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IRS Facts Help Taxpayers Understand Individual Retirement Arrangements

IRS - Individual Retirement Account Facts

Individual Retirement Arrangements – better known simply as IRAs – are accounts into which someone can deposit money to provide financial security when they retire. A taxpayer can set up an IRA with a:

  • bank or other financial institution
  • life insurance company
  • mutual fund
  • stockbroker

Here are some terms and definitions related to IRAs to help people learn more about how the arrangements work: Read more

IRS: Offshore Voluntary Compliance Program To End September 28, 2018

IRS - Offshore Voluntary Disclosure Program Ends September 28, 2018

The Internal Revenue Service today reminded taxpayers they have until Sept. 28 to apply for the Offshore Voluntary Disclosure Program (OVDP).

Since the OVDP’s initial launch in 2009, more than 56,000 taxpayers have used the various terms of the program to comply voluntarily with U.S. tax laws. These taxpayers with undisclosed offshore accounts have paid a total of $11.1 billion in back taxes, interest and penalties. The planned end of the current OVDP also reflects advances in third-party reporting and increased awareness of U.S. taxpayers of their offshore tax and reporting obligations.

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Report Of Cash Payments Over $10,000 Received In A Trade Or Business – Financial Crimes And Automobile Dealership Transactions

IRS - Reporting On Cash Payments Over $10,000

Generally, any person in a trade or business who receives more than $10,000 in cash in a single transaction or related transactions must complete a Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business (PDF). Form 8300 is a joint form issued by the IRS and the Financial Crimes Enforcement Network (FinCEN) and is used by the government to track individuals that evade taxes and those who profit from criminal activities. Although the cash reporting requirements apply to many types of businesses, auto dealerships frequently receive cash in excess of $10,000 and are required to comply with the filing requirements.

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How Long Does A Typical IRS Tax Audit Take?

Venar Ayar, How long does an IRS tax audit take?
Tax Audit Time Frame

The Internal Revenue Service regularly performs tax audits of both corporate taxpayers and individuals. Although tax audits are conducted year-long, they often spike during the few months after the tax season, especially when problematic or misleading returns come under the IRS microscope.

Irrespective of when an “examination” or audit commences, an IRS auditor would be assigned to your case.

While IRS tax auditors are trained to be efficient, they’re also well trained to be comprehensive and thorough – and depending, to a large extent, on the structure and complexity of the individual or company’s tax situation, the IRS audit process usually takes more time than you may estimate as a taxpayer.

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When To Request A Collection Due Process Hearing

venar ayar, Request due process hearing from the irs
What Is A Collection Due Process Hearing?

A collection due process (CDP) hearing gives you one last chance to avoid a federal tax lien or tax levy. You will know you have a right to request a CDP hearing because you will receive a CDP notice. This notice is sent when any of the following IRS collection actions are being taken:

  • Filing of a Federal tax lien
  • Bank account levy
  • Jeopardy Levy
  • Levy on Your State Tax Refund

The IRS should send you this notice before taking the proposed actions, but there are some situations where they can send the notice of taking action. The important thing to note is that you have 30 days from the date of the notice to request a CDP hearing.

Request A Collection Due Process Hearing

By requesting a CDP hearing, you temporarily avoid the lien or levy. The IRS will typically not initiate the levy during the CDP hearing process. This gives you time to weigh your options.

The IRS is going to continue to pursue collection unless you give them a viable alternative. It’s always better to negotiate before they levy your assets than after.

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Offer In Compromise FAQs

Chuck Woodson, Offer In Compromise

We’re all responsible for paying our fair share of taxes each year. But what happens when the amount that you owe is simply out of reach? What happens if you failed to make payments in a timely manner and your financial circumstances have shifted to the point where your cumulative debt is beyond your ability to pay? In the face of this untenable position, your best option for paying the IRS may be what is known as an Offer in Compromise.

The Goal of the Offer in Compromise

The Offer in Compromise, or OIC, was created to accomplish two goals: it allows American taxpayers who are unable to pay the full amount of their tax debt a way to negotiate a payment that is in keeping with their ability to pay, while at the same time providing the IRS with the ability to collect at least a portion of the amount that is owed to them. The process is neither simple nor fast: it generally takes at least one to two years for both sides to come to an agreement on an amount to be paid.

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IRS Rules: FATCA Reporting For U.S. Taxpayers

IRS, U.S. Citizens Reporting Foreign Assets, TaxConnections

The Foreign Account Tax Compliance Act (FATCA) is an important development in U.S. efforts to combat tax evasion by U.S. persons holding accounts and other financial assets offshore. The Treasury Department and the IRS continue to develop guidance concerning FATCA. For current and more in-depth information, please visit FATCA.

Under FATCA, certain U.S. taxpayers holding financial assets outside the United States must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets. There are serious penalties for not reporting these financial assets (as described below). This FATCA requirement is in addition to the long-standing requirement to report foreign financial accounts on FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR) (formerly TD F 90-22.1).

FATCA will also require certain foreign financial institutions to report directly to the IRS information about financial accounts held by U.S. taxpayers or by foreign entities in which U.S. taxpayers hold a substantial ownership interest. The reporting institutions will include not only banks, but also other financial institutions, such as investment entities, brokers, and certain insurance companies. Some non-financial foreign entities will also have to report certain of their U.S. owners.

Therefore, if you set up a new account with a foreign financial institution, it may ask you for information about your citizenship. FATCA provides special (and lessened) reporting requirements about the U.S. account holders of certain financial institutions that do not solicit business outside their country of organization and that mainly service account holders resident within it. In order to qualify for this favorable treatment, however, the local foreign financial institution cannot discriminate by declining to open or maintain accounts for U.S. citizens who reside in the country where it is organized.

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Tax Havens And The IRS

The term “tax haven” is a bit of a misnomer, for the places that are considered tax havens don’t just offer an escape from taxes. They also offer secrecy and a place for U.S. citizens and corporations to keep their money far from the government’s grasp.  What is a tax haven, and how does the IRS think of them?

The IRS actively fights against tax havens via their The Abusive Tax Scheme Program, which actively attempts to prevent abusive behavior by would-be taxpayers. Avoiding paying taxes via hiding money in tax havens is a white-collar crime.

What Is A Tax Haven?

A tax haven is any country, state, or territory that offers foreign individuals and businesses with little or no tax liability. It usually refers only to countries that are politically and economically stable. Tax havens fall into one of three categories:

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IRS Penalty: What Is Reasonable Cause?

IRS penalty relief brings big business opportunities for astute tax practitioners as the IRS does indeed have the authority to provide relief from various penalties if you know how to do the dance.

In 2014 the IRS abated either in part or in full approximately 12.3% of the 40.3 million penalties issued reducing penalty assessments paid by US Taxpayers up to $9.8 billion.

According to the IRM, relief from penalties can fall into one of four separate categories.

  • Reasonable cause.
  • Statutory exceptions.
  • Administrative waivers.
  • Correction of IRS error.

This post drills down into Reasonable Cause. The IRS bases reasonable cause on all the facts and circumstances of each individual case file and it allows for relief of penalties as per IRM 20.1.1.3.2.

The IRS grants reasonable cause relief when you exercised ordinary business care and prudence in determining your tax obligations but nevertheless were unable to to timely comply with those obligations.

IRS Policy Statement 3-2 provides a very limited list of ’causes’ which can be ‘reasonable’ for late filing of a return or failure to deposit or pay tax when due (IRM 1.2.12.1.2).

Examples of sound causes for delay which can be accepted as reasonable cause include:

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United States Income Tax Treaties – A to Z

IRS Tax Treaties

The United States has tax treaties with a number of foreign countries. Under these treaties, residents (not necessarily citizens) of foreign countries are taxed at a reduced rate, or are exempt from U.S. taxes on certain items of income they receive from sources within the United States. These reduced rates and exemptions vary among countries and specific items of income. Under these same treaties, residents or citizens of the United States are taxed at a reduced rate, or are exempt from foreign taxes, on certain items of income they receive from sources within foreign countries. Most income tax treaties contain what is known as a “saving clause” which prevents a citizen or resident of the United States from using the provisions of a tax treaty in order to avoid taxation of U.S. source income.

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The IRS’s Continued Refusal To Exclude Already Open TAS Cases From The Passport Certification Program Violates Taxpayer Rights

Nina Olson, National Taxpayer Advocate

In January, I wrote my third blog about the IRS’s new program to certify the seriously delinquent tax debts of taxpayers for the purposes of passport denial, limitation, or revocation. At that point, the IRS had just begun implementing the program, and I expressed serious concerns about how the IRS’s refusal to exclude taxpayers with already open TAS cases would infringe upon their rights. As of the writing of this blog, the IRS has still refused to exclude these taxpayers from certification. Today, I want to walk through what my office has been doing over the last few months to elevate this issue to the highest levels of IRS leadership and how the IRS has responded.

As background, Section 7345 of the Internal Revenue Code (IRC) authorizes (but does not require) the IRS to certify a taxpayer’s seriously delinquent tax debt to the Department of State for the purposes of passport denial, limitation, or revocation. A seriously delinquent tax debt is an assessed, individual tax liability exceeding $51,000 (adjusted for inflation) for which either a notice of federal tax lien has been filed or a levy has been made. IRC § 7345(b)(2) provides exceptions for current installment agreements (IAs), offers in compromise (OICs), and Collection Due Process hearings. Because the statute provides the IRS with discretion to not certify taxpayers who meet the definition of a seriously delinquent tax debt, the IRS has created some certification exclusions, such as for taxpayers in currently not collectible (CNC) hardship status and those with pending IAs and OICs. See IRM 5.19.1.5.19.4 for a full list.

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