Tax Matters - The Top Tax Defenders Blog

Payroll Taxes Piling Up? How to Get Business Tax Relief

Aylin Poulton — Tue, 21 Feb 2012 00:00:00 GMT

Do you owe back payroll taxes to the IRS? If so, you're likely wondering what your repayment options are. Failing to make arrangements to settle this debt in a timely manner can put your business at risk. The good news is that you can get business tax relief from an IRS installment payment plan.

Possible Consequences of Unpaid Payroll Taxes

The IRS takes unpaid payroll taxes very seriously. Legally, failure to submit these taxes each quarter is a crime and business owners can be subject to imprisonment for neglecting this requirement. Along with jail time the IRS can also levy substantial financial penalties for non-compliant employers. 16 days after the deadline for filing your Form 941 you can be subjected to a 33 percent penalty in addition to the original tax owed. If the debt remains unpaid the IRS has the authority to close your business and intercept any payments from your clients to settle the debt. Once the IRS decides to pursue your business for failure to submit payroll taxes the agency can also take action against anyone connected to the business including employees, accountants and shareholders.

Get Assistance from a Tax Professional

Since the IRS takes such a strong stance against companies that owe unpaid payroll taxes it's wise to get assistance from a tax professional that has experience dealing with this particular issue. While you have the choice to represent yourself in these proceedings doing so can be overwhelming, especially if you don't know all of your tax settlement options. Hiring a tax resolution specialist can ensure that you get access to the tax relief provisions that are available to you.

Take Action Right Away

Whatever action you decide to take it's essential that you do so right away. Waiting too long can give the IRS time to close your business, place you in jail or investigate all of your employees. As the time goes by the amount of your penalties and interest also add up quickly. Even if you're able to keep the IRS from physically closing your business the amount of debt you may have to pay back can be enough to sink your company. If you set up an IRS installment payment plan, however, you'll have the opportunity to decide how much of your debt you can repay so that your payments don't swallow up your operating income.

Settling a past payroll tax debt with the IRS can be intimidating. Seeking the advice of a qualified tax resolution specialist, though, can help you get through this process without negatively affecting your business's bottom line.

*Image courtesy of Flickr

Wage Garnishment: Facts & Fiction

Aylin Poulton — Fri, 17 Feb 2012 12:00:00 GMT

If you're facing wage garnishment you may be unclear about the process. It's important to find out exactly how the wage garnishment procedure works so that you can make plans to repay your debt as quickly as possible and stop wage garnishments. To do this you'll need to clear up a few wage garnishment myths:

1. My employer has to ask my permission before garnishing my wages.

This is untrue. Once your employer receives a notice that your wages are subject to garnishment, he or she is legally obligated to comply immediately. Your boss does not have to inform you of the garnishment.

2. I won't receive any notice before my wages are garnished.

Legally, the government is not required to inform you of an upcoming garnishment. However, individuals generally receive several notices before collection action is taken.

3. I can't stop wage garnishment from happening once I get a final notice.

A final notice is issued after several previous notices have been disregarded. After you receive a final notice you'll have 30 days to either request a hearing or establishing an arrangement for repayment. If you do not take these steps within the 30 days your wages will be garnished.

4. The government has to leave me enough money to cover my expenses.

The government does not have to consider your other financial expenses during the garnishment process. Legally, you can be left with less than $200 on each check if you're single and less than $300 if you're married.

5. If my wages are garnished, my employer can fire me.

Your employer cannot fire you for one wage garnishment levy. However, if you have two garnishments your employer can legally terminate your employment. This also applies if you have more than one debt that is being repaid through garnishment at the same time.

6. Child support and back taxes are the only debts that can be collected through garnishment.

While taxes and child support are the most common debts that are collected by wage garnishment other debts can also be repaid through this procedure. Student loans, past due court fines and civil monetary judgments can all be collected in this manner.

7. The government can only garnish my wages for one debt.

This is an important myth to clear up, since you can be fired for more than one wage garnishment as mentioned above. If you have multiple past due debts the government can garnish your wages for all of them at the same time.

Wage garnishment poses real financial risks to employed individuals. Understanding the truth about some common wage garnishment myths and consulting a tax resolution specialist can help you decide how to resolve your past debts quickly.

*Image courtesy of Flickr

Small Business Owners: Tax Help from the IRS

Aylin Poulton — Tue, 14 Feb 2012 12:00:00 GMT

The IRS offers many income tax incentives and deductions to small business owners. Among these provisions are deductions for health insurance, asset depreciation and credits for those affected by the Alternative Minimum Tax (AMT). Business owners who take advantage of this tax help for small business from the IRS may be able to significantly reduce their tax liability.

Health Care Tax Credit

Companies that employ 25 or fewer workers and pay at least half of their employees' health insurance costs may be eligible for the health care tax credit. To qualify employee wages must fall between $25,000 and $50,000 annually. Through 2013 company owners can claim up to 35 percent of their costs as a tax credit on their business tax return.

Deduction for Self-Employed Health Insurance

A recent change in the tax law allows self-employed taxpayers to deduct a portion of their own health insurance costs from both their business income and their self-employment taxes. To claim this deduction, taxpayers must be paying for their own insurance costs.

Section 179 Depreciation Deduction

The Section 179 depreciation provision allows taxpayers to write off the entire cost of equipment and computer software in one tax year rather than depreciating it gradually over the course of its useful life. Depending on the purchase, this deduction can greatly help to offset business income and reduce tax. The Section 179 depreciation deduction can be used on purchases up to $500,000, but the provision began being phased out in early 2012. In order to claim a Section 179 deduction a business must have a profit for the year.

Additional Deduction for Bonus Depreciation

Bonus depreciation is a tax provision that enables business owners to write off depreciation even if the business reported a loss. Typically, depreciation can only be used as a business expense to offset income, but by claiming this deduction, taxpayers can claim these costs even if they had no taxable income that year. This option is only valid on new purchases of equipment or other assets.

Auto Depreciation

The IRS has expanded the first-year depreciation allowances for cars, trucks, and other vehicles that are placed into service for business use. Taxpayers should consult the IRS guidelines to learn exactly how much they can deduct for their business vehicles.

General Business Credit

In 2010 the IRS allowed business owners who were affected by the Alternative Minimum Tax to claim their General Business Credit deductions. Prior to that year taxpayers who were subject to AMT were disallowed from these deductions.

The IRS has extended several credits and deductions that can provide tax help for small business owners. Taxpayers who need assistance navigating the tax guidelines should seek the advice of a qualified tax resolution professional.

*Image courtesy of Flickr

Get Lien: How to Avoid a Tax Lien

Aylin Poulton — Fri, 10 Feb 2012 12:00:00 GMT

Tax liens can cause a financial headache for individuals who owe back taxes to the IRS. Once a lien is imposed, individuals may lose access to their property, cash and other assets. To avoid falling into this situation, it's best for taxpayers to learn how to prevent tax liens in the first place.

About Tax Liens

Basically, a tax lien is a claim that the government places on your assets. This lien serves as a way of notifying courts that the federal government has the right to seize your property in case of a bankruptcy proceeding or if you decide to sell your property for any reason. In a way, the lien also serves as form of security against the outstanding balance you owe.

How a Tax Lien Can Affect You

A tax lien typically "freezes" your credit and assets. This means that you won't be able to apply for additional financing while the lien is in place, which can be particularly difficult for taxpayers who run a small business. Tax liens are also enforceable against assets you acquire after the lien is imposed. If a tax lien is placed on your assets, the notice will be a matter of public record, which means it may appear in your local newspaper. The tax lien will also appear on your credit report, potentially damaging your credit for some time. If you're trying to sell real estate that has been affected by a tax lien you won't be able to complete the sale until the lien is removed.

Avoiding Tax Liens

Since tax liens have such a negative impact it's wise to take steps to prevent them. The best way to avoid a tax lien is to establish a payment plan with the IRS. This serves to inform them that you do intend to repay your back tax debt. If you're unable to keep up with the payments or if you fall into financial difficulty you may receive a collection notice from the IRS. You can try to appeal this action to gain some more time. But if the appeals procedure seems daunting or if you need additional help, contact a tax resolution specialist who can recommend other tax relief options such as an offer in compromise.

Learning how to prevent tax liens can be a financial lifesaver for taxpayers who owe back taxes to the IRS. By getting help from a qualified tax resolution specialist, you can prevent or remove tax liens efficiently.

*Image courtesy of Flickr

Penalty Abatement: How You Can Qualify

Aylin Poulton — Tue, 07 Feb 2012 12:00:00 GMT

Do you owe back taxes to the IRS because a life emergency prevented you from filing your return on time? If so there's a possibility that you'll qualify for an IRS relief provision called penalty abatement. If you're able to get an abatement, you may be able to have your late filing penalties forgiven. However, qualifying for this provision is not easy and the IRS will not offer it to you simply because you made an error on your forms or forgot to send in your return on time. If you'd like to inquire about receiving penalty abatement don't deal with the IRS alone. Request the assistance of a qualified tax resolution specialist.

What is Penalty Abatement?

In short, penalty abatement is when the IRS forgives any outstanding late filing or payment penalties on your account. You'll still owe the back tax amount but without the compounded penalties that accrue during each month the payment is late. Generally, this provision is only extended to taxpayers with legitimate emergencies that prevented them from sending in their returns on time or contributed to mathematical errors that resulted in an underpayment of tax.

Qualifying for an Abatement

Typical situations that qualify for a penalty abatement include the death or prolonged illness of a family member, a medical emergency or rehab stay for the taxpayer himself or a natural disaster that causes the taxpayer to lose his tax documents. You might also qualify for abatement if you acted on incorrect advice from a tax professional that resulted in you paying too little tax. However, to claim that situation, you'll have to apply for abatement within one to four years after the tax was due.

Why You Need a Tax Resolution Specialist

Even if you have the necessary circumstances getting penalty abatement from the IRS is tricky. Revenue agents must decide if your tax underpayment was due to mathematical error or fraud. In most cases, the IRS assesses a 25 percent penalty if an individual paid too little tax due to a math mistake. However, cases that the IRS considers fraudulent are subject to a 75 percent penalty as well as continual interest and late filing penalties. To make the case that your return involved a clerical error you need the assistance of a tax resolution specialist who can help you avoid incriminating yourself and help you supply proof of your claim.

Qualifying for IRS penalty abatement is a complicated procedure so make sure you don't try to deal with the IRS alone. Hiring an experienced tax preparation help professional can help you receive this IRS tax relief provision.

6 Tips to Help Lower Your Taxes

Aylin Poulton — Fri, 03 Feb 2012 12:00:00 GMT

As tax time approaches taxpayers may be wondering if there are any options they can use to lower their income taxes. In order for any deduction to count for the tax year, it must have been made by December 31. Here are 6 tips to reduce your 2011 taxes.

Contribute to a Qualified Charity

To claim the deduction, you must make the donation to a registered non-profit organization and you'll need to get proof of your contribution from a cancelled check, a credit card transaction, or a receipt from the organization itself. Remember to qualify as a deductible contribution the donation should have been made prior to December 31.

Make Home Improvements That Improve Energy Efficiency

The IRS allows taxpayers to claim deductions for certain energy efficient home improvements such as installing a tankless water heater, solar lighting panels, or upgrading to energy efficient windows. Depending on the type of home improvement done, you may qualify to deduct up to 30 percent of the installation and purchase price as a deduction.

Adjust Your Investment Portfolio

You can deduct up to $3,000 per year in capital losses and you can carryover the excess losses to future years. If your portfolio is showing lots of taxable gains as of the beginning of December, you might consider selling some of your stock shares to reduce the impact of those gains as much as possible.

Top up Your Retirement Accounts

Making the maximum allowable contribution to your retirement plans is a great way to take a tax deduction. The IRS allows taxpayers to contribute up to $5,000 to IRA plans and senior taxpayers can contribute up to $6,000. These contributions can go a long way to help with tax liability.

Use Your IRA to Make a Charitable Donation

If you're over the age of 70 1/2, you can claim an additional charitable donation deduction by having a donation sent directly from your IRA plan. Instead of claiming this donation as an itemized deduction, you'll be able to exclude the amount you donated from your gross income for the year.

Claim the Small Business Health Care Tax Credit

Small business owners who pay for at least half of their employees' health care premiums may qualify to claim up to 35 percent of these costs as a tax credit on their business income.

As tax time approaches, many taxpayers may be worried about their impending bill from the IRS. By using these tips to reduce 2011 taxes and consulting with a qualified tax resolution specialist you can substantially reduce your tax liability.

*Image courtesy of Flickr

Unfiled Tax Returns? It's Never Too Late

Aylin Poulton — Tue, 31 Jan 2012 12:00:00 GMT

If the tax deadline for last year passed you by you might think it's too late to file your return. The truth is you can file a tax return at any time even if the deadline has come and gone. However, the sooner you submit your return the better off you'll be. Here are five reasons to file delinquent tax returns to the IRS.

1. Neglecting to File a Return is Illegal.

First of all, not completing your federal income tax return is technically a crime. Tax law requires that all taxpayers who have earned enough money to report their income to the IRS do so by the filing deadline each year. The IRS has placed several people in jail simply for failing to complete their income taxes on time.

2. The IRS Assesses a 25 Percent Penalty for Late Filing.

Another reason to file a delinquent return is that it helps you lessen the impact of late filing penalties. The IRS charges a 25 percent penalty immediately when your return is not filed by the tax deadline. This penalty even applies to taxpayers who receive tax extensions. All the extension does is give the taxpayer more time to complete their forms. The tax they owe is still due by the deadline. It's best for those who apply for extensions to send in a payment based on an estimate of their tax liability before the filing deadline for that year.

3. You May Be Subject to More Penalties.

On top of late filing penalties you will also accrue failure to pay penalties on the amount of tax you owe. This penalty is compounded monthly so your tax bill will continue to grow until you settle your account. In addition to the penalties, your account will also generate interest which you'll be responsible for paying.

4. The IRS May Prepare a Return for You.

While this may sound like less work for you it's really not. If the IRS prepares your return the agency will limit your deductions and exemptions to the bare minimum which will cause you to pay more in income tax.

5. You Won't Qualify for Tax Relief Until You File for Past Years.

Should you need to take advantage of tax relief provisions such as an offer in compromise, you won't even qualify to apply for them if you have unfiled tax returns that have not been filed. Clearing up your outstanding tax record will make it easier for you to request tax relief.

In short, it's always in your best interest to file delinquent tax returns to the IRS. If you need assistance preparing your forms, consider hiring a tax resolution specialist to assist you.

*Image courtesy of Flickr

Behind on Payroll Taxes? There's Hope

Aylin Poulton — Fri, 27 Jan 2012 12:00:00 GMT

All employers who hire workers have to submit payroll taxes to the IRS each quarter. Problems arise when a business doesn't have the funds to pay these taxes on time. Companies may run into trouble when their customers don't pay their invoices on time because this may cause them to run out of the money they need to submit their taxes to the IRS. Legally, the IRS can close a business for failure to pay payroll taxes in a timely manner. If you fall behind on your payroll taxes there are a few steps you can take to settle your account.

Get Current on Your Past Returns

The first thing to do is to get caught up on your entire past payroll tax returns. If you haven't submitted a few of them due to concerns about funds complete those and send them in right away. You should do this even if you don't have the money to pay the taxes you owe. Once you've completed the past forms set aside enough money to pay the payroll taxes that are due for your most recent quarter. Then make sure that you complete your forms and pay your payroll taxes from there forward. This will leave you with only the back payroll taxes to settle and will likely keep the IRS from closing your business.

Don't Contact the IRS on Your Own

To settle the back payroll taxes it's essential that you don't talk to the IRS by yourself. Revenue agents may attempt to get to you to incriminate yourself in a phone conversation by asking questions about how your business is run or the number of employees you have. Make sure that no employees in the office speak with IRS agents about the business.

Enlist the Help of a Tax Specialist

Hiring the assistance of a qualified tax resolution specialist is a great way to protect yourself from IRS collections. There are several tax relief programs that you may qualify for including an offer in compromise or penalty abatement. An offer in compromise may allow you to have your entire tax debt forgiven while penalty abatement can help you avoid paying any additional late filing penalties on top of your back payroll taxes. An experienced tax resolution specialist can assist you to apply for these and other relief provisions.

If you're behind on your payroll taxes don't panic! By completing all of your past returns, paying your current tax due, avoiding contact with the IRS and getting a tax specialist to help you you'll be able to settle your payroll tax problems and keep your business open.

*Image courtesy of Flickr

10 Most Overlooked Tax Deductions

Aylin Poulton — Tue, 24 Jan 2012 16:27:00 GMT

While most individuals are familiar with common deductions such as home mortgage interest, charitable donations and self-employment expenses, there are many other tax deductions that can lower an outstanding balance or increase a refund. Here are 10 of the most overlooked tax deductions.

1. State Income Taxes

If you paid a balance due on your state income tax returns last year you can write off those taxes as an itemized deduction. Enter the amount of state and local income tax you paid on Line 5 of Schedule A.

2. Military Homebuyer Credit

Military members qualified to use the First-Time Homebuyers Credit for homes they purchased during the first four months of 2011. If you're a member of the Armed Forces and you purchased a home in early 2011, you may still qualify for the Military Homebuyer Credit on your 2011 return.

3. Section 179 Depreciation

Business owners and self-employed taxpayers who place a new asset in service that has a useful life of less than 20 years have the option to write off all of the depreciation at once in one tax year. This is commonly used for small equipment such as computers and office machines.

4. Travel Expenses

You may be able to write off the cost of gas, airfare and up to 50 percent of your meals on business travel. However, if your employer reimbursed you for those expenses you won't be eligible to claim the deduction.

5. Energy Efficient Home Improvements

Installing energy-saving appliances and modifying home construction to use alternative energy is another way you can reduce your taxes. If you made an energy-saving purchase in 2011, you can write off up to $500 of small adjustments and up to 30 percent of appliances.

6. Refinance Home Points

If you refinanced your home this tax year you can deduct the points you paid to complete the transaction. These points are deducted on Schedule A along with your mortgage interest.

7. Travel for Charitable Organizations

Mileage you accrue while assisting a charitable organization is also deductible. This includes travel to and from the organization's building, job site or drop-off location.

8. Employment Search Expenses

The costs you incurred while searching for a new job may be deductible if you were searching for employment in the same field as your previous job. Qualified expenses include mileage, the cost of printing resumes and fees paid to an employment agency.

9. Moving Expenses

You can also deduct the cost of relocating more than 50 miles for a new job. Eligible expenses include mileage, truck rental and packaging expenses.

10. The American Opportunity Credit

If you went back to school this tax year, you can deduct up to $2,500 of your college tuition and expenses on your return. This credit is refundable, which means you can receive some of it as a refund.

Taking advantage of the 10 most overlooked tax deductions can help you receive a larger refund this year. If you need help determining your eligibility for any of these tax breaks and customized tax planning, contact a tax resolution professional.

*Photo courtesy of Flickr

What Can I Do About Unfiled Tax Returns?

Aylin Poulton — Fri, 20 Jan 2012 16:17:00 GMT

Have you missed filing a couple of your past federal income tax returns? If so, you may be feeling nervous about what action the IRS may take against you. While there are potentially harsh financial consequences for not reporting your income to the IRS, you can easily clear up any unfiled tax returns by preparing your forms and submitting them as soon as possible. If you're wondering what you can do about unfiled tax returns you may find this information helpful.

Why You Need to File Past Returns

There are several reasons why you should file your unfiled tax returns from previous years. For one thing, submitting your past forms keeps you in compliance with federal tax law. This alone can contribute to your peace of mind. Along with the conscientious benefit of filing your previous returns, you'll also benefit financially. If you owe outstanding balances from previous years, your account with the IRS has been accruing interest and late filing penalties all this time. Filing your previous years' returns will help you clear up any outstanding charges.

How to Get Started

The first thing you need to do is collect all of the necessary documents to prepare your past returns. You'll need to get copies of IRS Form 1040 for the years you haven't filed, as well as the supporting documents and schedules you'll need to complete. For example, if you need to report self-employment income, you must complete Form 1040 along with Schedule C "Profit or Loss From Business". If you plan to itemize your deductions, you'll need to complete Schedule A. You will also need to track down receipts and paperwork that support the deductions and income you'll report on your past return.

Submit the Returns with Any Necessary Payments

Even though the previous years' returns may be long overdue, you should still submit them to the IRS as you would a current year's return. The IRS does not allow taxpayers to file past returns electronically, so you'll have to complete paper forms and mail them to the appropriate mailing address for your state of residence. If you calculate that you owe a balance, enclose the voucher from Form 1040-V along with either a check or money order. If you're unable to pay your entire balance in full you can arrange an installment plan that will help you pay your balance gradually.

Clearing up unfiled tax returns doesn't have to be a complicated process. By preparing your forms and filing them, you can place your account back in good standing with the IRS. If you need assistance filing your forms, seek help from a qualified federal tax resolution professional.

*Photo courtesy of Flickr

How to Stop Wage Garnishment

Aylin Poulton — Tue, 17 Jan 2012 14:22:00 GMT

If you owe a significant amount of back taxes, you may be at risk of having your wages garnished by the IRS. Generally, wage garnishment is one of the last steps the agency takes to collect an outstanding balance due. Most taxpayers who have their wages garnished have also been subjected to an IRS levy on their other assets such as their property, automobiles or bank accounts. Whatever steps you take to remove a wage garnishment, you'll want to begin immediately since the IRS will have access to every paycheck you earn as long as the garnishment is in effect. If you're wondering what you can do to stop wage garnishments, here are a few steps that will help you rectify your tax issues.

Examine Your Tax Situation

It's important to find out exactly how much debt you owe the IRS before you take any other steps to get rid of your wage garnishment. Getting a complete picture of your financial situation can alert you to any potential discrepancies that may exist on your account with the IRS. Contact the agency and request a copy of your outstanding account to learn your exact account balance.

Make Arrangements to Repay Your Debt

Since the IRS often begins wage garnishment in cases when a taxpayer has made no attempt to repay the debt, taking immediate steps to begin repaying your balance can help you have the garnishment removed. The IRS accepts several methods for paying your outstanding balance, including credit card payment, money orders and personal checks. Installment agreements are another way you can begin repaying your debt. These plans allow you to make regular payments toward your tax balance. If you pay through an installment plan, you will still be assessed interest on your balance but you'll be able to determine the amount of your payments, the day you'd like to make your payment and the frequency of your installments.

Get Help to Appeal Your Ruling

If you disagree with the amount of tax the IRS says you owe, you may wish to file an appeal of your levy or garnishment. This process can be quite complicated so you might find it helpful to get the assistance of an experienced tax resolution professional to help you prepare your arguments and present your side of the case.

Even if your wages are being garnished by the IRS you can still regain control of your finances. By looking carefully at your tax balance, repaying your balance and receiving assistance from a tax attorney, you can put an end to IRS wage garnishment.

*Photo courtesy of Flickr

10 Common Audit Triggers

Aylin Poulton — Fri, 13 Jan 2012 16:26:00 GMT

Nobody likes to get audited by the IRS. While the prospect of an audit is bad news, the good news is that you can avoid an audit by learning about 10 common audit triggers.

Not Reporting All of Your Income

One of the biggest red flags for the IRS is failing to report all of your taxable income. If you get income from a source other than wages and salaries be sure to include that on your return as well.

Taking Large Deductions for Charitable Donations

Noncash charitable donations are notoriously difficult for the IRS to track. When you claim an inordinately high amount of charitable donations without supporting documents you may risk an audit.

Operating a Cash Business

If you receive a large amount of your self-employment income through cash payments, you may be particularly at risk for an audit. Make sure you report all of your income and tips and keep good documentation.

Mathematical Errors on Your Return

Common math mistakes on your return and schedules can cause you to get audited. Taking your time when preparing your forms and double-checking your work can help you avoid making errors that will draw the attention of the IRS to your return.

Claiming High Business Losses

If you report a large business loss on your return, expect the IRS to have some questions about your business. Since business losses drastically reduce your taxable income, the IRS may have doubts about the veracity of your claim.

Excessive Self-Employment Deductions

Another big audit flag for self-employed taxpayers is deducting large amounts of business expenses. Be sure to keep good records and receipts to back up your deductions in case your return is flagged.

Taking the Home Office Deduction

The home office deduction allows taxpayers who use a dedicated space in their home exclusively for business to deduct a percentage of their mortgage expenses, utilities, and repairs as a business expense. It's easy for a taxpayer to claim that a space is used for business when it's actually a guestroom, so IRS agents frequently audit returns that claim this deduction.

Claiming an Automobile was Exclusively Used in Business

The IRS is also suspicious of taxpayers who claim they use their vehicles exclusively for business so that they can write off the car expenses on their self-employment income. Again, good records and receipts can protect you in case of an audit due to claiming this deduction.

Deducting Travel Expenses

Travel expenses can only be deducted when they are incurred in the course of business. Meals, entertainment and lodging may be deductible to a certain extent, but since some individuals exaggerate these numbers, the IRS tends to investigate these claims.

Claiming a High Amount of Itemized Deductions

If you claim an unusually high number of itemized deductions, you may also be audited. This is particularly true for taxpayers whose deductions are much larger than their taxable income.

The best way to protect yourself against these 10 common audit triggers is to keep excellent records of your income and deductions. In case you are audited, seek the assistance of a qualified tax resolution professional or certified public accountant for qualified audit representation.

*Photo courtesy of Flickr

How to Qualify for an Offer in Compromise

Aylin Poulton — Tue, 10 Jan 2012 16:12:00 GMT

If you owe a substantial amount of back taxes that you will not be able to repay to the IRS, you may consider applying for an offer in compromise. This provision allows eligible taxpayers to drastically reduce or eliminate their outstanding tax liability. Learning how to qualify for an offer in compromise can help you to make a successful request and have your offer accepted by the IRS.

File All of Your Past Returns

In order to have your request for an offer in compromise approved by the IRS, you must have filed all of your previous year returns. This means that you cannot have any outstanding tax years where you didn't submit a return. Since you can go back and file your past returns at any time, you'll want to complete and submit any past unfiled returns before you begin the process of applying for an offer in compromise.

Check Your Current Financial Standing

Along with the filing requirements, the IRS also requires that you meet certain financial conditions before you receive an offer in compromise. If you're currently in bankruptcy or undergoing an IRS audit, you will not quality for the program. You must also provide proof that repaying your outstanding balance would be almost impossible for you in your financial situation. You may need to submit copies of your bills, documentation of your income, and bank account statements to back up your claim.

Double Check Any Estimated Tax Liability

Self-employed taxpayers are often required to make estimated tax payments during the tax years. These payments must be submitted in four installments - one in each fiscal quarter. If you are self-employed and you're required to make estimated tax payments to the IRS, you must be up-to-date on these payments before you can apply for an offer in compromise. This may sound contradictory, but since estimated tax payments cover payroll taxes, they have no bearing on federal income tax liability.

Submit an Application

If you meet all of the above conditions, you may be eligible to qualify for an offer in compromise. To apply, you must pay an upfront fee of $150 and then complete the application. You can download a copy of the application on Form 656-B by visiting the IRS website. Along with the form are detailed instructions on how to complete the application.

By checking the eligibility requirements for qualifying for an offer in compromise, you may find out that you're eligible for tax relief from the IRS. Since the qualification process can be a long procedure, you might want to get help from an experienced tax resolution professional before you begin your application.

*Photo coutesy of Flickr

How to Remove a Federal Tax Lien

Aylin Poulton — Fri, 06 Jan 2012 15:57:00 GMT

If you've been hit with a federal tax lien by the IRS you might feel that your financial options are limited. However, there are several legal methods you can use to try to remove tax liens. It's important to note that a tax lien is generally imposed after an individual owes back taxes and has not made an attempt to repay them, so if you owe back taxes and you're already making payments on them, it's very unlikely that you'll have a lien placed on your account. If you want to learn how to remove a federal tax lien, here are four ways you can do so.

Repay the Tax in Full

The simplest way to get rid of the lien is to pay your entire back tax balance in full. Depending on the size of your debt, this may be nearly impossible, but it's worth looking into other payment options to take care of it. After you add up the interest and penalties your tax balance is accruing, it may actually be less expensive to pay it off using a low-interest credit card than to let it continue to accrue fees from the IRS.

Establish an Installment Agreement

If you can't pay your entire balance off at once, consider enrolling in an IRS installment agreement. These plans are free to join and they give you the flexibility of deciding what day of the month you want to submit your payment and how much you want to pay each month. Even though you're making payments through this program, the IRS will continue adding interest and penalties to your balance each month, so take that into account when you're deciding on your payment amount. You can request an installment plan by completing IRS Form 9465.

Apply for an Offer in Compromise

The IRS allows select taxpayers with extreme financial difficulties to settle their tax bills for cents on the dollar. This option is called an "offer in compromise" and it is reserved for those who cannot possibly repay their back taxes. You can apply for this provision by completing IRS Form 656 "Offer in Compromise". However, you'll have to submit documentation proving that the settlement amount is more than the IRS would be able to get from you over time.

Appeal the Tax Lien

The fourth way to remove a tax lien is to appeal it. When you get the mailed notice from the IRS informing you of the lien, you'll also receive a notification of your right to request a hearing. You have up to 30 days to request a hearing at which you can present your case for why the lien should not apply to you. You may wish to contact a qualified tax resolution specialist for assistance preparing your arguments.

After a federal tax lien is placed on your account, you still have time to remove it. By taking advantage of these methods to remove a federal tax lien, you can begin settling your federal income tax troubles.

*Photo courtesy of Flickr

What to do after Defaulting on an IRS Installment Agreement

Aylin Poulton — Tue, 03 Jan 2012 15:25:00 GMT

Taxpayers who owe back taxes to the IRS can take advantage of an installment plan to repay their balance due. Installment plans allow individuals to set their own payment amount and payment date so that they can afford to repay their debts. To sign up for an IRS payment plan, taxpayers must complete Form 9465 "Installment Agreement Request" and submit it to the IRS. But what if you default on an IRS installment agreement? What can happen to you because of defaulting? What will the IRS do next?

Situations That Could Cause You to Default

It's very easy to default on an IRS installment agreement. If you miss a single payment, you will automatically default on the plan. If you provide false or incorrect information on your installment agreement request the agency could revoke your plan and require you to pay the entire balance immediately. Loss of income can also make it impossible for you to meet your monthly repayment amount, causing you to default on your agreement. If your account goes into default, you'll receive a CP-523 notice from the IRS that reports the status of your account. Generally, if this is your first missed payment, you'll have at least 30 days before the IRS places your account into default.

Communicate With the IRS Immediately

The most important thing to do if you default on an IRS installment agreement is to contact the IRS right away. Failure to communicate with the agency can lead to a tax lien being placed on your property or to having your assets seized to repay the back taxes. On the other hand, if you speak with an agent as soon as you default, you can avoid these consequences by requesting that your installment plan be adjusted to reflect your new financial circumstances. For example, if you've lost a major source of income that makes it hard to repay your debt, you can request a lower repayment amount until your income returns to normal.

Set Up Automatic Payments

Once you've renegotiated your installment agreement terms, it's a good idea to establish automatic payments so that you don't accidentally miss a payment again. On IRS Form 433-D "Installment Agreement", you can enter your bank account number and bank routing number so that the payment is automatically withdrawn from your funds each month.

Defaulting on an IRS installment agreement doesn't mean the end of the world. If you communicate with the IRS as quickly as you can, you can avoid facing a tax lien and return your account to good standing. As with all tax related matters talking with a tax resolution professional can help you sort out all the options.

*Photo courtesy of Flickr

10 Most Common Questions about IRS Tax Audits

Aylin Poulton — Fri, 30 Dec 2011 15:11:00 GMT

The prospect of an IRS audit is enough to frighten any American taxpayer. An audit is a lengthy, investigative process that examines every aspect of your financial history for the tax year in question. According to the findings, you may owe additional taxes, penalties and interest to the IRS. Here are 10 frequently asked questions about IRS audits.

Does the IRS Perform Random Audits?

Yes. The agency resumed performing random audits in 2007. Nearly 50,000 tax returns are selected for random examination each year. Of these, only about 2,000 taxpayers will have to submit to a full audit.

Will I Have to Pay More Taxes?

If your return contains errors or incorrect information, you will probably have to pay more taxes. Only about 25 percent of audited taxpayers will escape remitting additional tax.

Should I File a Return for This Year?

Since the IRS can use the information from this year's return as evidence for or against you during your audit, it's probably best to file an extension for this year. After your audit has been completed, submit your current year's return.

Can I Speed Up the Process?

No. Auditors can take up to 28 months (2 years, 4 months) to complete a full audit, so you'll have to be patient. On the other hand, if the 28-month period ends and your audit hasn't been resolved it will expire and you won't be required to continue the process.

Do I Have to Let the IRS Agent Into My House?

No. Without an express invitation from you, agents cannot enter your residence unless they have a court order. However, if you've claimed a home office deduction on your return, the agent might void the deduction if he or she is not able to inspect the home office.

What if the Agent is Difficult?

Try to see things from his or her standpoint. Instead of getting defensive, try to be reasonable and understanding of their job duties.

Can I Lose My Home Because of an Audit?

It's unlikely. If you communicate openly with the IRS, the agency will probably not seize any of your assets, including your home. To seize your residence, the IRS needs a court order. If this rare occurrence happens to you, contact a tax resolution professional for help.

Should I Negotiate a Deal With the IRS?

Possibly. You may be able to reduce your overall tax liability by applying for an Offer In Compromise on IRS Form 656.

Is There Any Way to Appeal the Audit Finding?

You can appeal the audit findings by submitting a protest letter within 30 days after the audit is completed. This will grant you a hearing at which you can make your case.

Can I Be Charged With Fraud?

Yes, but it's very rare. Only about two percent of audited taxpayers are charged with tax fraud. To be charged with tax fraud, you must owe at least $70,000 to the IRS.

If you're subjected to an IRS audit, you may be feeling nervous. By familiarizing yourself with these 10 FAQs about IRS tax audits, you can prepare yourself for this process. In addition a tax professioinal can help you with audit representation.

*Photo courtesy of Flickr

Job Search Tax Deductions

Aylin Poulton — Tue, 27 Dec 2011 15:33:00 GMT

If you're out of work or if you're just looking for new employment, did you know that you can write off some of your expenses on your tax return? The IRS allows you to deduct some of these relevant costs as a deduction on Schedule A. The key to claiming these expenses is finding out which job search costs you can claim and how to report them on your return. Here are a few job search tax deduction tips you can use to file your upcoming tax form.

Eligibility Requirements

Before you start adding up your expenses you'll have to make sure you meet the eligibility requirements to claim your job search costs. First, you must be looking for work in the same line of employment you have now. If you're changing industries or searching for your first job, you won't be able to write off your deductions. If you're unemployed you can still claim the expenses but you must be searching for a job in the same field as your previous job.

Types of Deductible Expenses

You can claim almost any job search-related expense as a deduction. This includes the cost of typing resumes, printing them out and mailing them to prospective employers as well as any fees you pay to an employment agency to help you find a new job. If you take a trip primarily to search for employment or attend an interview, you may be able to claim the cost of your travel as an expense. You can also write off the cost of long-distance phone calls to potential employers. Be sure to keep a record of these expenses so you can back up your claim on your return.

Reporting Your Deduction

When you're ready to claim your job search tax deductions, you'll need to report your expenses on IRS Schedule A "Itemized Deductions". The IRS only allows you to deduct the amount of your costs that are more than two percent of your AGI (adjusted gross income). This means that if your adjusted gross income is $20,000, you'll only be able to deduct the amount of your job search expenses that exceed $400 (20,000 x. 02). On Schedule A, you'll list these deductions as miscellaneous expenses on line 28.

While job hunting can be a difficult situation, you can ease some of the financial pressure by claiming your eligible deductions on your taxes. If you need help understanding the tax laws relating to deducting your job search expenses or tax preparation help, consult an experienced tax resolution professional for assistance.

*Photo courtesy of Flickr

Small Business Tax Tips

Aylin Poulton — Fri, 23 Dec 2011 15:05:00 GMT

At the end of each tax year small business owners do well to prepare for their upcoming tax returns. With a little advance planning and a few small business tax tips business people can maximize their deductions, lower their taxable income and possibly increase their refund.

Look Over the Books

Give yourself a head start on end of the year accounting by reviewing your records. When you look at your total income and your expenses for the year, you'll get an idea of your possible tax bill. Once you see how much income you've earned, you can start making adjustments to decrease your tax liability. Make sure to keep all of your pertinent tax records since small business owners tend to get an IRS audit more frequently than individual taxpayers.

Hold Off on Receiving Payments

If your company operates the cash accounting basis you can defer some of your income until the New Year. According to the cash basis of accounting you don't have to count your income until it's actually received rather than counting it when you earn it. In this way, you can postpone some of your invoices until the next year and avoid including it as income on your upcoming return.

Take Advantage of Last-Minute Deductions

Another way to save on your tax bill for the coming year is to make as many deductions as possible in the final part of the year. Small business owners can claim many types of deductions, including office supplies, equipment, advertising, repairs, utilities and travel. Since sole proprietors claim their net income on their individual returns they may also wish to get a head start on personal deductions such as charitable donations. If you have business bills that come due in January, consider paying them early in December.

Increase Your Retirement Contributions

Business owners can also make late-year contributions to their retirement plans. The IRS allows taxpayers to claim a deduction for a limited amount of contributions to a qualified retirement plan such as an IRA, 401(k) or an SEP. If you haven't established a retirement plan yet, you can still do so during December. If you're filing a joint return with your spouse, you can also make a contribution on his or her behalf. The IRS will allow both of you to claim a separate retirement contribution on your return.

Even though you might have a lot of accounting to do as a small business owner, you can prepare yourself for tax season by spending the final part of each year examining your books, deferring your income, talking with a tax resolution specialist and getting an early start on your deductible expenses.

*Photo courtesy of Flickr

Tax Preparation Help: How to Avoid Tax Penalties

Aylin Poulton — Tue, 20 Dec 2011 18:12:00 GMT

Most taxpayers try to avoid paying additional income tax along with their returns each year. However, even if you can't escape paying a balance due, you can avoid paying additional tax penalties and interest on top of your taxes. The best way to avoid tax penalties is to submit your return on time, file an extension if you need to and get tax preparation help from finance professionals.

File by the Deadline

The failure-to-file penalty is one of the most common tax penalties imposed on taxpayers. This is the penalty that the IRS assesses on all individuals who fail to submit their tax return by the filing deadline. Generally, the filing deadline is April 15 of each tax year but due to national holidays the deadline may be up to three days later. If you don't send your return in by that date you’ll have to pay a five percent penalty for each month that the return is late.

Request an Extension, if Necessary

If it's getting close to the filing deadline and you don't think you'll be able to complete your return on time you can still avoid the failure-to-file penalty by requesting a filing extension. To ask for this provision, you'll need to complete IRS Form 4868 by the filing deadline. The IRS provides detailed instructions to help you complete this form on time. Even if you file an extension you will still need to make arrangements to pay your outstanding balance due. Using an installment plan can make repayment easier on your finances.

Seek Help from a Qualified Tax Professional

If you need help to avoid tax penalties you can always get assistance by speaking with an experienced tax preparer. This is particularly beneficial if you think that your tax return is too complicated for you to prepare on your own. If the IRS audits your return and suspects that you've deliberately understated your income or overstated your expenses you may be assessed a 20 percent penalty along with interest and other penalties. Certified public accountants and tax resolution specialists are specially trained to help taxpayers deal with common issues such as back taxes and penalties. If you're audited, a professional tax preparer can help you organize your records to demonstrate proof that will back up the figures on your return.

So, the best way to avoid tax penalties is to get help with your tax preparation as early in the filing season as possible. If you take advantage of tax assistance you can spare yourself the headache of tax penalties.

*Photo courtesy of Flickr

IRS Tax Documents: What to Keep and How Long

Aylin Poulton — Fri, 16 Dec 2011 15:26:00 GMT

Some taxpayers might feel that they don't need to keep their income tax documents unless they have particularly complex tax situations. The reality is that all taxpayers should keep their essential tax documents on file. Depending on your circumstances, you may need to keep your records for several years, in case of an audit or to back up a claim.

Important Tax Documents

The most important tax document to keep is, of course, your IRS Form 1040 or whichever tax return you use to file. This document contains figures and private data that you should maintain for a time such as your total income for the year, your adjusted gross income (AGI), your dependents and your total refund. Since the tax return contains private information such as your full name, address, the names of your spouse and dependents and your Social Security numbers you may wish to keep it in a secure place in your home. Other important tax documents include the W-2 forms from your employer that apply to the return, any supporting schedules such as Schedule A, Schedule C, or Schedule D and the receipts that support your deductions.

How Long to Keep Your Records

A general rule is to keep all of your tax documents for at least three years. But, in some situations, it may be advisable to retain them for up to seven years. It's also wise to keep your forms organized by tax year, so if you need to refer to them you can easily find the relevant tax return for the year in question. If you electronically file your return you'll have the option to store your documents online but you should also keep backup paper copies.

Why Recordkeeping is Important

Keeping your tax records on file is important for a couple of reasons. First, it helps you to be prepared in case of an audit. Since the IRS has a three-year window to go back and audit your return, you'll want to keep your records for at least that long. Small business owners, in particular, do well to keep their records for that long. Business owners have a particularly high probability of being audited and showing proof of their income and deductions can help them avoid paying back taxes. Some taxpayers may wish to keep their tax documents for up to seven years. This is especially advisable for those who have extremely complicated returns, since the IRS can audit returns up to seven years ago if agents suspect fraudulent reporting.

Knowing what tax documents to keep and how long can help you prepare for a possible audit. If you have questions about how to store your documents, consult a qualified tax resolution professional.

*Photo courtesy of Flickr

What is an IRS Tax Levy

Aylin Poulton — Wed, 14 Dec 2011 12:41:00 GMT

If you owe the Internal Revenue Service a substantial amount of back taxes, you'll probably want to know about how you can avoid a tax levy. Generally, by the time the IRS issues a tax levy, your tax bill will have increased significantly due to back penalties and interest, so it's in your best interest to avoid a levy at all costs.

How a Tax Levy Works

When the IRS issues a tax levy, the agency essentially becomes a payee of all of your income and property. This means that when you receive a paycheck, the IRS receives a large portion of the proceeds before you receive any of the funds. This same principle applies to self-employment earnings, Social Security benefits and pension payments from retirement plans. Even worse, your employer receives a notice of the levy so that he or she can make the necessary withdrawals. As a result, your personal financial situation may become a source of office gossip.

Who Might Be Subject to a Levy

If you owe back taxes and you're making installment payments to the IRS, you probably won't have to worry about a levy. However, if you owe outstanding taxes and you haven't made any attempts to repay your balance due, you might be at risk for a tax levy. Because the IRS has the authority to issue a levy on any person who is delinquent on their tax payments, it's essential that you communicate with the agency directly to inform them of your intent to repay your tax bill.

How a Tax Levy Affects You

As mentioned before, tax levies have an immediate impact on your financial well-being, since they cut into your income sources. The IRS can also place a levy on your bank account, your home and other property, including your insurance policies and your jewelry. However, the agency cannot touch your personal effects such as your clothing and furniture. If you're receiving unemployment benefits, court-ordered child support or public assistance these assets are generally exempt from the levy. If you decide to appeal your IRS levy, you'll have 30 days from the date the levy is issued to request your hearing.

While an IRS tax levy can put a strain on your financial situation, you don't have to face it alone. An experienced tax resolution specialist can help remove tax levies and help plan your appeal and advise you on how to make a convincing argument during your hearing.

*Photo courtesy of Flickr

Innocent Spouse Tax Relief: Know the Qualifications

Aylin Poulton — Fri, 09 Dec 2011 13:27:00 GMT

Innocent spouse relief is a provision offered by the Internal Revenue Service to spouses who were unaware that their husbands or wives were committing tax fraud. Taxpayers who qualify for this relief may be exempt from back taxes, penalties and criminal prosecution due to the fraud of the other spouse. Qualifying for innocent spouse relief, though, can be difficult, since there are many conditions a taxpayer must meet.

Your spouse must have misrepresented financial information on the tax return - To be considered an innocent spouse your partner must have reported something incorrectly or deceitfully on your tax form. This might include making math errors that result in a larger refund, failing to report taxable income or claiming ineligible dependents. You cannot get innocent spouse relief from the IRS for other financial issues such as your spouse's credit card debt or loan obligations.
Prove that you were not involved in the fraud - The most important qualification for innocent spouse relief is that you must not have been involved with or known about the fraudulent activity. For example, if you and your spouse shared a joint bank account and you had access to the balance information, you may be considered liable since you could have known about any additional income that was not reported.
You must have filed a joint income tax return for the relevant tax year - When couples file a joint income tax return, they are each accepting shared responsibility for the reported information on their form. As such, the IRS can legally pursue both partners for back taxes, even if only one committed fraud or incurred the debt. To get relief from this debt, you must have filed jointly for the tax year in question.
Request relief within the allotted time - The Internal Revenue Service only gives innocent spouses two years from the date they take collective action for the tax debt to request relief. It is essential that you submit IRS Form 8857 "Request for Innocent Spouse Relief" before that time expires.

If you meet all of these qualifications, the IRS may consider you an innocent spouse and exempt you from responsibility for your spouse's tax obligations. However, if you are unsure about your eligibility for this provision or if you need assistance completing Form 8857, talk to an experienced tax resolution specialist or a tax attorney. These professionals can provide you with resources that will help you to apply for relief properly.

*Photo courtesy of Flickr

Payroll Taxes: Responsibilities of Employers

Aylin Poulton — Fri, 02 Dec 2011 15:09:00 GMT

If you are a business owner with employees, you have the responsibility of collecting payroll taxes. While some of these taxes are dependent upon the withholding preference of each employee, the federal and state governments predetermine others. Failure to withhold these taxes and remit them to the appropriate authorities can cause you to have levies or fines imposed upon your business.

Withhold the Appropriate Income Tax

A major aspect of your payroll tax responsibility is to make the appropriate deductions for federal and state income tax on the paycheck of each employee. Before you make the deductions, you'll have to review the completed IRS Form W-4 for each employee to find out how many dependents they are claiming and which marital status they are claiming during the year. You must deduct federal and state income taxes on each employee's earnings according to their wishes on the form.

Deduct FICA Taxes

FICA taxes are another required deduction for payroll department supervisors to make. These taxes include Social Security and Medicare deductions, which must be submitted to the federal government. Along with the employee's portion of these taxes, you'll have to match their contributions with a payment of your own. As of 2011, the Social Security tax is 4.2% for employees and 6.2% for employers, for 10.4%. Medicare taxes are substantially smaller, 1.45% from both employee and employer, for 2.9%.

Remit the Federal and State Unemployment Taxes

Unlike income taxes and one-half of the FICA taxes that are withheld from employee wages, the Federal Unemployment Tax (FUTA) and the State Unemployment Tax (SUTA) come out of your own pocket. You'll have to pay 0.6% of your total employee wages for the FUTA tax. SUTA tax rates vary, according to each U.S. state's regulations.

Submit Your Quarterly Tax Payments

Once you've deducted all of the necessary payroll taxes and set aside funds for your own employer taxes, you must complete a quarterly tax report and submit it along with the corresponding tax payment. This information is completed on an IRS Form 941 "Employers' Quarterly Tax Return". On this form, you'll complete fields that show your total payroll wages for the quarter, total taxes due and total taxes withheld. Each Form 941 includes a pre-printed voucher that you should complete and send along with your tax payment.

Fulfilling your payroll responsibilities as an employer can sound like a complicated task, but doing so is essential to maintaining your compliance with the Internal Revenue Service. If you need assistance completing these duties in a timely manner, you can get help from a qualified payroll tax resolution professional, bookkeeper or certified public accountant.

*Photo courtesy of Flickr

How to Qualify for Temporarily Uncollectible Status with IRS

Aylin Poulton — Fri, 18 Nov 2011 15:07:00 GMT

As the U.S. economy continues to languish, some taxpayers who owe the IRS back taxes are facing their own financial hardships. For many, simply paying the monthly bills is a difficult task, so repaying back tax debt can be almost impossible on their current income. Unfortunately, the IRS is legally entitled to pursue payment for outstanding taxes, regardless of the current circumstances of the individual who owes the debt. If you owe back taxes and you're facing financial hardship, one of the ways you may be able to get some tax relief is to qualify for temporarily uncollectible status with IRS agents. If you qualify, the IRS will stop pursuing you for your back taxes immediately.

What Constitutes a Hardship?

The sticking point for this provision is understanding what constitutes a hardship. Simply losing income may not enough to grant you this provision and falling below the poverty line doesn't let you off the hook for your tax bill either. The only way you can make a case for your hardship circumstances is to prove that attempting to repay your tax debt at this time would be an "undue" hardship on you or your family. You'll need documentation to back up this claim as well. For example, if you owe outstanding medical bills that are putting on a strain on your finances, you would need to provide proof of those bills, as well as your current income and household expenses.

Making Your Case

Regardless of your circumstances, though, it's best not to attempt to claim the temporarily uncollectible status without seeking the assistance of a qualified tax resolution specialist. The IRS routinely denies these requests and only about 25 percent of the claims are approved. A skilled tax attorney, however, can help you to assess your situation to find out if your petition is likely to be granted. If so, the attorney can help you put together a convincing argument that may make it more likely for your request to be processed.

Other Tax Resolution Options

If you don't qualify for this status, there are other options you can use to ease your tax burden. Repaying your debt in installments may help; since you can decide how much you want to pay each month and what day you'll submit the payment. Another option is seeking relief through a lump-sum compromise payment. This provision allows settling your outstanding tax debt for a fraction of the balance due as long as you make the payment in a lump sum.

Whether you qualify for temporarily uncollectible status with IRS representatives or not, you can find solutions that will help you manage your tax troubles and regain your financial footing.

*Photo courtesy of Flickr

Tax Liens: How to Avoid and Resolve

Aylin Poulton — Tue, 15 Nov 2011 10:27:00 GMT

Due to the ongoing economic crisis, many American taxpayers are facing tax troubles with the IRS. As more and more individuals face mounting debt, unemployment and financial uncertainty, they may also be dealing with tax liens that have been imposed upon them by the federal government. One of the best ways to handle this issue is learn how to prevent tax liens in the first place. However, if you're already under a tax lien, how can you resolve it quickly?

About Tax Liens

Simply put, a tax lien is a hold that the IRS places on your available assets. This is generally done when an individual owes an outstanding tax debt and has not attempted to pay it or settle it in a timely manner. When a tax lien is imposed on your assets, it can affect your credit report, your property value, your ability to establish new lines of credit and your access to the money in your bank account. Even worse, a tax lien cannot be absolved via bankruptcy. Rather, the government becomes one of the creditors seeking repayment during bankruptcy proceedings.

Avoiding a Tax Lien

If you want to know how to prevent tax liens, the easiest way is to avoid them at all costs. This means that you should file your tax return on time and work hard to submit any balance due immediately. If you're unable to remit the entire balance due at once, contact the IRS about establishing a payment plan that will let you repay your debt in installments. You won't escape interest fees and penalties, but you will keep your account in good standing with the IRS. As long as you're making some kind of payment on your account, you won't have to worry about facing a tax lien.

Resolving a Tax Lien

On the other hand, if you're already dealing with a tax lien, you're probably searching for ways to resolve it. The first step is to appeal the IRS assessment of your tax debt. Doing this on your own can be overwhelming, so don't hesitate to ask an experienced tax attorney or tax resolution specialist for help. A successful appeal can permanently remove tax liens from your account.

If you owe back taxes to the IRS, you can prevent a tax lien by keeping your account in good standing through regular communication with the agency and timely payments. However, if you're dealing with a tax lien on your account, getting assistance from a qualified tax resolution specialist may be the key to getting your lien resolved soon.