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Archive for Venar Ayar

Can The IRS Garnish Your Wages If You Are Self-Employed?

Venar Ayar- Can The IRS Garnish The Self - Employed

Independent contractors and self-employed taxpayers may not have to worry about wage garnishments, but that doesn’t mean they entirely free from IRS collection actions. The IRS has many other collection powers at its disposal, so you’re better off resolving your tax problems through negotiation or settlement.

How Wage Garnishments Work

Employers handle the following tax matters for their employees:

  • They withhold income taxes based on your W-4 allowances and send this money to the IRS.
  • They withhold payroll taxes (Social Security and Medicare) and send it to the IRS.
  • They pay their own portion of your payroll taxes.

It’s fairly simple for the IRS to ask your employer to send a larger portion of your pay directly to the IRS. This is how an IRS wage garnishment works, and your employer is obligated to obey the order.

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How To Appeal The Trust Fund Recovery Penalty

Venar Ayar - Trust Fund Recovery Penal

The trust fund recovery penalty (TFRP) is equal to 100% of any unpaid trust fund taxes. You may become personally responsible for this penalty if the IRS determines that you are a responsible person at the business who willfully failed to send the payroll tax money to the IRS.

The TFRP is a severe penalty, and you should consult a tax attorney if you are being investigated for a possible TFRP assessment.

Negotiating The TFRP

First, you have the option to request mediation before the IRS assess the TFRP. This involves a neutral mediator who will attempt to reach a settlement between you and the IRS.

The good thing about mediation is that it isn’t binding on either party. If you don’t like the deal, the IRS can move forward with the penalty assessment and you can use your formal appeal rights.

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Being Audited By The IRS But Don’t Have Any Receipts?

Venar Ayar - Records For A Tax Audit
IRS Record Keeping Guidelines

The Internal Revenue Service generally advises taxpayers to retain copies of all tax returns and any relevant supporting documentation for at least the previous three tax years. The IRS also provides an extensive list of the types of records they may request if you are audited. These include:

  • Receipts
  • Bills
  • Checks
  • Legal paperwork and documentation
  • Loan agreements
  • Tickets
  • Medical or Dental Records
  • Employment documents

The IRS accepts electronic records in some instances, namely if the electronic records were produced by tax software. If you have any questions about whether your electronic documents and files are acceptable to the IRS, you should contact an experienced tax attorney right away.

Can Lack Of Receipts Derail Your Audit?

While it is imperative that you maintain all your records relating to your tax returns, especially for the last three tax years, if, for some reason, you do not have all the necessary documentation before an audit, you aren’t out of luck completely.

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What To Do If You Cannot Make An IRS Minimum Monthly Installment Payment

Venar Ayar- What To Do If You Cannot Pay IRS Monthly Installment Payments

If you find yourself unable to make the minimum monthly installment payment, you can negotiate a monthly payment amount that fits your budget by completing Form 433-F and working with the IRS employee assigned to your case. However, you’ll need to show that your financial situation justifies a payment below the typical IRS standards.

Installment Agreement Requests

The IRS prefers taxpayers to pay a certain amount towards their tax debt each month. The minimum payment amount is generally calculated by diving your balance by 72.

If you can afford to pay this amount, you may qualify for a streamlined installment agreement request, and you may not have to complete a Collection Information Statement.

If you can’t pay this much each month, you can still get an IRS installment agreement. By completing the Collection Information Statement, you can show the IRS why you’ll need a lower monthly payment amount to keep up with your other expenses.

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Can The IRS Garnish Wages From Both You And Your Spouse? IRS Wage Garnishment Policy

Venar Ayar - Can The IRS Garnish Wages From Both You And Your Spouse

The IRS can garnish the wages of both you and your spouse for joint tax debt. The IRS policy is generally to garnish the wages of the higher earning spouse, but they may deviate from this rule if you’ve flagrantly refused to pay your tax debt.

Wage Garnishment

When you owe tax debt and the IRS has sent you several notices demanding payment, you may be at risk for enforced collections. A wage garnishment is a common IRS collection tactic, which involves taking a portion of each paycheck you receive and applying it to your tax debt.

A taxpayer gets an exempt amount that cannot be garnished based on their filing status and number of dependents. For example, a married taxpayer who files jointly and has two dependents will receive $2,733.33 per month. The rest of your wages will be sent to the IRS until your tax debt is paid off in full.

If you receive any bonuses or commissions, the IRS can also seize 100% of these amounts.

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What’s Considered Reasonable Cause For Penalty Abatement?

Venar Ayar - Reasonable Cause For Penalty Abatement

The IRS may grant penalty relief for reasonable cause based on all the facts and circumstances of your situation. This broad category of penalty relief can cover many different types of accidents or unexpected circumstances.

Typical Reasonable Causes

The IRS lists the following events as “sound reasons” for failing to meet your tax obligations:

  • Fire, casualty, or natural disaster
  • Inability to obtain records
  • Death, serious illness, or incapacitation of the taxpayers or an immediate family member

If one of the situations caused you to miss a tax payment or filing deadline, you may have a good case for reasonable cause penalty abatement.

Other Potential Reasons

The IRS will consider any other reason that shows you used ordinary business care and prudence to follow the tax laws but were unable to do so. These cases usually involve some events that were out of your control, whether due to someone else’s fault or an accident.

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Who Needs To File A 2018 Individual Tax Return

Venar Ayar- Who Needs To File A 2018 Tax Return

2018 tax returns are due April 15, 2019, but not everyone needs to file a tax return. Taxpayers most commonly need to file when they want a tax refund, when they earned more than the income threshold, or when they had self-employment income.

It’s best to figure out if you need to file a return early on during the tax season so you don’t need to scramble to get your return completed by Tax Day.

Income Thresholds

You need to file a return if your income was at or above the following amounts in 2018:

  • $12,000 for single taxpayers
  • $18,000 for heads of household
  • $24,000 for married taxpayers who file joint returns

Taxpayers whose income exceeds the thresholds need to file regardless of whether they owe taxes or will receive a refund.

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Factors That Indicate How Long It Takes To Pay Off IRS Debt

Venar Ayar- How Long It Takes To Payoff IRS Debt

Several factors will influence how long it takes to pay off your tax debt, including the amount of your balance, how old the tax debt is, and your overall financial situation. You may be able to settle your tax debt relatively quickly if you have low income and few assets. In other cases, you may need to make installment agreement payments over several years or more.

How Much Do You Owe?

The IRS generally wants your tax money as soon as possible. However, flexible payment arrangements are also offered to allow taxpayers to pay back taxes without breaking their budget.

If you owe under $10,000, you can qualify for a guaranteed installment agreement if you can pay off your balance within three years.

If you owe up to $50,000, you can typically pay off your balance over the course of 72 months with a streamlined installment plan by paying with direct debit. Taxpayers who owe $25,000 or less may be eligible for streamlined agreements using other payment methods.

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3 Ways To Pay Off An IRS Installment Agreement Faster

Venar Ayar - Payoff IRS Installment Agreement Faster
How To Pay Off Your Installment Agreement Faster

If you want to pay off your installment agreement faster, you have a few different options. The flexibility offered by IRS payment plans allows you to pay more if you are able to, which allows you to cut down your balance and minimize penalties and interest.

Lump-Sum Payments

You can begin your payment plan by making a lump-sum payment. If you have a method of getting some extra cash, such as getting a loan or selling some assets, this one-time payment can offer you several benefits:

  • Lowering your balance reduces the amount of interest and penalties you’ll have to pay
  • A lump-sum payment can allow you to lower your monthly payment or reduce your repayment period
  • A one-time payment may allow you to qualify for certain types of installment plans, such as streamlined installment agreements

If you can’t make a lump-sum payment, you still have other options for paying off your installment agreement faster.

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IRS Payment Extensions For Undue Hardship

Venar Ayar- IRS Extension Payments
How To Get An IRS Payment Extension

Taxpayers can request a payment extension of six months or more if paying the tax on time will cause an undue hardship. Use Form 1127 to file this request extra time to pay your taxes without incurring late-payment penalties.

Who Can Use Form 1127?

Form 1127 can be used to request a payment extension for:

  • Tax due on a return
  • Deficiency amounts that were added after an IRS examination

If the tax is due on a return, you need to file Form 1127 before the return’s due date, not including any filing extensions. Payment extensions for deficiency amounts must be requested before the payment due date.

You can request payment extensions for income taxes, self-employment taxes, and some other less common types of taxes.

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Why Is Your Tax Refund Being Offset?

Venar Ayar - Tax Refund Offset
What Does It Mean To Have Your Tax Refund Offset?

Instead of receiving the nice tax refund check you’ve been expecting, you get a notice in the mail. It says your tax refund has been offset. What does this mean?

A refund offset means the government has determined that you owe a debt and has applied your tax refund towards this debt. Tax refunds can offset for many types of debts—not just federal tax debts—through the Treasury Offset Program (TOP).

Refund Offsets For Federal Tax Debt

If you owe the IRS money, they will seize your tax refund check. There’s no way around this other than to resolve your tax problems.

Even while you are making payments as part of an installment agreement, the IRS may continue to seize your tax refunds and apply them towards your outstanding balance. You could adjust your withholding amounts on your W-4 or reduce your estimated tax payments, which would reduce the amount of your refund.

However, if you reduce these amounts too much, you could face underpayment penalties.

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