Taxpayers who don’t meet their tax obligations may owe a penalty.
The IRS charges a penalty for various reasons, including if you don’t:
- File your tax return on time
- Pay any tax you owe on time and in the right way
- Prepare an accurate return
- Provide accurate information returns
We may charge interest on a penalty if you don’t pay it in full. We charge some penalties every month until you pay the full amount you owe.
Understand the different types of penalties, what you need to do if you get a penalty and how to avoid getting one.
In this third article in our Looming Transfer Pricing Exams & IRS Preparedness Measures series, we highlight and summarize the essential aspects of the IRS’s Transfer Pricing Examination Process (TPEP) Execution Phase.
The Execution Phase immediately follows the opening conference and consists of continued risk assessment, fact finding, information gathering, and issue development. Stages of issue development include determining the facts, applying the law to those facts, and understanding the various tax implications of the issue. The issue team is advised to make every effort to resolve factual differences with the taxpayer.
The home office deduction allows qualifying taxpayers to deduct certain home expenses on their tax return. With more people working from home than ever before, some taxpayers may be wondering if they can claim a home office deduction when they file their 2020 tax return next year.
Here are some things to help taxpayers understand the home office deduction and whether they can claim it:
• Employees are not eligible to claim the home office deduction.
• The home office deduction Form 8829 is available to both homeowners and renters.
• There are certain expenses taxpayers can deduct. They include mortgage interest, insurance, utilities, repairs, maintenance, depreciation and rent.
• Taxpayers must meet specific requirements to claim home expenses as a deduction. Even then, the deductible amount of these types of expenses may be limited.
• The term “home” for purposes of this deduction:
The Internal Revenue Service Office of Chief Counsel today announced the Settlement Days program will continue remotely enabling unrepresented taxpayers to work towards resolving their pending United States Tax Court case despite “stay-at-home” orders in many jurisdictions. The first two events are for docketed cases with place of trial in Detroit or Atlanta. Future events may be scheduled in other cities throughout the United States.
Virtual Settlement Days is a coordinated effort to resolve Tax Court cases by giving taxpayers not represented by counsel the opportunity to receive free tax advice and possible representation from Low Income Taxpayer Clinics (LITCs) or other pro bono organizations. Taxpayers can discuss their Tax Court case and federal tax issues with members of the IRS Office of Chief Counsel, Appeals and Collections.
The program is geared to help unrepresented taxpayers receive free assistance in discussing a potential fair settlement of their tax disputes in an informal setting without the need for further litigation or a trial in Tax Court. The vast majority of taxpayers participating in previous Settlement Days programs have resolved their cases; most of those who ended up with a liability have been able to enter into an installment payment arrangement.
The Tax Court canceled scheduled trial sessions in a series of Orders issued on March 11, 13 and 23, 2020. The Tax Court Orders state that it is expected that parties will continue to work together to exchange information and address pending issues. The Settlement Days events accomplish the Tax Court’s goals by allowing the parties to work towards settling case on a remote basis.
I have been fortunate the past couple of years to have been able to travel. I find that as I check off places on my bucket list, I keep adding on to it! I have been bitten by the travel bug! We recently went to Munich, Germany and climbed 14 stories to the top of The Kirche of St. Peter. The climb through the narrow stairway was somewhat crowded and tight at times but it was absolutely worth it! The views at the top were breath-taking.
Of course when you travel, you need your passport. What happens when you owe taxes to the Government, can they revoke your passport? If you remember, back in 2015, there was a Law passed called the FAST Act. The Act was mostly about transportation but they got in a clause that if you owed more than $50,000 in taxes, the Government could revoke your existing passport or deny you a new passport.
Under Section 32101 of the FAST Act, if the IRS certifies a taxpayer as having a ‘seriously delinquent tax debt”, which is: (1) Owing $52,000 or more in taxes and (2) Meeting certain other requirements under IRC §7345(b), the State Department must deny the taxpayer’s original or renewal passport application and may revoke or limit an existing passport.
If you’re already having financial problems, IRS collection actions can make your situation even more difficult. Fortunately, the IRS will consider your financial issues if you ask for a collection alternative.
Request A CDP Hearing
The IRS won’t know about your financial hardship unless you tell them. If your assets are about to be seized, you should make sure you request a Collection Due Process (CDP) hearing to explain your situation.
The IRS is usually required to send a Notice of Intent to Levy in the mail before your assets can be seized. You have 30 days to respond to this notice and request a CDP hearing. At the hearing, you can propose collection alternatives, and the IRS won’t levy your assets until the CDP process is complete.
Make sure you read every IRS notice you get and pay careful attention to any deadlines mentioned in the notice.
According to the IRS Strategic Plan FY 2018 to 2020, these are the major Trends and Challenges going forward:
SERVING AN INCREASINGLY COMPLEX TAX BASE
The U.S. tax base is becoming more complex. Economic and demographic changes in our society have fundamentally changed the way citizens earn money and the way we live. U.S. workers earning income through contracting or freelancing is projected to increase as more workers pursue flexible arrangements or earn income through digital platforms and app-based businesses (the “gig economy”).
This shift in income sources requires the IRS to adapt its outreach and enforcement efforts. According to one assessment, in the gig economy, nearly one-third of those earning money through app-based platforms were unaware of their tax status as small business owners. This likely affects the rate of voluntary tax compliance. In addition to changes in employment trends, family structures and living habits are shifting. A record number of Americans live in multigenerational households, a dynamic that could affect a taxpayer’s ability to claim deductions and credits accurately. This highlights the growing need for IRS to communicate eligibility requirements and verify compliance.
MANAGING GLOBAL TAX COOPERATION
The Freedom of Information Act, 5 U.S.C. 552, provides any person the right to request access of federal agency records or information. The FOIA applies to records either created or obtained by an agency and under agency control at the time of the FOIA request. Agencies within the executive branch of the federal government, including the Executive Office of the President and independent regulatory agencies are subject to the FOIA. State governments, municipal corporations, the courts, Congress and private citizens are not subject to the FOIA.
All IRS records are subject to FOIA requests. However, FOIA does not require the IRS to release all documents that are subject to FOIA requests. The IRS may withhold information pursuant to nine exemptions and three exclusions contained in the FOIA statute.
While the Freedom of Information Act is an option in some cases, records that can be processed routinely in accordance with procedures identified in 26 CFR 601.702(d) are specifically excluded from the processing requirements of the FOIA. Many FOIA requests for IRS information can be obtained more efficiently using routine established agency procedures.
The FOIA established an effective statutory right that records of the Executive Branch of the United States Government are accessible to the people. This was not always the policy regarding disclosure of Federal information. Before the FOIA was enacted in 1966, the Administrative Procedure Act governed the disclosure of agency records to the public and was viewed as a withholding statute rather than a disclosure statute.
Congress approved major tax reform in the Tax Cuts and Jobs Act, signed into law on December 22, 2017. This legislation, which affects both individuals and businesses, is commonly referred to as TCJA or the 2017 tax reform legislation. This electronic publication covers many of the TCJA provisions that are important for small and medium-sized businesses, their owners and tax professionals to understand. Businesses affected by TCJA include corporations, S corporations, partnerships (including limited liability companies or LLCs) and sole proprietorships. Changes to deductions, depreciation, expensing, credits, fringe benefits and other items may affect your business tax liability and your bottom line.
It’s important to consider your business structure and accounting methods when applying tax reform to your situation. The official IRS.gov website includes a Tax Reform page that highlights what you need to know about the tax law changes. This page also provides links to news releases, publications, notices, legal guidance and other resources. There’s also a dedicated tax reform page for businesses. We update these resources regularly. Some provisions of TCJA that affect individual taxpayers can also affect business taxes. As a business owner or self-employed individual, you should review tax reform changes for individuals and determine how these provisions affect your business tax situation.
The Internal Revenue Service, in partnership with the tax preparation community, has devised a new process that will allow tax practitioners to access employer information needed for return preparation and electronic filing while also protecting taxpayer data.
The new process is part of a series of steps planned by the IRS to enhance safeguards around the tax transcript format and distribution to better protect taxpayers from identity theft. A transcript is a summary of tax return entries on the Form 1040 series.
In September 2018, the IRS began partially masking the personally identifiable information for all individuals and entities listed on an individual tax return. The redesigned transcript will fully display all financial entries. See New Tax Transcript and Customer File Number for details.
The Internal Revenue Service (IRS) computes standard mileage rates for business, medical and moving each year, based on a number of factors, to determine the standard mileage rates for the following year.
As it does annually around the end of the year, the IRS has announced the 2019 optional standard mileage rates. Thus, beginning on Jan. 1, 2019, the standard mileage rates for the use of a car (or a van, pickup or panel truck) are:
- 58 cents per mile for business miles driven (including a 26-cent-per-mile allocation for depreciation). This is up from 54.5 cents in 2018;
- 20 cents per mile driven for medical or moving* purposes. This is up from 18 cents in 2018; and
- 14 cents per mile driven in service of charitable organizations.* For years 2018 through 2025, the deduction for moving is only allowed for members of the armed forces on active duty who move pursuant to a military order.