TaxConnections


 

Tag Archive for IRS

Tax Debt And Passport Revocation: The New Weapon Against Americans Abroad

John-Richardson- Tax Debt and Passport Revocation

US Passport application links Citizenship (State Dept) to Taxation (Treasury) to enforce “Taxation based Citizenship

The logical progression continues …

I just got off the phone with someone who has just received a letter from the IRS stating that:

1. He had a “seriously delinquent” tax debt; and

2. That notice of the “seriously delinquent” tax debt was being forwarded to the State Department.

(In 2016 I did a presentation on this topic just a few months after the law came into force. You may view the presentation here.) Read more

TAS Research Shows That Education Improves EITC Compliance

Nina Olson, IRS, Taxpayer Advocate Service, EITC

Recently, the IRS provided its response to my Most Serious Problem addressing EITC issues in the 2017 Annual Report to Congress. I want to reiterate my recommendation that the IRS should provide a dedicated toll-free Extra Help telephone line for EITC taxpayers.I’ve made similar recommendations herehere, and here. The IRS has not agreed to implement my recommendation. Instead, the IRS responded to my latest recommendation by saying, in part: Read more

Tax Cuts And Jobs Act: New Rules And Limitations On Depreciation And Expensing

IRS, Tax Cuts And Jobs Act On Depreciation

The Tax Cuts and Jobs Act, signed Dec. 22, 2017, changed some laws regarding depreciation deductions.

Businesses Can Immediately Expense More Under The New Law

A taxpayer may elect to expense the cost of any section 179 property and deduct it in the year the property is placed in service. The new law increased the maximum deduction from $500,000 to $1 million. It also increased the phase-out threshold from $2 million to $2.5 million.

The new law also expands the definition of section 179 property to allow the taxpayer to elect to include the following improvements made to nonresidential real property after the date when the property was first placed in service:

Read more

What Are The Penalties For Not Filing Your Tax Return?

Charles Woodson, IRS Penalties For Not Filing

Everybody knows the old saying about death and taxes, yet a surprising number of people fail to file an income tax return. If you’re one of those people and you think you’ll be able to slide by, you need to reconsider your position. Even if you’re unable to pay your taxes, you need to file a return. Not doing so will eventually lead to a domino effect of negative consequences.

No matter how many people have told you that it’s no big deal, or that the IRS has “bigger fish to fry” than you, the employees of the Internal Revenue Service have a job to do and a process that they follow. Even if no legal action is taken against you, failure to file a return will end up working against you. Let’s take a look at the rules regarding filing your taxes and the various outcomes that you risk:

Read more

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.

Read more

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.

Read more

Many Corporations Will Pay A Blended Federal Income Tax This Year Under The New Tax Reform Law

IRS

Many U.S. corporations elect to use a fiscal year end and not a calendar year end for federal income tax reporting purposes.  Due to a provision in the recently enacted Tax Cuts and Jobs Act (TCJA), a corporation with a fiscal year that includes Jan. 1, 2018 will pay federal income tax using a blended tax rate and not the flat 21 percent tax rate under the TCJA that would generally apply to taxable years beginning after Dec. 31, 2017.

Corporations determine their federal income tax for fiscal years that include Jan. 1, 2018, by first calculating their tax for the entire taxable year using the tax rates in effect prior to TCJA and then calculating their tax using the new 21 percent rate, subsequently proportioning each tax amount based on the number of days in the taxable year when the different rates were in effect.  The sum of these two amounts is the corporation’s federal income tax for the fiscal year.

The blended rate applies to all fiscal year corporations whose fiscal year includes Jan. 1, 2018.  Fiscal year corporations that have already filed their federal income tax returns that do not reflect the blended rate may want to consider filing an amended return.

The federal sequester law remains in effect for the 2018 federal fiscal year. Corporations need to be aware of how this may affect their tax credits and refunds. Revised forms and instructions can be found on IRS.gov.

 

 

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:

Read more

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.

Read more

Sentencing Guidelines For A Taxpayer Charged with FBAR Violations

Do You Have Foreign Income?

In case you have foreign income or assets, you might be under an obligation to file a Report of Foreign Bank and Financial Accounts (FBAR) disclosing your assets and income to the IRS. The FBAR filing requirements specifically apply to US taxpayers with financial interest in, or signature authority over a financial account or foreign bank with a value of at least $10,000 at any point.

These FBAR requirements extend to U.S. residents, U.S. citizens and various kinds of business entities, such as limited liability companies (LLCs), corporations and partnerships. Keep in mind that FBAR violations, which usually involve failure to maintain relevant financial records or failure to file an FBAR, could result in severe penalties, especially if these violations are “willful.”

Failure To File

Since 2017, any failure to file can lead to harsh sentencing; this depends on how much you or your business has in foreign financial institutions or offshore accounts. A failure to disclose and furnish the information is usually an intentional act to deceive the IRS. You have to file the FBAR paperwork, as long as your accounts have over $10,000.

Read more

What Taxpayers Should Know About Tax Return Copies And Transcripts

IRS, TaxConnections

The IRS recommends that taxpayers keep a copy of tax returns for at least three years. Doing so can help taxpayers prepare future tax returns or even assist with amending a prior year’s return. If a taxpayer is unable to locate copies of previous year tax returns, they should check with their software provider or tax preparer first. Tax returns are available from IRS for a fee.

Even though taxpayers may have a copy of their tax return, some taxpayers need a transcript. These are often necessary for a mortgage or college financial aid application.

Here is some information about copies of tax returns and transcripts that can help taxpayers know when and how to get them:

Transcripts
To get a transcript, taxpayers can:

Read more

No More Hide N’ Seek For Taxpayers’ Overseas Assets

IRS Is Ending Its Offshore Voluntary Disclosure Program

The IRS is ending the Offshore Voluntary Disclosure Program (OVDP) this September 28th. This program has given U.S. taxpayers an opportunity to come forward with ‘previously undisclosed foreign income, accounts or assets with the promise and certainty that they will not face criminal prosecution.

Since the program’s inception in 2009, over 56,000 US taxpayers have paid over $11.1 billion in back taxes, interest, and penalties through the OVDP, but the number of participants has steadily declined over the past few years – from 18,000 in 2011 down to only 600 in 2017.

Read more

Meet Tax Experts At TaxConnections...