When a taxpayer can’t afford to pay a tax liability in full, Internal Revenue Code (IRC) § 7122 authorizes the IRS to accept less than the full amount due in the form of an offer in compromise (OIC). As a condition of acceptance for an OIC, the taxpayer must agree to remain compliant with his or her filing and paying requirements for the five years following the acceptance of the OIC. So, although the IRS agrees to settle a tax debt for less than the full amount due, the IRS secures future filing and payment compliance for the next five years, hopefully developing better taxpayer habits, while also collecting an amount that it is unlikely to collect otherwise. On the other hand, the taxpayer is no longer saddled with a debt that cannot be satisfied in full. Read more
Tag Archive for tax liability
Effective Use Of The Offer In Compromise (OIC) Program Will Save Valuable IRS Resources While Bringing Finality To Taxpayers
In some instances, tax liabilities can be discharged by filing bankruptcy. There are two main types of bankruptcy available (Chapter 7 and Chapter 13), each with definitive and complicated rules regarding discharging tax liabilities. In both instances, the following must be true:
- Tax returns were timely filed or it has been at least 2 years since the returns were filed
- Tax returns were last due to be filed for at least 3 years, including extensions
- Tax liability was assessed at least 240 days before filing bankruptcy
- Taxpayer did not pursue tax evasion or defeat
- Tax liability is not due to a fraudulent tax return
- Tax was not assessable at the time of filing bankruptcy
- Liability is not due on Trust Fund Tax
- Tax was unsecured
The key to a legal and successful reduction in your tax liability is planning. We don’t just comply with tax procedures but we also recommend proactive tax saving measures to maximize your income after tax deductions.
We take it upon ourselves to master the current tax laws, new tax rules and the complicated tax codes by frequently attending tax seminars. Read more
Tax credit systems are in place to let tax payers deduct a certain amount from their tax liability to the state or federal government based on different programs. One such initiative is the American Opportunity Tax Credit, or commonly known as AOTC. This tax credit system is designed specifically for college going students, allowing them to settle their college costs via tax credits. AOTC is much more beneficial when compared to tuition deduction since it allows for an actual reduction in taxes that you owe to the government. But there are certain eligibility criteria that one must meet to be able to benefit from this system. Read more
Well, it would be a bit of a stretch to say that most of us don’t want to pay taxes. However, who wouldn’t take a tax deduction if it is available? For all those individuals who are looking out for different ways by which they can reduce their tax liability, here is one effective method of doing so. You can include your Medicare premiums and even dental expenses in tax filing for better deductions. Sure, there are some prerequisites and details that one must consider and they are below.
Deducting Medicare Premiums Read more
With the arrival of the holidays, we are thinking about family get-together’s, holiday gifting and parties. But right behind the good times is tax season. Before you get busy with holiday festivities, take the time to consider a couple of things you can do now to avoid or reduce potential penalties on your 2017 tax return.
If you are a wage earner, you may not have had enough income tax withheld from your paycheck to meet your tax liability for the year. Or, if you have wages and also have taxable income from other sources such as investments, a second job or a side business, or if you are married and your spouse is also employed, your withholding for the year may not be enough to cover your 2017 tax liability. Read more
In our practice, we see many new clients who have sales tax exposure issues. And we, of course, are happy to help them identify and then mitigate that exposure. As we discussed in our blog last month, “Sales Tax Non-Compliance: What’s Your Exposure“, sales tax exposure can add up quickly. Sales tax is a gross tax and if not properly collected from the buyers at the time of the sale, it can come back to haunt the seller later.
Partly in response to the problem faced by dealers in medical marijuana or those in states where marijuana sales are legal, the IRS has partnered with PayNearMe to allow taxpayers to make cash payment on their taxes at participating 7-Eleven stores in 34 states. This allows anyone without a bank account a more Read more
More than 50 tax provisions that Congress routinely extends on a yearly basis expired at the end of 2014. The big problem is each year they are extending the provisions later and later in the year creating uncertainty for taxpayers on whether they can depend on these tax incentives or not. This makes tax planning unclear and leaves taxpayers wondering about their projected tax liability.
For 2014, Congress waited almost to the end of the year to apply many of the provisions to the 2014 tax year. This was not only a problem for taxpayers but also for the IRS, which needed to adjust its forms and tax filing software at the last minute and actually had to delay the start of the tax season. Read more
In preparing your tax returns, you are allowed the choice of either claiming the standard deduction, or claiming itemized deductions. Your deductions (standard or itemized) are subtracted from your adjusted gross income (AGI) to figure your taxable income. Depending on which choice gives you the greater benefit, you may choose to take your standard deduction, or you may choose to claim itemized deductions; the aim here is to maximize your refund or minimize your tax liability.
The Standard Deduction
The standard deduction is a fixed dollar amount that the government allows taxpayers who do not itemize deductions to deduct from their income. The standard deduction reduces the amount of income that is taxed, and eliminates the need for many taxpayers Read more
All too often, taxpayers wait until after the close of the tax year to worry about their taxes, missing opportunities that could reduce their tax liability or help them financially. Fall is the perfect time for tax planning. The following are some events that can affect your tax return; you may need to take steps to mitigate their impact and thus avoid unpleasant surprises after it is too late to address them.
• Did you get married, divorced, or become widowed?
• Did you change jobs or has your spouse started working?
• Did you have a substantial increase or decrease in income?
• Did you have a substantial gain from the sale of stocks or bonds?
• Did you buy or sell rental property? Read more
If you are a U.S. citizen or resident alien living and working (or on military duty) outside the United States and Puerto Rico, June 15, 2015 is the filing due date for your 2014 income tax return and to pay any tax due. If your return has not been completed and you need additional time to file your return, file Form 4868 to obtain 4 additional months to file. Then, file Form 1040 by October 15, 2015. However, if you are a participant in a combat zone, you may be able to further extend the filing deadline (see below).
Caution: This is not an extension of time to pay your tax liability, only an extension to file the return. If you expect to owe, estimate how much and include your payment with the extension. If you owe taxes when you do file your extended tax return, you will be liable for both the late payment penalty and interest from the due date. Read more