Chances are that if you’ve been on the internet – or in stores doing holiday returns – you’ve heard about the tax code changes for 2018. It can be hard to separate truth from opinion amid the buzz. Those who support the bill are pushing nothing but positivity, while those in its opposition warn the public of serious dangers. But what you want to focus on is how these changes will really affect you.

What the Tax Changes Mean for Taxpayers

Here is what you need to know when it comes to the new U.S. tax changes (and we’ll spare you the nitty-gritty details of tax law):

Tax Breaks for Businesses

Companies and business owners are getting lucky as the new bill will reduce corporate tax rates from 35 percent to 21 percent.

If you receive income from pass-through entities such as partnerships, you’ll receive a break on the first 20 percent of that income. This will lead to a reduction from about 30 to 40 percent, on average.

U.S.-based global businesses must move large funds from offshore accounts (where they were previously untaxed) back into the country. To do so, they will receive a tax rate of 8 to 15 percent on these transfers instead of the previous 35 percent corporate tax rate.

These changes in corporate taxes could have long-term positive results, such as the ability to provide higher wages and better benefits to employees.

Tax Changes for Individuals

Whereas corporate tax changes are considered permanent, changes to individual taxes are effective for eight years, unless Congress extends the terms. The most notable changes for individuals include a doubled standard deduction and the elimination of the individual mandate associated with the Affordable Care Act (the penalty for not buying health insurance). Sound too good to be true? Well, it is.

Along with a doubled standard deduction, there will be no personal exemptions. So, for a single individual, the standard deduction rate will decrease from $6,350 to $12,000. In addition, the personal exemption ($4,050) will no longer apply. These numbers are similar for Married Filing Jointly filers, but no more personal exemption means it’s less beneficial for those with dependents. The changes will increase Earned Income Credits and Child Tax Credits as to not hurt larger families, but even these credits will be hard to claim. In the end, inflation will offset the pros.

Changes to Itemized Deductions

Do you itemize your deductions or take the standard? The itemizing threshold will be reduced from 10 to 7.5 percent of your Federal Adjusted Gross income for a period. This will require lower relative expenses in order to itemize. However, there are new restrictions on what you can claim as itemized deductions.

Whether these tax reform implications or in your favor or not, it’s wise to get help from a tax professional so you can stay compliant with the State and IRS requirements (and avoid penalties). Tax Defense Network’s team of licensed tax professionals have been helping clients for over 10 years resolve tax issues, and we can help you, too.

The post The Tax Cuts and Jobs Act: How Does It Affect You? appeared first on Student Loan Solver.

Cryptocurrency investments, such as Bitcoin, are on the rise. You see it on the news and in your digital feeds. The IRS sees this money as taxable and is pursuing investors who are dodging paying taxes.

What is Bitcoin?

In short, virtual currency is like real money, but as a digital representation. The most well-known include Bitcoin, which is virtual currency used to pay for goods or services or to be held as an investment.  Bitcoin operates on a peer-to-peer exchange system, in which many computers are used to track and log details of every transaction.  As a form of cryptocurrency, banks are left out of the mix, allowing users to remain anonymous in their transactions.

Bitcoin hasn’t always been worth so much. The cryptocurrency was created in 2009 when creator Satoshi Nakamoto mined the first block on the chain worth $.000076 per Bitcoin. That current price has come a long way, worth$17,552.67 per Bitcoin as of December 15, 2017.

Bitcoin taxes

This year, the IRS went after Coinbase, Inc., a large “digital wallet” company that allows users to buy, sell, and transfer Bitcoin.  When the court ruled that IRS could gather data on all 14,355 Coinbase, Inc. customers, the agency discovered only 800-900 of those customers were reporting virtual currency gains on their taxes. The moral of the story? Just because your money is virtual, like Bitcoin, doesn’t mean it’s free from taxes – or from the eyes of the IRS.

Along with any currency, no matter how “virtual,” comes financial responsibility — and that includes reporting income to the correct agencies. After Bitcoin’s value hike in 2014, the IRS decided Bitcoin is to be treated as either a capital asset or item of inventory.

Bitcoin transfers are considered a “taxable event” and are subject to self-employment tax (if used as compensation for a service). Compensation of over $600 (.035 Bitcoin) is subject to the same reporting standards as any other self-employment payment, which means that the payer is required to report the payment to the IRS, and to the payee on Form 1099-MISC. The IRS will have the potential to assess large penalties on top of even larger taxes due for unreported income, particularly over a $20,000 threshold. Taxpayers: Be aware that just because your transaction is below the threshold, that doesn’t exclude you from your reporting requirement.  The IRS can – and will – track an increased number of transactions through voluntary reporting and court orders to disclose transaction details.

Proper tax planning is key

Complying and properly reporting on all taxes – including Bitcoin – will allow you to avoid the severe penalties that come with under-reporting.  Be proactive in your financial planning regarding digital currency to ensure you’re reporting transactions in the most beneficial way for you, avoiding unnecessary tax liability. Tax Defense Network is the go-to expert for tax filing, including cryptocurrency like Bitcoin Call now to discuss how to keep your cash from your cryptocurrency investments with a free consultation.

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When reviewing how much you can pay, the IRS takes into account:

• Any assets that you can take a loan against,
• Any asset such as your car, boat, or house that you can sell to pay the tax debt, and
• Property that is yours but is held by someone else such as funds in bank accounts, retirement accounts, etc.

The information you will need to include on Form 433-A includes:

• Your checking, savings, online (e.g. PayPal) financial accounts
• Your stored value cards (e.g. payroll card, child benefit card)
• Stock, bonds, mutual funds, and other investments
• Available credit on credit cards
• Your gross monthly wages and/or salaries without deductions, or net business income
• Any real estate, vehicles, and personal assets
• Current market value of your assets

Self-employed individuals also need to share with the IRS their business bank accounts and business assets.

As the IRS has to leave you enough for you to meet allowable living expenses, they also need to review your specific financial needs. Therefore, on Form 433-A, you will need to include your necessary total living expenses. These will include expenses on:

• Food, clothing and miscellaneous
• Housing and utilities
• Vehicle ownership and operation
• Public transportation
• Health insurance
• Out-of-pocket health care costs
• Court ordered payments
• Current year taxes
• Secured debts
• Other expenses such as student loans, unsecured debts, and tuition fee.

Total Monthly National Standards for Food, Clothing and Misc.

Based on your financial statement, the IRS determines your ability to pay and decides whether to approve your application for a payment plan or not. Under the Fresh Start, the IRS may not ask for a financial statement if you owe $50,000 or less in tax debt and apply for an Installment Agreement. For tax debts that are greater than $50,000, and to request a tax debt reduction, you will need to provide the IRS with a financial statement (Form 433-F).

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Deferring income is a tax strategy to lower your annual tax bill. Only taxpayers that expect their tax bracket to remain the same or drop down to a lower bracket should defer income. If the income bracket is expected to rise, they may be able to advance the receipt of income to 2016 to pay taxes in the lower bracket.

Defer Income

Income is taxed in the year in which it is received. If you are due a bonus or a payment in December 2017, you can postpone receiving it in 2018 to avoid paying taxes on it this year.

Employees have certain restrictions when it comes to deferring income, as they cannot postpone the receipt of their paychecks. However, if they have income from other sources that can be postponed, they may consider deferring it to early next year.

The self-employed, freelancers and consultants have more room to maneuver. For these individuals, delaying billing until the beginning of 2018 is a smart way to lower income tax.

Those who are planning to sell assets can avoid paying tax on capital gains by deferring the sale or the receiving of capital gains to next year.

Additionally, taxpayers may take distributions from an IRA at the beginning of the next year rather than this year, if their type of IRA charges taxes at the time of withdrawal. Those who save in a Roth IRA can withdraw anytime without having to pay taxes at the time of withdrawal. However, those with a traditional IRA can avoid paying income tax on a withdrawal if they hold off until 2016.

Defer Deductions

If you expect your income to increase next year, you may defer your deductions. You can postpone paying bills for expenses such as medical costs, property tax and charitable contributions. Consider all your expenses that are tax deductible that have also not yet been paid.

Small adjustments eventually lead to big savings. By using tax strategies such as deferring income, taxpayers can pay less in taxes to the IRS each year.

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IRS Direct Pay

For making payments to the IRS as an average taxpayer, one easy method is IRS Direct Pay. It can be used for filing individual tax bills or making estimated tax payments directly from your bank account (checking or savings) to the IRS. This feature has the added advantage of being free of charge. To use Direct Pay, you need to have a Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN).

As soon as you make a payment using Direct Pay, you get a confirmation notification that it has been submitted. The bank account information you provide is not stored in the IRS systems.

Electronic Federal Tax Payment System (EFTPS)

Another secure payment method offered by the government is the EFTPS. Both businesses and individual taxpayers can use EFTPS to pay their taxes. To access the EFTPS website, you must have a secure Internet browser with 128-bit encryption. To log on, you must have the following three items:

1. EIN or SSN
2. EFTPS Personal Identification Number
3. Internet Password

Using EFTPS, you can make income tax payments, employment tax payments, and estimated and excise tax payments. The site is available 24/7 and can be accessed via computer or smart phone. Additionally, you can schedule payments for up to 365 days in advance.

Payment by Check or Money Order

If you choose to pay via mail, then you can make your check, money order or cashier’s check payable to the U.S. Treasury. Include your name, address, SSN, daytime phone number, tax period and the tax notice or form number on your method of payment. Remember not to affix your check or money order to other documents.

Payment by Debit or Credit Card

To process payments made by debit or credit cards, the IRS uses standard service providers and business/commercial card networks. A processing fee is charged, which may be tax deductible. The fee varies depending on the service provider used. The IRS does not charge any fee for the transfer or the processing of the payment.

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Notice CP14 is the first contact the IRS makes to collect taxes past due. If the notice is ignored or payment is not made, the IRS sends additional notices and can employ collection actions such as a lien or a levy to collect the taxes due. To resolve the issue, taxpayers may follow these steps:

Review the Notice

The first thing to do when receiving Notice CP14 is to know why you received it. The notice includes the following:

• The tax year for which taxes are due
• The date on which the notice was issued
• Your Social Security Number
• IRS phone number
• Tax amount owed
• Payments and credits
• Penalties charged on taxes owed
• The final amount due to be paid
• The deadline for paying the amount owed

The notice also includes information on payment options, penalties, and interest.

Determine If the IRS is Correct

Before agreeing or disagreeing with the notice, check to see if your return had errors that led to the assessment of taxes due. If you find errors, you will need to pay the amount owed before the payment deadline in order to avoid further penalties and interest.

If you do not identify errors or find that the amount owed is greater or less than what the IRS determined, you can call the IRS on the phone number indicated on the notice. An IRS representative will assist you in resolving the issue.

Payment Options

You can make the payment using IRS Direct Pay, a service that allows you to electronically pay your taxes directly from your savings or checking account. Alternatively, you may pay by credit or debit card.

If you cannot pay the full tax owed, either send a request to the IRS to receive up to 120 days to pay, or set up an Installment Agreement. An Installment Agreement allows taxpayers to pay their tax bill in fixed monthly installments. For tax bills of up to $50,000, the IRS allows Streamlined Installment Agreements. For larger debt amounts, it is advisable to seek assistance from a tax professional before sending a request for an Installment Agreement.

The post You Have a Balance Due – CP14 appeared first on Student Loan Solver.

 Below are four of the taxes that lead early Americans to stand up and say “No taxation without representation!”

Sugar Tax

The Sugar Act was an effort to both regulate trade and raise revenue in the colonies. The act technically reduced taxes on sugar, but was more strictly enforced than prior taxes. The act expanded the powers of custom officials to prosecute smugglers and required ship captains to maintain details manifests of cargo. The act also restricted the export of certain goods to locations other than Britain.

The new duties caused significantly reduced trade and the colonial economy went into a decline. This led to the revolt when the Stamp Tax was passed.

Stamp Tax

The Stamp Act was passed in 1765, and was charged on any kind of printed paper. No printed paper remained untouched by tax. Every newspaper, legal document, ship’s papers, and even playing cards were taxed. The colonies feared that the Parliament would impose any tax at will if this tax were allowed to continue.

Despite revolts, the act was repealed only when the cost of collecting the stamp tax grew more than the revenue it generated. With the repealing of the Stamp Act, Parliament passed the Declaratory Act where it stated that it had the right to impose any law in the colonies.

Townshend Taxes

After repealing the Stamp Act, Charles Townshend, Chancellor of the Exchequer, mistakenly believed that the American colonists would not object to an indirect tax on imports, rather than a direct tax on goods. A series of bills were passed and became known as the Townshend Acts. The purpose of these taxes was to have greater control over the colonies, establishing the British Empire’s right to tax the colonies and to raise revenue for the salaries of governors and other officials loyal to the British Empire.

Both the colonies and the British merchants disliked this tax because the revenue generated was paid to the agents enforcing the tax. Due to this, this tax too was repealed.

Tea Tax

The Tea Act was passed to allow the British East India Company to directly ship its tea to North America without paying the duty on exporst. This upset the colonial merchants, as now the Company could sell tea at much lower prices, cutting out competition from smugglers.

When the duty-free tea reached Boston harbor, it provoked the Boston Tea Party. The British Parliament responded by passing the Coercive or Intolerable Acts to punish Massachusetts for the revolt.

The Intolerable Acts escalated tensions in the colonies, especially Massachusetts. This tension broke out into the American War of Independence in April, 1775 with the Battle of Lexington and Concord. The colonies officially declared their independence from Britain and its taxes a little over a year later.

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An IRS Notice of Deficiency, or Notice CP3219A, lets you know that the information you reported on your tax return is different from the information reported to the IRS by third parties, such as your employer or any financial institution in which you have accounts, and the IRS has changed the amount of tax you owe.

If you agree with the changes made by the IRS and you do not have additional income, credits or expenses that you need to report, you do not need to amend your tax return. You can sign the Form 5564, Notice of Deficiency – Waiver and send it to the IRS. If you have additional income, credits or expenses, then you will need to amend your tax return and file Form 1040-X.

What to do if you don’t agree with the notice

In case you disagree with the notice, you should contact the IRS over the phone or send a written explanation supporting your position. You may also want to contact the third party that reported the information in question (e.g. employer) and ask them to correct it. The IRS will let you know how long you have to contest their assessment on the notice.

If you filed your tax return and you do not have a copy of it to check the alleged difference, you can request that the IRS to send you a copy of your tax return by sending Form 4506.

If your tax liability has increased because of the changes the IRS made, then you should know that the IRS will charge penalty and interest on the taxes that remain to be paid. Therefore, you should make immediate efforts to confirm the changes, and if found to be true, pay the balance to resolve your back taxes.

Taxpayers that cannot pay the unpaid taxes should apply for an IRS tax debt payment plan. After receiving this IRS notice, it is important to begin efforts to resolve the issue immediately, as penalty and interest are charged on unpaid taxes every month until the entire amount of tax debt is paid in full.

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If you owe the IRS and can’t pay, you may qualify for the IRS Debt Forgiveness Program.

Under certain circumstances, taxpayers can have their tax debt partially forgiven. When the IRS considers forgiving tax debt, the present financial condition of the taxpayer is of primary importance. That means the IRS cannot collect more than a taxpayer can pay. If any collection action by the IRS would force a tax debtor into a financial crisis, the IRS cannot collect the back taxes.

Offer in Compromise

Taxpayers that have the resources to pay only a partial amount of their tax debt can apply for the IRS government payment plan called an Offer in Compromise (OIC) to resolve the remaining amount. Depending on the financial capacity of the taxpayer, the IRS significantly reduces the total debt to an amount that the taxpayer can pay. This reduced amount can be paid in a lump sum or in fixed monthly installments.

Fresh Start Initiative

To make it easier for taxpayers to qualify for an OIC, the IRS has expanded their Fresh Start initiative. Under these more flexible rules, taxpayers do not have to disclose extensive financial details to the IRS to judge their paying ability. The Fresh Start initiative for OIC offers taxpayers the following advantages:

• The IRS now looks at only one year of future income for offers if they are paid in five or fewer months when calculating a taxpayer’s reasonable collection potential. This is down from previous four years. For agreements of six to 24 months, the IRS now looks at two years of future income instead of the previous five years.

• Taxpayers are now allowed to make their student loans’ minimum payments for post-high school education loans guaranteed by the federal government.

• Taxpayers may, under certain conditions, pay delinquent federal and state or local taxes in monthly installments if they cannot pay it in full.

• The standard allowance for the Allowable Living Expense amount has been expanded. This allowance now includes credit card payments, bank fees and charges, and other miscellaneous allowances.

What next?

Understanding your tax debt and dealing with the IRS isn’t easy to do alone, even with programs like IRS Debt Forgiveness. Luckily, there are professionals who can help you navigate your options. Call Tax Defense Network for a no-cost, confidential consultation today at (855) 204-8609.

The post What is the IRS Debt Forgiveness Program? appeared first on Student Loan Solver.

Here are six repercussions the IRS budget cuts have on taxpayers:

1. A slower (and downright miserable) customer experience – Call the IRS and you’ll likely sit on hold for over 30 minutes listening to Muzak. Due to staffing cuts over the years, the IRS doesn’t have the resources to provide efficient service for its overwhelming number of callers – both on and off tax season. Not only that, but many representatives who are answering calls are less equipped to deal with your issues quickly due to lack of training.

2. Fewer, less experienced, or even unethical representatives – An understaffed IRS does more than just hold up customer service lines – it delays Revenue Officer case assignment and adds to the timeline in which you resolve your tax debt. To fill the talent gap, the IRS rehired over 200 employees that have been fired for unethical behavior, like fraud, theft, and even taxpayer data abuse. The people you are supposed to trust could be a danger to your financial life.

3. Clunky and unsafe service-automation processes – Fewer humans means more robots. And for the IRS, the robots don’t quite measure up. For example, taxpayers have the right to appeal an IRS decision with a local Appeals or Settlement Officer, but 12 states are without any qualified local appeals staff. To discourage in-person appeals, the IRS has released a telecommunication system within its centralized appeal office. Non-local Officers understand less about local businesses’ challenges, are out of tune with regional issues and are lower-ranked employees who lack expertise and experience.

The IRS believes that technology can replace the local expertise at a lower cost, but this hasn’t yet shown true. In fact, visits to the IRS website decreased by 4.1 percent despite the push for more online services (enough to make that 30+ minutes on hold sound tempting). This combination of a limited local presence and a poor attempt at replacement with technology ultimately leaves taxpayers who need help out to dry.

4. A lack of taxpayer outreach and education – You may think the government is a pro when it comes to confusing the public about taxes, but the IRS wants you to be informed about (and comply with) tax law. Unfortunately, taxpayers are left in the dark due to lack of awareness and education when only four percent of the “Taxpayer Services” budget goes to working with organizations such as state tax authorities and volunteer groups (most of this budget goes to processing returns). More cuts will continue to widen the gap of outreach and support.

5. More scams and ID theft – Financial scams involving sensitive personal data are everyone’s worst nightmare. If the IRS can’t provide adequate education and awareness of how to mitigate these risks, fraudulent activity increases. Ignorance isn’t the only loophole – confidential data can be easily compromised to do a lack of sufficient infrastructure and technology. The IRS has made significant gains over the past few years, but maintaining the progress may become difficult with less financial support.

6. Debt collection from private companies – Congress recently ruled (again) that a portion of debt collection would be outsourced to private debt collectors (PDCs) – an approach that comes with its own set of issues. For one, a sizable percentage of government funding (25 percent) money now goes to PDCs instead of government programs. When prior private debt collection programs have proven to cost more than the government makes, it’s lose-lose for Uncle Sam and citizens. Taxpayers need to protect themselves and stay informed more than ever.

For people who have tax debt, these six issues aren’t making the already-difficult process any easier. Luckily, tax professionals can deal with the IRS on your behalf (so you can say “sayonara” to long hold times). If you have questions about individual or small business IRS issues, call Tax Defense Network for a free consultation at (855) 204-8609.

The post 6 Ways the IRS Budget Cut Affects Taxpayers appeared first on Student Loan Solver.