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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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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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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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What Is An IRS Notice Of Intent To Offset?

Venar Ayar- IRS Notice Of Intent To Offset

If you receive an IRS Notice of Intent to Offset, your tax refund is going to be seized and put towards debt you owe to the IRS or another government agency. As part of the Treasury Offset Program (TOP), your tax refund checks are matched against any outstanding debts you owe a federal or state government agency. When you have an outstanding debt, your refund can be seized up to the amount of debt you owe.

Treasury Offset Program Debts

The TOP can be used to offset your refund when you owe any of the following debts:

  • Unpaid child support
  • Federal tax debt
  • State tax debt
  • Federal non-tax debt, such as federal student loans
  • Some unemployment compensation debts

Your debt can generally be sent to TOP once it is 90 days past due. Your debt won’t go to the IRS—it goes to the agency you owe.

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5 Ways To Stop An IRS Levy

5 Ways To Stop An IRS Levy
How To Stop An IRS Levy

When the IRS is about to levy your assets, you should look for any possible opportunities to stop or delay the levy. Once the levy happens, it’s very difficult to get that property back, but there are several ways to stop a levy before it takes place.

Consider any of these 5 ways to stop an IRS levy and consult a tax attorney to determine which strategy works best for your situation.

1.) Pay In Full

You can stop all IRS collection actions by paying your outstanding tax debt in full, including your back taxes, penalties, and interest. If you don’t have the money on hand, you may be able to sell some assets, borrow against your home, or borrow the money from friends and family.

2.) Request A Payment Plan

The IRS won’t levy your assets if you are making monthly payments as part of an installment agreement. You’ll also be required to file all required tax returns and pay all current tax obligations, such as estimated tax payments.

As a bonus, the IRS will generally delay a pending levy while they are considering your installment agreement request.

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How Bankruptcy Affects IRS Collections

Venar Ayar- Bankruptcy And The Internal Revenue
Bankruptcy And The Internal Revenue

Bankruptcy may temporarily delay collection activities by the IRS. However, some types of tax debt are not dischargeable in bankruptcy, so the IRS may be able to resume their collection efforts once the automatic stay is lifted.If you are considering filing for bankruptcy primarily due to delinquent tax debt, you should first consult with a tax resolution attorney to weigh your options.

The Automatic Stay In Bankruptcy

The automatic stay in bankruptcy immediately stops all collection activities by your creditors, including the IRS. Once you file for bankruptcy, creditors can’t send you collection notices in the mail or attempt to seize your assets. If they try to collect during this time, they are breaking the law.

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Virtual Currency And The IRS

Venar Ayar- Virtual Currency

Virtual currency refers to any digital currency which is only available in an electronic form and not as a physical form of money. Virtual currencies, like Bitcoin, are created by a process known as “mining,” where an individual, using powerful computers, authenticates transactions in what is known as a “blockchain,” or a ledger of digital transactions.

Virtual currencies may be traded on digital trading platforms, such as the third-party Coinbase, and can be used as a form of online payment, held as an investment, or used in loans to other individuals.

The IRS And Virtual Currencies

According to IRS Notice 2014-21, “the sale or exchange of convertible virtual currency, or the use of convertible virtual currency to pay for goods or services in a real-world economy transaction, has tax consequences that may result in a tax liability.”  This means, per IRS determination, virtual currencies, such as Bitcoin, are treated as property, and subject to tax regulations.

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Payroll Tax Errors: Who Does The IRS Hold Accountable?

Venar Ayar- Payroll Tax Errors

If you are an employer or employee who has fallen behind on payroll taxes and are now facing a hefty bill from the Internal Revenue Service, ignoring it will not make it go away. When it comes to unpaid payroll taxes, the IRS often comes down much harder on taxpayers than they do with unpaid income taxes. There have been countless instances where the IRS has gone as far as closing down a business or sending the owners of those businesses to prison for back payroll taxes. But, who does the IRS hold accountable for payroll tax errors?

What Is the Employer’s Responsibility?

According to the IRS, employers are responsible for reporting the income and employment taxes that are withheld from their employee’s paychecks. This information is required to be reported on the Employer’s Quarterly Federal Tax Return form, also known as Form 941. The employer is also responsible for the depositing of these reported taxes, in full, to a bank or other financial institution that is authorized in compliance with Federal Tax Deposit Requirements. Employers are also required to submit a Federal Unemployment Tax (FUTA) return each year and deposit those taxes as well.

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When To Make An Administrative Wrongful Levy Claim

Venar Ayar - When To Make An Administrative Claim

What is an Administrative Wrongful Levy Claim?

You can file an administrative wrongful levy claim when the IRS seizes property to collect tax revenue owed by another person and you have a superior right to this property. This typically means you either own the property or have a security interest that was filed before any IRS tax lien was filed.

If your property was levied because of taxes you owe, you’ll need to either appeal the levy at a collection due process hearing or ask for a levy release. Wrongful levy claims are limited to cases where the tax debt at issue is owed by another person.

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What To Know About The IRS 1099-K Form

Venar Ayar- What To Know About The 1099-K

IRS Form 1099-K is a form used by the Internal Revenue Service to report certain transactions to improve voluntary tax payments and compliance. The form originated in 2008 as part of the Housing Assistance Tax Act, even though the document has nothing to do with housing at all. A 1099-K is required for those who received payments:

  • From payment card transactions (e.g., debit, credit or stored-value cards), and/or
  • In settlement of third-party payment network transactions above the minimum reporting thresholds of –
    • gross payments that exceed $20,000, and
    • more than 200 such transactions

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All You Need To Know About The Tax Evasion Statute

Venar Ayar- Statue On Tax Evasion

As defined within the 26 United States Code section 7201 by the Internal Revenue Code, failure to report taxes accurately, failure to report taxes and failure to pay taxes are all forms of tax evasion. In order to establish a case of tax evasion against you the government is tasked with the duty of proving beyond reasonable doubt that you the taxpayer attempted to evade a tax or the payment of a tax; an additional tax due and owing and that you as the taxpayer acted willfully. If the IRS proves your guilt then the repercussions to you will range from monetary fines to jail time.

Filing taxes can be a cumbersome and complex affair especially when it is done for a self-operated business or over a substantial amount of assets. Even the most innocent of mistakes may be interpreted as tax evasion thus making the line between a law-abiding tax-payer and a tax evader quite thin. Which is why you should know what the tax evasion statute is all about because in a case like this, ignorance can be quite expensive.

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Resolving Trust Fund Recovery Penalty Disputes

Venar Ayar - Trust Fund Penalty Dispute

What are Trust Fund Taxes?

Trust fund taxes include the Social Security, Medicare, and federal income tax a business withholds from its employees’ wages. These amounts are held in trust by the business until they are transferred to the IRS.

In other words, these taxes are effectively being paid by the employee to the IRS. The employer is just an intermediary responsible for facilitating the transaction.

When the employer fails to remit these amounts to the IRS, bad things can happen. First, the employer can face the failure to deposit penalty for unpaid payroll taxes if the payments are even one day late.

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