tax incentives:

For the new homes tax credit, use IRS Form 8908
For residential energy efficient property, use IRS Form 5695

If you are conserving energy, you can make use of these tax credits when filing taxes in 2013 to reduce your tax liability.

Got Email from the IRS? It’s Fake

noreply@blogger.com (Shruti Chandra) — Fri, 18 Jan 2013 17:12:00 +0000

If you have begun receiving fake emails from the IRS leading you to a webpage that replicates the IRS web page, you know tax season is here. You cannot overlook it: the keyword here is fake. Any email you receive from the IRS is an imitation, purposely planted to get your tax filing information. The IRS never initiates communication with taxpayers through email, text messages or social networking sites.

Scam artists have come up with new email scams this tax season. These are the ones to watch out for:

A fake email from the IRS' Electronic Federal Tax Payment System (EFTPS), informing you that your tax payment was rejected. To get information on why your payment was declined, it tells you to click on a link. If you click on the link provided, your computer will get malware used to get information you store on your computer.
Fake emails with headers such as ‘IRS notification' ‘IRS service' or simply ‘IRS.' Some even have fake signatures with the seal of the IRS. They use the irs.gov web address to deceive taxpayers, and may contain either an attachment or a link.
A scam email using the 'Where's My Refund?' title telling you to find out what your tax refund status online. The link on the email does not lead to the authentic IRS Where's My Refund? web page, just an imitation. You will be asked to share your Social Security number (SSN) and other tax filing information, which the scammers use to file false tax returns in your name.

When taxpayers are confronted with these emails, it is best to report them. Any email you receive that claims to be from the IRS or EFTPS can be reported to the IRS at phishing@irs.gov. You just need to forward the email received. Never click on any links or open the attachment on those emails for any reason.

The IRS has a special unit for identity protection known as IPSU (Identity Protection Specialized Unit). If you lost or shared your SSN, but your tax records are not yet affected, you can reach the IRS through their toll-free number 1-800-908-4490.

This tax season, don't fall victim to ID phishing attacks. Report the scammers to the IRS and save other taxpayers from getting victimized by tax frauds.

Filing Taxes & Refund Issues in 2013

noreply@blogger.com (Shruti Chandra) — Fri, 11 Jan 2013 17:09:00 +0000

Filing taxes this year will be different from past years, as Congress has made many big and small changes to the tax law to avoid a fiscal fall. In return, the IRS has postponed the date of filing taxes from Jan 22nd to Jan 30th for most taxpayers. Now, those who have simple tax returns are likely to file in February, while those with complex tax returns may file as late as April 15th.

The IRS has come up with a list of IRS Forms that can only be filed in late February or early March.

Because of the delay in filing taxes, you can expect refunds later than usual. If your tax return is simple and you need a refund soon, you need to file early. You will need to start preparing for tax filing now if you want your refund to reach you in February.

In most cases, the IRS takes up to 21 days to send a refund. If you are filing an amended tax return, it might take anywhere from 8 to 12 weeks for your tax refund to reach you.

The good news is that you can check your refund status on the IRS website. Entering your SSN, filing status and exact refund amount on Where's My Refund? will get you information on when the IRS got your tax return, when they approved it and when they sent your refund to you.

If you e-file your return (80% of the taxpayers did last year), you can check it on Where's My Refund? 72 hours after filing. If you mailed your paper return, you will need to wait 4 weeks.

With tax scammers overactive in the tax season, it is needless to mention that you must never share your SSN on any unsecure web page. You cannot check your refund status anywhere else on the Internet except on the secure IRS web page.

Don’t Give to the IRS When You are Giving to Charity

noreply@blogger.com (Shruti Chandra) — Fri, 04 Jan 2013 17:11:00 +0000

The IRS will accept any extra tax money you are willing to give them, but you can save much of your tax money if you donate to charities. Donations given to churches, other religious institutions, and recognized non-profit organizations, are tax-deductible. But to claim your tax deduction, you need to have written record of the payment made. You can file Form 1040 and choose itemized deductions on Schedule A to include the deduction.

Property: If you plan to donate a property to a charitable organization, you can get a tax exemption on it if the charitable organization is recognized. It is only after you have handed over the legal rights to the property that you can include it in your tax return for a tax deduction.

Donating to Churches or other religious institutions: If you are donating to any religious institution, you do not need to check their 501(c)(3) tax-exempt status because all religious institutions automatically enjoy a tax-exempt status. As for other charitable organizations, you need to verify before claiming a deduction whether the organization has obtained 501(c)(3) tax-exempt status from the IRS or not.

Written Record the IRS Accepts: The IRS accepts documentary proof of the amount paid to a charity if it has the name of the charitable institution, the date on which the contribution was made, and the amount paid to the institution. Whether you pay by check, cash, credit card, debit card or wire-to-wire, do remember to receive a receipt from the organization.

Donation of Over $500 Annually: If you donate more than $500 a year to charity and the donations are not in cash, you will need to attach Form 8283 (Noncash Charitable Contributions) to your tax return. Donations of more than $5,000 need an appraisal by a qualified evaluator.

You can save a lot of your money in taxes through various deductions and lower your tax bill. If you pay to charity frequently, this deduction can save you much on taxes. When you are paying to charity, don’t pay to the IRS.

Expect Scammers to Steal Your Identity

noreply@blogger.com (Shruti Chandra) — Fri, 28 Dec 2012 18:30:00 +0000

With tax season just around the corner, you can expect to receive unsolicited e-mails claiming to be from the IRS, or phone calls from scammers masquerading as reputable financial institutions, asking you to share your personal and financial information with them. They will sound professional and convincing. If you believe them and give them the information they're asking for, they could file fake tax returns on your behalf and run away with huge refunds. This is what scammers do in tax season: they steal identities to claim millions from the IRS in tax refunds.

Things to Remember:
1. The IRS never initiates contact with you by e-mail, SMS or social media. Any such contact is an attempt to steal your identity.

2. During the tax season, scammers will try to get your personal and financial information by stealing your wallet or purse, looking through the trash, hacking into unsecured websites on which you shared sensitive information, etc.

3. Scammers are looking to get your Social Security Number (SSN) above anything else. Without the SSN, the IRS does not accept tax returns. Keeping your SSN protected must be your priority during the tax season.

What Is the IRS Doing?
The IRS’ Criminal Investigation (CI) department prevents, detects and investigates cases of identity theft. CI currently has four Scheme Development Centers (SDCs) across the country to detect refund fraud. But it seems that is not enough. The IRS could not prevent 1.5 million potentially fraudulent tax returns from being filed in 2011. More than $5.2 billion in tax refunds was lost due to identity theft in that year.

You know the extent of the problem from the fact that the IRS successfully detected more than 930,000 identity-theft related tax returns in 2011.

The IRS is now looking to introduce new processes for handling tax returns, hoping to curb the menace that identity theft has become. Identity theft has topped the IRS Dirty Dozen tax scams, the list of the most widespread tax scams the IRS publishes every year. Instead of relying on the IRS, it is best to keep your SSN, and other financial and personal information, safe.

Marriage & Taxes: The Good News and The Bad News

noreply@blogger.com (Shruti Chandra) — Fri, 21 Dec 2012 15:24:00 +0000

If you are getting married this year, you might want to know that even if you marry on December 31st this year, the IRS will consider you married for the entire 2012. Along with music, dresses, food, laughs and love, you will also enjoy many tax benefits after you are married. That is if you choose to file taxes jointly. Apart from of course lower tax rates that all married couples who file jointly enjoy, some other tax benefits both you and your spouse will have are:

The Good

Freedom towards contributing to the IRA

If either you or your spouse has taxable compensation, either of you can make a contribution to an IRA. This benefit is not enjoyed by individual taxpayers who do not have taxable compensation. The working spouse can make a spousal IRA contribution for the non-working spouse.

Retirement account benefits

Retirement is the last thing you think about when getting married, but tax laws dictate that both you and your spouse can benefit from a retirement account even if either one of you is not the account owner. You can make your spouse a beneficiary to your retirement account.

The Bad

Withdrawing from retirement plan

It is not something anybody expects from a spouse, but many times a spouse may withdraw large amounts of retirement assets without the knowledge of their spouse. That can hurt the retirement years of the couple. Luckily, in most cases a spouse can cash out without the other’s consent only if the accrued balance is $5,000 or less.

Innocent Spouse

If a married couple has been filing taxes jointly and a spouse incurs a tax liability without the knowledge or fault of the other, the innocent spouse may be cleared of any responsibility towards paying the tax liability. Taxpayers who file for innocent spouse relief whether they are married, separated or divorced, may use the services of a tax expert to qualify for this IRS relief program.

Get Rid of Tax Debt When in Bankruptcy

noreply@blogger.com (Shruti Chandra) — Fri, 14 Dec 2012 16:31:00 +0000

Bankruptcy is not a happy time, but it is a time when you need to keep your wits about you the most. If you have an income tax debt hanging like a sword above your head, you can get rid of it under Chapter 7 or Chapter 13 of the Bankruptcy Code if:

The debt is due to failure to pay income tax. Apart from income tax, no other tax can be eliminated in bankruptcy.
The tax debt is at least three years old before you apply for bankruptcy. Newer income tax debt is not considered.
You have no record of filing fraudulent tax returns, willful tax evasion or tax avoidance with the IRS.
The tax return you filed when in tax debt was filed at least two years before you filed for bankruptcy.
The IRS assessed your tax debt at least 240 days before you filed the bankruptcy petition.

Only if you have cleared all these five points can you get the IRS to forget about your tax debt, forever.

What about Liens?

If the IRS placed a tax lien on your property and/or assets before you filed for bankruptcy, the bankruptcy will not automatically remove the lien. The IRS still has legal right over the property and/or assets under the lien. The only thing a bankruptcy order will do is alter the value of your equity in the property to the time when you filed for bankruptcy.

Managing Assets

When you file for bankruptcy, you need to know which of your assets can be seized and which can be retained by you. Every state has a different take on it, but in most states, your household goods, furniture, personal belongings, social security, unemployment benefits and some kinds of properties can be retained by the owner. If you have a major equity in a property, stock or IRA, you run a risk.

Of course, you should consult a specialist before filing for bankruptcy, but if you have already filed for bankruptcy under Chapter 7 in the past six years, you will only be able to file for it again after the completion of six years.

Stop the IRS from Taking Away Your Salary

noreply@blogger.com (Shruti Chandra) — Fri, 07 Dec 2012 18:21:00 +0000

The IRS will not stop short of humiliating, embarrassing and reducing a taxpayer to poverty if back taxes are not paid to them on time. They can affect your credit report, seize and/or sell your property/assets or garnish your wages. They have various aggressive collection methods to get you to pay them taxes owed. And getting back tax debt is their only concern. The worst the IRS can do to you is to begin taking a chunk from your wages to fulfill the tax debt. How you will pay your bills is not their concern. In many cases, the IRS takes the entire salary, for months.

They will send your employer a notice with information about the tax debt and how much money from your wages needs to be deducted every month so that the tax debt can be paid. Your employer cannot say a word to the IRS. S/he is supposed to carry out their orders. It is your employer who will deduct a certain amount from your paycheck every month and send it over to the IRS.

The IRS will not contact you for wage garnishment. They will contact your employer, and your employer will tell you how much out of your paycheck will go to the IRS every month. It is embarrassing to know that everybody in your office knows about your financial situation, and even more embarrassing is the reduced salary that you will be getting for many months till the entire tax debt is paid.

It is the IRS that decides how much to cut from your salary and for how long the wage garnishment will stay. As soon as you find out about wage garnishment, get help. You need to stop the IRS before they slice off a sum from your paycheck. If the IRS has legal rights, so have you. The first step you need to take is not to get bullied by the IRS. Be strong. The second step is to take immediate steps to stop wage garnishment. They cannot hurt you if you know your rights. You can stop the IRS.